Furloughs vs pay cuts

Interesting article in today's New York Times on the growing number of companies cutting pay instead of or in addition to furloughs.


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  • In tough economic times, reduced pay makes the most sense to me. You still have enough workers to get the job done, unlike with furloughs or layoffs. This helps the organization's future outlook, and increases the ability for the organization to bounce back when the economy begins to turn around. Plus, everyone ends up the same or better off financially:

    People who would have been laid off will probably make more money working, are less likely to end up losing their homes, etc, and continue to be productive members of society.

    People who would have kept their jobs will have less stress at work worrying about if they are next while they try to do the work of 3 people. They will have more financial worries while making less money, but since we all pay for unemployment in the end they are really not any worse off in the long run. They are just paying their share up front instead of later through taxes. And remember, we not only pay taxes for the actually money going to the unemployed, but also for all the administration burdens, plus the value of the time congress spends debating the issue.

    People not directly affected because they don't work there will probably pay less taxes, and have less problems with things like the value of their homes dropping dramatically because the guy down the street lost his job and then his home.

    Reducing pay is really a case of pay less now, as opposed to layoffs which is pay more later. A 5 or 10% cut is a hardship, but in most cases will not cause people to lose their homes, etc. The 20% cut mentioned in the article would be very hard for most people, so while I adovacate reduced pay, I also believe it must be done judiciously.

    Just my 2 cents.
  • Thanks for letting us know Frank. We are on it.
  • Here is sobering commentary from yesterday's Wall Street Journal -- a New Jersey business owner explaining why he isn't doing any hiring right now. tk

  • Given his complaints, I'm sure Mr. Fleischer was a big supporter of a single-payer health insurance system as a means to help reduce the employer's burden, right? Given the failure of that proposal to make it past GOP objections, he certainly supports strengthening the state-by-state insurance exchanges, right?

    Sorry... I'm tired of these guys who want to blame all their troubles on 'Obamacare' - which, of course, bears little resemblance to what Obama campaigned on (and was elected on) and looks almost identical to the Republican counter-proposal to 'Hillarycare' from the '90s. (And also closely resembles the plan Mitt Romney signed into law in Mass.)

    I mentioned recently in response to a poster on this Forum that we're hiring. I attended my 30-year class reunion last weekend and quite a few of us are having trouble filling openings. You're either hiring or not, but if your company's growth is that closely dependent to your group health insurance, then you've just done a poor job of planning.
  • I guess my impression was a bit different than yours Frank. I noticed the first time I processed payroll (years ago) that a staggering amount of money goes to government one way or another. Future health care expenses are not as uncertain as they were a year ago, but there is still some uncertainty there. Mostly, I am uncertain on taxes. I felt that was what the author was saying. His uncertainty is making him reluctant to hire.

    My other impression is that they probably weren't doing as much in benefits as we are, and those who don't do that much now will be impacted the most in the future.

    I also disagree with you regarding the basis of the new law, but that is another matter. At this point I am just glad to see something resolved and the country moving forward. Now that we have it we can get the kinks out as they appear, just like with any other law. That is, of course, assuming the parties can quit arguing over who is winning and just get on with it.
  • I gravitated toward his 'Obamacare' reference because health insurance is the only part of the equation that has changed significantly over the past 10-20 years. Was he this reluctant to hire in the '80s, or in the '90s? Your observation about the 'deduction shock' you get the first time you process payroll is spot on... but that was how many years ago? My point is, it has been that way for decades and it's a bit disingenuous for Mr. Fleischer to suddenly come to the realization that government makes it tough for small business.
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