WSJ Spotlights Wage Declines of the Laid Off

The Wall Street Journal is excellent today with this front-page examination of what the recession is doing to wages of those who’ve gotten new jobs after being laid off.

It’s a reporting-rich piece that looks at the devastation—both short-term and long-term—faced by those who’ve lost jobs in this downturn.

First we get a nice triple-anecdote lede:

In California, former auto worker Maria Gregg was out of work five months last year before landing a new job—at a nearly 20% pay cut.

In Massachusetts, Kevin Cronan, who lost his $150,000-a-year job as a money manager in early 2009, is now frothing cappuccinos at a Starbucks for $8.85 an hour.

In Wisconsin, Dale Szabo, a former manufacturing manager with two master’s degrees, has been searching years for a job comparable to the one he lost in 2003. He’s now a school janitor.

The paper’s Sudeep Reddy, whom we last saw on The Audit winning a scrap with Sarah Palin, follows that with a reminder that there are many more who are worse off:

They are among the lucky. There are 14.5 million people on the unemployment rolls, including 6.4 million who have been jobless for more than six months.

The Journaldoes a good job of ferreting pairing data with the real people it’s reporting on. Here’s some good historical context, for instance, that shows how the average laid-off worker in this recession will likely be paying the price for decades. It cites a study of the 1981 recession that found workers in mass layoffs were earning a fifth less than similar folks who hadn’t been laid off and that even kids of the fired would make 9 percent less than those whose parents kept their jobs.

Here’s how that phenomenon is playing out thus far in this downturn:

Between 2007 and 2009, more than half the full-time workers who lost jobs that they had held for at least three years and then found new full-time work by early last year reported wage declines, according to the Labor Department. Thirty-six percent reported the new job paid at least 20% less than the one they lost.

A candid admission from a luxury resort operator helps the WSJ show how the increasing desperation of workers is benefiting owners:

South Seas Island Resort, which employs about 300 in Captiva, Fla., cut jobs during the downturn, but has now begun adding staff.

“Right now I view this as an employer’s market,” says Rick Hayduk, managing director, who says the resort is attracting senior people at lower salaries than before. “The past 24 months have taken a toll on a lot of individuals,” he says. “I think they abandoned their hopes to receive compensation similar to what they did when they lost their jobs. We have been able to reevaluate some of our starting wages.”

The upshot: The resort will keep labor costs flat this year, even as revenue picks up and the resort selectively adds workers.

My beef with the piece is that the janitor anecdote doesn’t really work here. It’s about a guy who lost his job as a manufacturing manager in 2003 and then had to grab a $9 an hour gig as a janitor two years later. But his whole experience predated the downturn by at least two years. Indeed, he’s been promoted and now makes $17 an hour, though that’s still far below his 2003 wage.

Now the janitor may be part of a story—the economy was hardly robust for middle-class and working-class folks during the 2000’s—but it doesn’t fit here. That’s all the more strange because it’s not like there aren’t millions of people out there that have compelling stories that fit the thesis.

Still, it’s a very good effort.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , ,