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Pay cuts spreading beyond executive suite

Meghan McCarty Carino Apr 2, 2020
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As pay cuts spread further down from the executive suite, they hit average workers harder. Above, cashiers wearing protective masks work in a grocery store in Brooklyn on April 2. Stephanie Keith/Getty Images
COVID-19

Pay cuts spreading beyond executive suite

Meghan McCarty Carino Apr 2, 2020
As pay cuts spread further down from the executive suite, they hit average workers harder. Above, cashiers wearing protective masks work in a grocery store in Brooklyn on April 2. Stephanie Keith/Getty Images
HTML EMBED:
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Unemployment is spiking across the country and many of those managing to keep their jobs are getting paid less. It started with top executives at large household-name companies like Disney, Columbia, Lyft and Marriott cutting their pay — sometimes to zero — to keep their companies going during the downturn. Now cuts are trickling down below the major executive suites: at big law firms, at places like the Los Angeles Museum of Contemporary Art, SoulCycle and the medical device giant Boston Scientific.

Los Angeles copywriter Laura Cohn is among those who got a call from her employer with some good-news-bad-news: she could stay on, for now, but with fewer hours and about a 30% pay cut.

“To at least be working a little bit and to have a small amount of income coming in is better than nothing,” she said.

Her husband lost his job as an office manager a couple weeks ago, so Cohn was glad her employer stopped at cutting her pay and hours. “They opted to keep people employed,” she said. “We’re all in this together.”

UCLA management professor David Lewin hopes more firms will take this approach first before cutting jobs. “You can get to exactly the same labor cost reduction objective,” he said

The upside for workers is keeping their benefits and usually a higher income than what they’d get with unemployment insurance, while businesses have an easier time recovering when they avoid layoffs.

But there are downsides, said Paul Davis, a professor of human resource studies at the Cornell Industrial and Labor Relations School. In past downturns, job cuts have been favored over pay cuts by many businesses, because pay cuts can lower productivity and push the highest-achieving workers to leave the company.

The unprecedented nature of the current crisis could change that. “I think that workers are going to be a little more understanding and a little more amenable, at least initially,” he said.

But as pay cuts spread further down the ladder from the executive suite, he said, they have a broader impact on the economy and hit average working people harder.

Laura Cohn doesn’t have to worry about the roof over her head; she’s staying rent-free with family. But she has other bills coming due. And she’s lost a chunk of her paycheck.

“That was basically our health insurance premium,” she said — something she can’t afford to skip in the middle of a pandemic.

COVID-19 Economy FAQs

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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