When a New Job Means a Pay Cut

By Christopher Leonard, AP Business Writer

Unemployed for nearly a year, David Becker was relieved to land a new job in information technology last summer.

The offer carried a price, though: It was a lower-rung job than the one Becker had lost. He had to uproot his family from Wisconsin to Nevada. And, like many formerly jobless people who find work these days, Becker is now paid far less than before — $25,000 less.

It's one of the bleak realities of the economic recovery: Even as more employers are starting to hire, the new jobs typically pay less than the ones that were lost.

In the government's data, a job is a job. More jobs point to a growing economy. But to people who used to earn $60,000, a new $40,000 job means they'll spend less — and contribute less to the recovery.

"In most cases, it means a subdued expansion, for sure," said Marisa Di Natale, director at Moody's Economy.com.

Worse for those affected, people hired at lower wages in a tight job market tend to lag behind their peers for years, sometimes decades.

For example, workers laid off during the 1981-82 recession earned 20% less than people who remained in a job — even 20 years after they were rehired, a Columbia University study found. The study examined pay for white- and blue-collar workers, managers and hourly workers.

That means a few short months of unemployment could haunt workers such as 34-year-old Jessica Moore for years.

Moore had been employed since graduating from Penn State University more than 12 years ago. But in March, she was laid off from her job as managing editor for digital media at the nonprofit Sesame Workshop in New York, which produces "Sesame Street."

In April, Moore got an interview for a job opening as editor and publisher of the nonprofit Teen Voices magazine in Boston. The job paid 25% less than her previous position. And the company was a fraction of the size of Sesame Workshop.

Still, she leapt at the offer.

"I wanted the immediate security," she said.

If you liked this article you might like

Counterfeit Toys Are a Consumer Rip-Off -- And Health Hazard to Children

Obamacare Contraception Mandate Woes Continue

Cannabis Colleges Educate Budding Ganjapreneurs

4 Things to Avoid Before Closing on a House

Why 401(k) Savers Are Like Bad Boyfriends