2020-09-13 —

The layoffs and furloughs of more than 25 million U.S. workers have understandably fueled most of the nation's anguish over the coronavirus recession. But that's not the only economic setback for workers: Many companies are trimming employees' hours or wages to reduce costs -- either instead of, or in addition to, the job cuts. For workers, a smaller paycheck may be a welcome alternative to losing a job, but economists say it still could hurt consumer spending and the economy, and representĀ an even more enduring legacy of the downturn than the layoffs.


Across the economy, most workers are not seeing their pay cut, but they are grappling with wage freezes or meager increases. From March through June, employers froze the wages of 58% of their workers, up from 36% during the same period last year, according to a recent study by the University of Chicago and payroll processor ADP. In the second quarter, the wages and salaries of private-sector workers edged up 0.4%, the smallest increase in five years, according to the Labor Department's Employment Cost Index.


Most affected by the reductions in hours or pay are furloughed employees returning to work, socking them with a one-two punch of financial distress... About 40% of furloughed employees have returned to work, according to Gusto, a payroll and benefits provider to more than 100,000 small businesses. Of those, 29% have come back to fewer hours or lower wages, according to figures through August that Gusto provided exclusively to USA TODAY. That compares with just 17% of a much smaller pool of furloughed workers called back during the same period last year.


Many workers have been recalled by restaurants or shops, for example, that mostly or completely shut down in the early days of the crisis, and then reopened but without indoor dining or at lower capacity and limited hours. That curtailed workers' schedules and pay.


The highest-paid workers have been hit hardest by the pay reductions, with 13.4% of employees in the top 20% based on wages experiencing salary cuts between March and June, says the University of Chicago-ADP study. With layoffs prevalent, pay cuts at the top could represent "shared sacrifice across the organization," Sternberg says.

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