Pay Freezes Abound, from Federal Government to Private Companies

President Barack Obama’s recent move to freeze pay increases among the White House staff has received quite a bit of attention lately – as every move he makes is sure to do – but the White House is not the only employer freezing wages to cut costs. The current recession, described most colorfully as "brutal" by some media outlets, has led such companies as Avis, Yahoo and the Tropicana Casino and Resort to freeze wages as well. Obama, who froze wages for employees in the White House earning over $100,000, noted that "During this period of economic emergency, families are tightening their belts, and so should Washington."

With the unemployment at a 16-year high of 7.2% and expected to climb further, it appears that a pay freeze is the least of many employees’ worries. Among the other steps taken by employers to cut costs are reducing pay and stopping contributions to 401(k) retirement accounts. Allen Sinai, chief global economist at Decisions Economics, Inc. has note that "All of that hurts, but nothing hurts more than losing a job. It is a growing trend as companies try to cut costs. Going forward, we will see more of this, absolutely."

Statistics would appear to back up Sinai’s assessment, as the Labor Department reported last week that those filing for unemployment benefits increased by 62,000, to 589,000. The number of individuals drawing unemployment benefits rose to 4.6 million, an increase that was much worse than economists’ predictions. Meanwhile, news that Yahoo employees will not receive pay raises this year highlights how the recession is affecting not just blue collar and union workers, as it typical during a recession, but spreading also to white collar positions.