One alternative path to firing people used by some companies is to freeze the pay of employees. In some cases firms have such tremendous revenue problems that they lay off people and cap the pay of those who are left to man the ship. As the recession deepens, freezing salaries has become more wide spread, and nearly half of US companies may resort to the practice in the very near future.
According to Reuters, a survey by research firm ECA International show that “a quarter of the world’s companies, and 40 percent in the United States, plan to freeze salaries this year.” That may be good news for workers because instead of being fired they will simply get a raw deal on their compensation. It is very bad news for the federal government which is looking for every dime in IRS receipts that it can find to help deal with the federal budget deficit.
The survey also shows that workers in a number of companies outside the US will do much better either because their economies are stronger or because they have a limited pools of well-educated and skilled workers. Workers in Latin America, Vietnam, and Indonesia will see fatter checks. Some of that is due to inflation, but a large part is due to the fact that some of these national economies are still growing.
If the recession in the US deepens, the practice of pay freezes could certainly expand to more than 40% of American companies. If things get bad enough, no one will be able to get a raise at all.
Douglas A. McIntyre
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