Why Not Cut Everyone’s Salary By 10%?

If we were having an actual national emergency, rather than corporations happily sitting on piles of cash and handing out record bonuses and dividends, this might — might make sense. But since the only “emergency” here is corporate greed, I can only speculate as to why it only makes sense to take money from workers:

With 9.5 percent unemployment and millions more underemployed, it seems like a daunting, almost impossible, task to find jobs for everyone. But Ken Maryland, president of ClearView Economics, has an idea: Cut everyone’s pay by 10 percent.

“EVERYBODY — from the president down to the chambermaid — takes a 10% cut in compensation,” writes Marlyand for Marketwatch. “This freed-up compensation expense is then used to re-employ the 8% (12.3 million) of the unemployed. Net-net, the nation’s compensation bill has remained unchanged, and the unemployment rate is now 4.5%! Voila!”

The 4.5 percent Maryland refers to, is the optimal unemployment rate, which allows for employee turnover and doesn’t risk inflation. While his idea may seem crazy, companies have begun to do it in small fashion, as Maryland points out, by having furloughs and pay cuts.

Maryland says this has a chance because there’s an “inherent fairness” to the idea since everyone will be receiving the pay cut. But not really, since the employed would have to take the pay cut, while the unemployed will receive a significant increase in pay by suddenly having a paycheck.

Not to mention, the drop in pay doesn’t mean a mortgage that’s locked in will suddenly be cheaper or a car payment miraculously fall 10 percent. Maryland also says an issue with the idea would be making sure everyone falls in line, pointing out that unions would have a fit (although I’m not sure that CEO, whose pay increased more than anyone in business over the past 30 years, would be too happy with the idea as well).

5 thoughts on “Why Not Cut Everyone’s Salary By 10%?

  1. Been there. Done that.

    From one who has lived through a mandatory 2 day a month furlough for three consecutive months in 2009 (equals a 10% reduction in pay), this is a particularly shitty idea. Especially for those who make even less than I do. I at least had a spouse with an income. The single parents in my company really took it in the shorts for three months. And what guarantee is there that that 10% saved will actually go to hiring?

  2. Will prices drop 10%, too?

    Besides, corporations are still making profits, large ones. If they can’t hire a few people with that, then I don’t know what planet this guy thinks we’re living on.

  3. Giving corporations more money (10% pay cut) will not encourage them to hire more people. It does not increase the demand for their product, hence no increase in hiring. You would be better off by INCREASING everyone’s salary (except those already making over some large amount). With more money in their pockets, the average person (not the wealthy) will spend it, thus increasing demand, and thus, increasing employment.

  4. I’ve got a better idea. Why don’t we reduce the income of the top 1% income bracket by 95% and put the 20-25% (the correct number) of Americans who are unemployed in the US back to work.

    Or . . . or since everyone’s talking about rescinding citizenship of certain groups, why don’t we revoke the citizenship of that top 1%, confiscate everything they own and then put them in debtors prison for all the anguish they’ve wreaked on the world.

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