Iowa State University researchers examining the economic downturn, say Iowans that have been fortunate enough to avoid seeing their jobs cut have likely seen their hours trimmed. Economics professor, Peter Orazem, says the cutbacks in hours help businesses and employees.
Orazem says people are getting their hours cut and as a consequence, even though wages haven’t fallen, average weekly earnings have fallen.
He says though, the earnings haven’t fallen as much as you might think. Orazem says businesses like to use cutbacks in hours instead of slicing into employees’ paychecks. He says cutting pay is less common, because businesses don’t want to lose their best workers. Orazem says even though the economy is down on average, some firms are still hiring, and are looking to raid the best talent of their competition.
Orazem says businesses are also looking ahead to an upturn in the economy and want to keep the workers they’ve already trained. Orazem says there tends to be "labor hoarding" in a down economy so firms can be ready for a turnaround. He says the hoarding means there tends to be a lag in people being hired when the economy turns around. Orazem says once things turn around, those employees that had hours cut are given more work before the company hires new workers. Orazem says those with jobs could benefit if inflation increases.
Orazem says in the Great Depression, people who kept their jobs were paid more because prices were falling at a greater rate than wages. He says the people that lose their jobs are the ones who really get hurt the worst. An Iowa Workforce Development spokesperson says the April unemployment numbers showed some manufacturing companies had already brought back some workers on temporary layoff. The state agency says it’s too early to tell though if the labor situation is headed for a turnaround.