a. - take a temporary 10% pay cut of wages along with every other employee at your company…so that all jobs could be preserved through the economic downturn; or
b. - be subject to selective lay-off’s, whereby 10% of the workforce will lose their jobs
Many companies that are permitted to continue to operate, may face uncertain economic situations, if they aren’t already. For the companies to survive, many of them may face the choice as presented above. If you were the employee of such a company, which choice would you make?
Under the hypothetical, the CEO makes a market salary for his industry and size of his company. Assuming the business performance declines where either of the two options in the OP are necessary, no one in the company including the CEO are going to be receiving bonuses this year.
But “neither of the above” is not an option, as the company must take action to keep profitability at a minimum level, to satisfy lenders and shareholders.
In other words, the CEO is probably making a shitload more than the people who are being asked to take a pay cut, but the CEO is not intending to take a pay cut; let alone one that would put the CEO into a position similar to that of the workers.
And the shareholders must be satisfied in the short run, even if that means that the employees all get screwed. Which will probably also screw up the work being done, which is bad for the shareholders in the long run.
Funny - I’m in an “essential industry” and not only did we not require a paycut we all got raises and the company has hired thousands of more people.
That said - I’ve upped my donations to the local food pantry I support and a social service agency providing deliveries to seniors and disabled people, so really, any extra cash I’m getting from all this is more or less going back into supporting the community. So, if I was in the hypothetical in the OP… I’d take the paycut if it meant everyone else in the company could keep their jobs. I’ll take that hit for the greater good.
I am an employee in an essential industry, and (probably?) one that’s not going to expand as a result of the pandemic. I would definitely rather take a pay cut than have layoffs of the same percentage.
One of the bigger problems with economic downturns is that wages are sticky downwards (psychologically, it’s hard to accept a lower wage). But layoffs are vastly more damaging to individuals and to society than pay cuts. If we’d all be more willing to take a pay cut, we’d all be a lot better off.
I agree that I’d expect executives to take at least as large a cut. Realistically, though, executives are compensated via things like stock options and grants more than salary, so in any economic downturn, executives are taking a much larger effective pay cut because options and grants are worth a lot less. I mean, they’re still doing great compared to basically everyone, so I’m not shedding tears for them, but it’s not like they’re unaffected.
My company is small, but is owned by a much larger company that specializes in a completely different service. My company truly is critical (we supply power plants); our parent company is basically in the marine transportation sector, and hasn’t been forthcoming at all about how they’re faring financially during this crisis.
I wouldn’t want to see layoffs; if enacted company-wide, that would be quite a hit for my location, and we can’t afford to lose anyone right now. A wage cut would only be accepted without protest if upper management was also subject to pay cuts.
I’ve already lived through option “A” during the 2008 debacle. (It was reduced hours and forced vacation time rather then a pay cut though). It wasn’t that bad. So I’ll go with that.
Although, it would be nice getting rid of some of the slackers at work. (And replacing them with non lazy ones)
It’s a debate we’re having at my job, with the difference that we got a temporary pay increase rather a pay cut.
I would rather keep working until it’s over or I actually feel sick. Many in the camp of “keep working,” though, keep wanting to pile on more and more elaborate procedures to stay healthy - temperature screenings, face masks and gloves required at all times by everyone, even a UV light tunnel at the entrance. As well as crazy amounts of “hazard pay.”
The other camp wants layoffs. Right now, you can stay home without pay if you’re really worried but aren’t actually sick, with no penalties as far as attendance. The problem is, of course, no money coming in. They’d rather the company lay off a percentage so they could collect unemployment, but there’s no legal/policy-consistent way to lay off the exact people that don’t want to come in.
Well, this has no chance of happening at my job. Our turnover is very high year-round and they are constantly hiring new batches of people and maybe 10% last a year if that. Right now a lot of people are staying home and the new hires are coming as usual. They are offering multiple pay incentives and still having trouble getting enough people to come in and stay all shift. So for me this question is purely hypothetical and I guess I’d go with B. Can’t see any reason to take a paycut, and if i’m talking about this job specifically it’s barely worth doing without tons over overtime anyway as that makes the difference between a low wage working class job and basically median wage-ish.
My company did actually implement 10% paycut for us worker-bees, with graduating percentage increases until it hit 50% cuts for CEO and similar levels.
However, things are changing so rapidly that a bunch of us (me included) are getting temp layoffs (currently three months but my gut feel is minimum five or six months - this is much bigger shit than most people seem willing to accept).
I personally don’t mind at this point as I could use a few month break and there’s little to spend on anyway. On the other hand my wife and I are bloody fortunate.
I don’t understand why these discussions always seem to assume that 1) The CEO makes a shitload more than the employees in salary and 2) that all companies are public companies with shareholders to be satisfied. My husband works in an essential business ( because his company supplies essential businesses) but sales have tanked because most of their customers ( hardware stores) have closed. My husband and his co-workers took pay cuts, but the CEO almost certainly took the biggest cut, because it’s a family-owned company with no outside shareholders. Since there aren’t many sales, there isn’t any profit - and my guess is the decrease in profit is far more than any employee’s pay was cut. I’m not crying for him but I am pretty sure at the end of the year his income is going to be down by more than the approx $1000 a week cut the highest paid employees got.
I mean sure, there are lots of big companies where the CEO making a load of money even as s/he cuts the other employee’s pay -but there are lots of small ones , too. Even small businesses are often corporations with a CEO.
But I think that in my first reply in this thread (post #2) I was allowing for that possibility. The later post which you quoted was supposed to be addressing only the cases coming under the second category in post #2, not those coming under the first.
You did allow for that in your first post, but in your second post you assumed that “Under the hypothetical, the CEO makes a market salary for his industry and size of his company.” meant that the CEO is making a shitload more than the employees and is not intending to take a paycut.
Assuming the industry is one that would bounce back relatively well once things normalize, will employers use the opportunity to make those pay cuts permanent (thereby screwing loyal workers) or will they restore wages?
If the business is essential, what is the cash flow like right now? A grocery store’s business is likely remaining stable or perhaps even increasing (cash flow still good). A hardware store might be “essential” but is likely losing business (cash flow heading south, less work to be done). An electric utility needs to provide the same level of service, but there are people who can’t pay their power bills right now (cash flow decreasing, same work required).
In each of these scenarios, how long could the employer keep things open with each option? The mom-and-pop hardware store would seem to be at most risk, while Home Depot et al either have more cash reserves, or more leverage with banks. A power company running into financial problems would likely see some sort of bailout because if those go down, we’re ALL in a whole lotta hurt.
All in all, I’d love to support the 10% pay cut option (as long as it isn’t made permanent absent a long-term downturn) - as a bit of hurt in a lot of families seems less destructive than a few families with a LOT of hurt. But that might not be enough for some companies to survive, especially since certain expenses (e.g. health insurance) do not go down as salary decreases.