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But there is an unsettling permanence to the falling-wage trend, as companies hold the line on compensation so they can compete in an increasingly global economy in which low costs are key to survival. The ugly truth, which you won't hear on the campaign trail, is that even as economic growth picks up--as it surely will--there isn't a lot Washington can do to encourage employers to hand out more raises. Cost pressures will be so intense during the next expansion, business experts say, that companies are likely to stick to their guns. They will outsource more work--including skilled and white-collar tasks--to cheaper labor markets. They will embrace pay-for-performance schemes, which generally reward only the top-ranked workers at each wage level. And they will shift more of the costs and risks of illness and retirement to workers, especially in steel and other heavy industries.
Consider Jacki Harris, who through no fault of her own makes 25% less than she did a few years ago. With overtime, Harris, 41, was making $59,000 a year for delivering airplane parts and keeping track of blueprints at a Boeing jet plant in Long Beach, Calif. She was relieved to keep her job through several rounds of layoffs. But as the ranks thinned, she lost her seniority edge and ended up as a clerk making $44,000 a year with no possibility of overtime. "I cried for a month," says Harris, a single parent with a 13-year-old son. "You do more with fewer people. They push and push." She is struggling with her mortgage, clipping grocery coupons and living in fear of losing her job. Says Harris: "I never miss a day of work."
Ron Kimball is also working for less pay. Two years ago, he was a computer-sales executive earning $130,000 a year. He leased two shining cars, ate out often and took expensive vacations with his wife. When the small computer-services company he worked for in Raleigh, N.C., went out of business in the summer of 2001, Kimball, now 58, was unconcerned. "I had never had a problem finding work," he recalls. But times had changed. He struggled to land a decent job, and the stress contributed to a heart condition that required surgery. Finally, a mortgage firm that had turned down Kimball for a loan-officer opening asked him to manage its website. He jumped at the offer. His new annual salary: $40,000.
It's not just factory workers and those in the beleaguered tech industry who are taking their lumps. Steve Doppelt, 36, is an advertising creative director in New York City. With his employer, Publicis Groupe, in the throes of a major shake-up, Doppelt last month left to take a similar job at Kirshenbaum Bond + Partners--for 10% less pay. O.K., he isn't starving. The new job pays more than $200,000 a year, and Doppelt is regarded as a rising star. But he no longer has a secretary, and he is working in a cubicle instead of an office and is investing less for his later years. Doppelt's plight is reflected in an unusual statistic: even among the top 10% of earners 25 and older, average earnings adjusted for inflation dropped 1.4% in the first quarter of 2003 from the same period last year, according to the Labor Department. At the other end of the spectrum, wages for young college grads fell 1.5% in 2002, reports the Economic Policy Institute.