Article Thumbnail

More Hours for Less Money: The Bleak, Grueling Reality of a COVID Pay Cut

Workers with slashed pay are losing hope of their careers rebounding — and as these cuts likely herald another era of wage decline, things will only get worse

Miranda, a 31-year-old product designer, embodies the sort of resilience that will never appear in a Hollywood script. Not merely because her endurance is unlikely to culminate in a happy ending, but because American drama often emphasizes the virtues of struggle: The camera holds steady on the character in anguish so that when they finally break through, the suffering feels worth it. Miranda — her voice disaffected but placid, like she’s narrating someone else’s life — is simultaneously too worn down and on edge to feel relieved when she’s finished her 65-hour workweek.

When she tells me that in April, her salary was cut from $55,000 a year to just over $39,000, she flows through it, again, as though she’s describing someone else’s reality. When she tells me that, because of the layoffs at her company and despite the fact that she’s making 30 percent less than she was in April, she’s working nearly twice the number of hours, juggling multiple roles and not sleeping just so she can hold on to her health insurance and her one-bedroom studio in an expensive city, she affords herself no sense of accomplishment. It’s not determination driving her, she says, tonelessly: “I’m just starting to feel like a work robot.” 

She has “nothing outside of work, because meetings are so stressed, and it’s such a time crunch.” “I stopped listening to podcasts,” Miranda continues. “I stopped listening to audiobooks while I work. I stopped listening to music because I just need to be so hyper-focused to keep my job. It’s destructive.”

Still, even with her pay cut, she admits that she’s “definitely not doing as bad as other people” — a sort of survivor’s ennui of the gainfully employed and a common symptom amongst those workers who’ve had their pay cut in the era of COVID.

Fifty-three-year-old Janice, who works on the finance side of an event-planning organization in Arizona, has a similar syndrome. Despite her 25 percent pay cut, she tells me she’s “still lucky to have a job.” Her company-wide pay cuts were initially announced as a voluntary measure during a meeting in March. “The very first one was a request for voluntary early retirement, voluntary furloughs and voluntary pay cut with reduced hours,” she says.

But not enough people volunteered. “We had a town hall meeting at the end of the month that indicated that there were going to be furloughs lasting approximately three to four months,” says Janice. “Then there was an across-the-board pay cut of 25 percent for the balance of 2020.” It was at that point that her employer reinstated working 40 hours a week at 25 percent less pay. “I was making $45,000 a year.” In May, her annual salary was cut to just below $34,000. 

Janice and Miranda’s stories have their differences, but the trampled tone in the way they describe their current circumstance is like a chorus. Lost in the fury of life — working “obscene hours” for less money — Miranda tells me, these days, she’s lucky when she’s thinking about anything outside of “dark thoughts.” And so, she says, somewhat ominously, “I start thinking about running away as an alternative.”

This wasn’t always the case for Miranda. In fact, there was a time, before the pay cut, before the midnight hours and before she felt as though she had to “blow everyone’s socks off every time she got an assignment” that once required an entire team to complete, she enjoyed being a designer. “I’m an artist,” she says. “But you can’t pay the bills with that without some grants or whatever. So, I’m a designer as a trade, which I do like, normally.” For her, it was a job that she could “make money and not hate.” “But once the pay cut set in, I stopped caring anymore,” she says. “Anytime I do a really great job, I feel bitter about it. I don’t feel accomplished anymore.” 

In a sea of unemployment statistics, layoffs and, of course, the number of people suffering from symptoms of a plague, the COVID pay cut is the sort of headline that’s often lost in the mix, lacking the immediate drama or statistics that inspire clicks. Miranda admits as much: Although she’s no longer able to treat herself to takeout, she still has money for groceries. Janice needs a new pair of prescription glasses, but the old ones still work well enough for now. Neither of them are living on the margins, per se. But their pay cuts and devaluation in the job market is, according to Jeffrey Wenger, a senior policy researcher at the RAND Corporation, a glaring signal of an economy still hemorrhaging. 

According to a Washington Post story from July, “at least 4 million private-sector workers have had their pay cut during the pandemic” — twice the number of people that had their pay cut during the Great Recession. Wenger tells me that unlike layoffs, it’s particularly difficult to get a full picture of how much and who is most affected by pay cuts. “It’s really hard to go to this cross-sectional data and look at national averages and see what’s really going on with workers,” he says. “What you have to do is you have to follow the person in month one and find out what happened to them in month two and see if they’re still working and if they’re working, what wages they’re earning, and then you still have to control for their hours.”

A July report from Politico suggests, “Unlike job losses, which have disproportionately affected low-income workers, the pay cuts are mostly hitting workers in white-collar industries.” In fact, per the same report, “three-fourths of the cuts in pay fall within the top 40 percent of wage earners.”

