Analyzing My Pay Cut

I had planned to turn in and get some shut eye, after a night of hearing my daughter wail her brains out due to a fever. But I just remembered that I picked up my paystub today, and tomorrow will be the first payday where in my whole career of working, I have taken a paycut. Now, I'll set some context here - I am not the only one who took a paycut. In fact, all 300,000+ employees in my company took a pay cut. So while I realize I am not alone, it still stinks nonetheless.

In thinking about this further, I am angry at having to take this paycut. I had no choice. But consider this. In the 12+ years I have worked with this company, I have exceeded my job goals and performance goals every year. In fact, for many years on end, I was in the top 5% of performers in my company. Of course, I got the corresponding raises that went with that, and enjoyed getting raises every year, until last year. I was then told that as a means of savings, they started to bell curve the performance of the team. Only x-percentage of people (and it was very low percentage) can be in the top 15 percentile performers. I was ranked there, but my manager was forced to move me into the standard ranking (which 70% of people in the company get, and despite the statements of my manager that my ranking was still good, I said to her, "whatever, you don't have to sell me this." I was told to my face that I should have been ranked higher. I know I should have, and both my performance and peer reviews would indicate such, not to mention my historic pattern of excellence in my performance. I track all my contributions, goal timeframes, performance expectations and have a huge spreadsheet every year which I send to my manager to buttress and demonstrate that he/she did not go wrong in ranking me as highly as they did. Guess that doesn't matter anymore.

So you can imagine my irritation at being told that we are all being forced to take a pay cut due to the economic climate. Well, my paycut essentially erased two years worth of raises that I worked hard to earn. Further, the paycut is not reversible at a later date. There is no justification aside from, "well, it was this or let people go." At first, I accepted that explanation, but the more I thought of it, it goes against everything I know is right about earning one's pay. And shockingly, it has made me evaluate the role of unions, something I have always been against.

I can't see legally how they can cut my pay. If it was sucky performance, then fine, it's justified. But it's not - it's just a cost savings measure, though it has been apparent to me that it also is used by company brass to line their pockets with bonuses. They should not be allowed to arbitrarily cut my pay like this. It has effects on any future severance package and pension. In some jurisdictions around the world, the company had to ask people to accept a pay cut. So far the overwhelming answer for people who have been tried to be sold this, is a resounding "no". Why is it that their pay structure is protected, but ours in North America is not?

Now, I can understand if a pay cut works like this - we don't pay you for x amount of days, so take x amount of days off. It's almost equivalent to asking you to stay home without pay. That, I suppose is a bit more palatable. But the way this pay cut is structured, we are still required to put in our normal hours, and our executives are telling us that we need to focus on the job more than ever. Well, perhaps I am missing something, but this is a huge morale blow to employees. How can you expect them to exceed, if not simply just maintain current service levels to the customer if they are essentially devaluing the services of the same employee by pay cuts. But legally, how are they able to do this? Conversely, what is to prevent me from deciding to work with a commensurate percentage less effort, in relation to the percentage of my pay cut? Now, I would not do that, since I have a bit more personal integrity than that, but this is what's happening around the company, with people showing up whenever the please, hoping that they may simply get let go so they don't have to deal with this. Remember, these are not lazy people here - these are not troublemakers - those were canned by the tens of thousands already via layoffs and cutbacks. These remaining folks are hard working individuals who have poured their daily energy in putting their best foot forward. It has made it tremendous difficult to maintain the same fervour.

Now, in times like this I try to remind others (and myself) that it can always be worse. My sister lost her well-paying job a few months back, instead of accepting a whopping 35% pay cut. Some people who have left frustrated have not found other jobs. And unlike many in my position, I still actually enjoy my job to a degree and really enjoy working with the people with whom I have been privileged to be colleagues. My job offers much flexibility for my family schedule and it is rather low stress at this point. So I can easily look at my pay cut and say that yeah, it sucks, but it can be worse, and I just need to find the fringe benefits of the job that may not be monetary. It's true not everyone would be in a similar situation - some people have rotten bosses, rotten colleagues, are overworked and are then forced to take a pay cut - thankfully, I'm not in that bad of a situation, so I have to remain thankful that I have a job.

But it does make me think about the value of unions, in particular how they would protect stuff like this from happening, at least without agreeing to it on behalf of the workers. Unlike 20, 30, 40 years ago, where hard work was almost always guaranteed with a raise and / or a promotion, nowadays, it's hard to send the same message to kids that if you work hard, you'll do well. Oftentimes nowadays, companies will not care about how you perform as an employee and would not structure the pay to work like that (even though many of these companies have so-called pay for performance type of systems - at least by name only). I have a real challenging time telling my son straight faced that hard work pays off. I really can't say that for sure, since I'm not sure if I still believe that, as much as I would like to. Publicly traded companies are so concerned about their stock price that they would forego proper employee compensation treatment in order to save a couple of bucks. I think that overall, however, this will really come back to bit many companies in the butt, in the long term.

The Proposed $700 Billion U.S. Economic Bailout

Earlier this week, the U.S. House of Representatives voted down the Bush

administration-proposed, and subsquently signifiantly altered, economic bailout package that was worth up to $700 billion dollars. That is a lot of money and if it makes you uncomfortable, it should. It is a lot of money.

After the bill's failure, the markets went for a huge tumble. The Dow fell in what was described as historic drops. I saw it in my own retirement investment portfolio (RRSP) and how it lost significant value over the span of a day. In looking at mutual fund and stock prices, I doubt anyone's portolio performed any differently than mine. Everything took a dive.

I am not an economist by any stretch of the imagination, but I really wonder whether this bailout package is the right thing for the U.S. Bush alluded to it in a prime-time address late last week (I believe) where he says normally he wouldn't consider bailing out those who make mistakes, and I see his point about what would happen if nothing was done, but maybe that's just what needs to be done - let's face it, the American economy is in a recession, and the signs of this have been evident for many years. My wife and I were talking recently and I think she said that it seemed like after 9/11, U.S. investments have been on a continuing spiral. I have picked up more U.S. funds in my portfolio in recent years thinking that it can't get any worse than the price for which I bought my units, but nope, the prices continue to slide.

I tend to agree with those who argue that this sends the wrong message to these companies who for years have been making risky, if not bad business decisions, taking chances on risky investments on a volatile housing market and paying their CEOs exorbitants amounts of money. To bail them out does seem to excuse these decisions, but I do realize it's not just the institutions' leaders that are affected - these firms have thousands, if not tens or hundreds of thousands of employees who would be unemployed, and that, surely cannot help the economy.

Some have said that why should the average Joe have to chip in for the mistakes of Wall street? This is true, and I can empathize with this point, since this $700 billion is taxpayer money. I think that by not doing this, though, it's going to come back to hurt them in other ways such as being refused credit or lending for things like loans and mortgages. With no money to go around, who's going to lend it?

However, while I put the blame on these institutions for not properly vetting their potential borrowers due to greed, I also fault borrowers in general who borrow more than they can afford or take risks in taking on more credit than they can afford. But isn't this the way the culture is right now - we have these stupid payday loan companies who will be happy to lend you money at a ridiculous interest rate to help you cover things until you get your paycheque. People should realize that if you're going to one of these places, you have a bigger problem than needing a quick loan.

To me, the bailout, while stablizing the economy for the short-term, does not really address the long-term issue of pure greed, both from the lender, as well as the borrower. The bill was revamped and passed a Senate vote yesterday, but still needs to go to the house. I hope it's defeated again.