More Companies Should Cut Wages, Not Jobs

In a move that may be mimicked, FedEx moves to help workers, shareholders
By Clay Dillow,  Newser Staff
Posted Dec 19, 2008 11:37 AM CST
FedEx workers sort packages passing along a conveyor belt before loading them onto delivery trucks at the FedEx Express Station Monday, Dec. 15, 2008 in New York.    (AP Photo/Mark Lennihan)
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(Newser) – It was FedEx's turn yesterday to play Scrooge, announcing cutbacks in the face of recession, but the company's strategy—cutting wages for senior execs and other salaried employees, rather than cutting jobs—maybe prove to be the smart alternative, and a harbinger of things to come, Peter Eavis writes in the Wall Street Journal. It's less disruptive and expensive than layoffs, he argues, and better for the economy as a whole.

Why better? By keeping layoffs to a minimum, there's less negative effect on consumption. Banks could face fewer defaults from people who can no longer keep up with their bills. But perhaps most importantly, it brings down labor costs. Recessions tend to bring prices down to sustainable levels, and the sooner the price of labor finds equilibrium, the sooner economic recovery can begin.