Research shows that children of workers who lose jobs and go back to work at lower wages appear to suffer from lower wages, too. In a 2008 study, a group of economists tracked the wages of 60,000 father-child pairs from 1978 to 1999. Children whose fathers went through mass layoffs in the 1982 recession ended up with 9% lower earnings than similar children whose fathers didn’t experience the job cuts.
The impact was concentrated in children from lower-income families. “When someone at the bottom of the income distribution loses their job, the loss of income is much more likely to involve losing things that matter for the family to sustain itself,” says Marianne Page of the University of California, Davis, one of the researchers.
Part of the wage adjustment after a downturn rests on how much workers are willing to give up.
After seven years working in regional sales in Southern California for Diebold Inc., a manufacturer of ATMs and security systems, Virginia May says she was earning $30 an hour plus bonuses when she and 800 colleagues lost their jobs in early 2008. She took a seven-month stint with the Census Bureau last year, earning $25 an hour, but struggled to find the same wage anywhere else. Ms. May says she turned down 10 job offers out of 58 interviews. One of them was as an office manager, similar to the job she had at Diebold, paying $10 an hour.
“When it comes down to it, they want to offer us peanuts to work,” she said last fall.
Ms. May, 63 years old and never unemployed before the latest downturn, runs a group for unemployed professionals in the Los Angeles area. “The first thing we teach all of our members is: ‘Don’t accept the first offer, always go into negotiation with them,'” she says. “Some of the people are afraid to, because the market is so tough out there.”
After cashing out half of her $90,000 retirement account to get by, Ms. May had started eyeing part-time jobs and wages at $20 an hour or less. But she pulled through. A few days after Christmas, just as her unemployment benefits ran out, she got a job as an office administrator in California. Her pay, she says, “is more than I expected” and “just a little above what I was making two years ago.”
Others, like Mr. Cronan, the Starbucks barista in Massachusetts, take whatever work is available. He lost his job in January 2009 at a Boston money-management company, where he says he earned a $100,000 salary and $50,000 annual bonus in recent years. Mr. Cronan, 40, enrolled in adult-education courses and tried to wait out the downturn as he saw other people with MBAs take entry-level, $40,000-a-year jobs.
But once his 19-month severance period ended, Mr. Cronan needed health insurance and decided he couldn’t limit his search to only his field. So, in August, he got a job at his local Starbucks—the one he’d visited daily since losing his job—even though he expects to leave once he finds employment in his field.
He says he’s now earning $8.85 an hour for about 38 hours a week of work.
The Arlington, Mass., resident is continuing his job search with new expectations for how much he’ll earn when finance jobs in his specialty, currency, come back.
“If I’m offered $75,000, that’s a lot more than I’m making now,” Mr. Cronan says. “It’s a realistic approach. You can’t live looking in the rearview mirror.”