Pay freeze trend growing through recession
WASHINGTON — What do Tropicana Casino and Resort, Avis and the White House now have in common?
They're all freezing the pay of some of their workers. It's part of a growing trend by employers facing the fallout — economic and political — from a brutal recession.
For companies, pay freezes are a key cost-cutting tool for surviving hard times.
For President Barack Obama, who ordered a pay freeze for White House employees earning more than $100,000 a year, the move on his first full day in office sent a message to a nervous country: We're in this together.
The unemployment rate has bolted to a 16-year high of 7.2 percent. Last year, 2.6 million jobs vanished, the most since World War II. The jobless rate is expected to march upward and layoffs to pile up even with a multibillion-dollar stimulus package being crafted by Obama and Congress.
More squeezed employers, though, are seeking an alternative to layoffs. They're turning to pay freezes, pay reductions and other cost-cutting options, such as ending their contributions to 401(k) accounts.
The Federal Reserve has taken notice. In a recent survey of economic conditions, it observed that in some parts of the country, companies were resorting to "pay freezes or reductions in compensation."
A wide range of employers have followed suit. In some cases, they're imposing pay freezes or cuts to avoid immediate layoffs, though economists say such steps tend to lead to layoffs anyway. In other cases, employers are cutting or freezing pay and laying off workers.
