Firms Cut Pay Instead of Jobs

By Nick McMaster,  Newser Staff
Posted Feb 17, 2009 2:24 PM CST
In this June 20, 2007 file photo, assemblyman Vic Rista installs door molding in a Ford Expedition at the automaker's Michigan Truck plant in Wayne, Mich.   (AP Photo/Carlos Osorio, file)
camera-icon View 1 more image

(Newser) – Companies looking to cut labor costs are increasingly turning to salary reductions rather than further layoffs in an attempt to save employee morale, the Chicago Tribune reports. One extreme case is Acco Brands in Illinois, which imposed a six-week, 47% reduction for all workers instead of downsizing. "It's an alternative to permanent reductions in force," an Acco spokesman says.

Motorola, AMD, and GM have announced temporary pay cuts, and one consultancy’s survey found that 19% of companies planned to freeze salaries during the next 12 months. But some experts say spreading the pain of a recession around is not always the most effective for controlling costs or morale. "Usually, companies say they prefer layoffs to pay cuts," said a Yale economics professor. "It gets the misery out the door."