But others report that it’s service sector workers who have been hit hardest. Bloomberg writes that those most affected by the COVID pay cuts are the eight million Hispanic American workers employed in restaurants, hotels and other service-sector positions, with some 44 percent reporting reduced hours and pay. “That compares with 29 percent of white, 32 percent of Black and 41 percent of Asian adults who say the same,” reports Bloomberg. The same is true of those who’ve suffered the biggest hit to their savings — 43 percent of Hispanic and 40 percent of Black adults have used money from a savings or retirement account to pay their bills since the outbreak, compared with 33 percent of white adults.

“Typically what firms do is they do a temporary pay cut,” says Wenger. “They reinstate your wage when the economy starts doing better, when the company starts doing better, and then you just don’t see any wage growth.” In that sense, says Wenger, it’s a “painless way” on the part of corporations “to cut labor costs without having to do anything.” “You just let inflation erode the wages,” he explains. 

Still, Wenger insists that company-wide pay cuts aren’t necessarily a symptom of corporate greed. “It says something about the firms’ beliefs about the future of the economy that they’re cutting wages and holding onto staff rather than letting people go,” he says. He argues that since “cutting people’s wages is just shit for morale,” typically “downsizing is often a preferred strategy among some firms, rather than cutting wages or cutting hours because if you cut wages and hours, all the disgruntled people still come to work every day.” In other words, pay cuts could be viewed as corporations trying to be kind.

While that may be true, there are plenty of exceptions. In April, Tesla cut salaries and furloughed workers “to manage costs,” referring to the strategy as a “shared sacrifice” — better to have your pay cut than getting laid off, is the thinking here. And yet, according to The Verge, the cuts came “just a few days after Tesla announced better-than-expected sales figures for the first quarter of 2020.”

It was precisely this sort of experience of pay cuts amidst a time of increasing revenue that left Jennifer A., who “runs a sales organization for a lighting company,” scratching her head. In April — a month into the pandemic — the company she works for announced a 15 percent pay cut, at a time when the business was booming. “We got so crazy, busier than we’ve ever been, and my team and myself kept wondering, ‘When are you going to reinstate it [their wages]’? Because we haven’t seen this negative impact that we thought COVID was going to have on us.”

It took five months. And the reason she was given for why the pay cuts were instituted in the first place? “I think in order to protect the integrity of the business, they just took a step into saying, ‘Hey, let’s do a pay cut,’” she says. 

There’s also the issue of the psychological laceration that accompanies a pay cut. “You’re in a very precarious position where you become even more fearful to even question anything that’s happening around you,” says Wenger. “You [the worker] don’t have a lot of power in the marketplace.” Which is why, he thinks, after years of slow wage growth that peaked in 2019, when wages suddenly grew by 3.4 percent — “the fastest pace in nearly a decade and well above inflation,” per a different report in the Washington Post — we’re likely headed toward another period of very low growth, perhaps even wage decline. This, he says, is the market “re-equilibrating to lower wages.”

Coupled with a 20 percent pay cut, Jennifer F., who works in event organization, had her hours reduced in April. When we first spoke two weeks ago, she was one of only five people to have made it through two rounds of layoffs. “But my work was cut down to four days a week instead of five,” she told me then. “We didn’t have a lot of work to do, so I was grateful to have employment given that there wasn’t a lot of work.” 

Last week, however, Jennifer was laid off — but not before she was offered work as a freelancer, sans health insurance. “I don’t think a lot of these jobs are coming back, and personally, I’m looking to move.”

Prior to her pay cut, Miranda had managed to put away $2,000, double that of the nearly 70 percent of Americans who have less than $1,000 stashed away. But like so many other folks, she’s had to reach into her savings to keep up with bills. “That happened more toward the beginning of quarantine where I was still trying to navigate the pay cut,” she says. “Now, I’ve got it, I think, a lot better, where I’ve pared down things I don’t need.” But still, the $2,000 she’d spent two years saving is gone. 

Worse still: There’s nowhere else for Miranda to go if she wants to continue to work as a designer. “My industry is completely bone dry,” she says. “There aren’t jobs in it, period.” In fact, the company she works for is getting calls from other companies asking if they want to hire any of the designers they’ve had to lay off, “because we’re one of the few that’s still left open right now,” she continues. “I see that. But even if those designers were offered this job, I’m not sure they’d take it because I’m making just about what I would make if I were unemployed.”

This is precisely the sort of psychological hematoma Wenger is warning of. With so many industries buried beneath the haze of a pandemic, those “lucky” to still be working, even with a chunk of their check missing, know their alternatives are limited. And it’s impossible to know for sure, he says, how much worse things are likely to get before they begin to get better. “It’s a catastrophe,” he says. “It takes a long time to reset, rebuild and regrow your wages.”

At her age, Janice tells me that it’s unlikely that she’ll find work at her former $55,000 a year salary, particularly in this economy. In the week following our initial conversation and nearly six months after her initial pay cut, Janice, too, was laid off. “I am terrified of what is going to happen,” she says. “I’m a pre-existing [condition] person that has a treatment every seven weeks that runs five or six grand. I’m absolutely terrified of COBRA. I’ve been in an insanely fortunate position the way that it’s worked out for me so far, and I’m terrified of what’s coming.”

Do Not Sell My Personal Information