Is a salary cut the solution to the current economic crisis?

Around the world workers are already complaining about poor salaries, which is making it difficult for them to have both ends meet on daily basis. Asking them to accept salary cut is just asking them to accept an increase in their financial hardship.

Many people have been hit by the increase in the prices of basic commodities, making their budgets overstretched. Those affected have to make do without -among other things- leisure activities to satisfy their demands for basic needs.

A salary cut means a halt to personal plans like getting a house or having a relaxing holiday. Should people spend their time looking for cheap goods , watching TV and chatting over empty beer glasses to reduce the effect of salary cuts? For people in the West, it will be difficult to ask them to help aid organisations like Oxfam to help the poor when they themselves need help. An impoverished person in the West means more impoverished people in the already poor countries.

A cut in salary can be accepted. It is far better than redundancy and receiving unemployment benefits (which is not the case in the majority of countries around the world). At the individual level, this can be a good compromise. But for the national economy, this can have devastating effects as other industries will suffer, especially leisure activities like tourism. Less money for tourism means a slowdown in the sectors related to it like aviation, hotels and so forth.

If a cut in salary is a necessary price for a promising economic recovery for all, let it be. It can be an opportunity for people to consider the era of ME is over and it must be the WE era. Ordinary workers can accept a salary cut if the bosses also accept to have drastic cuts in their income and to experience the financial limits until full economic recovery.

If salary cuts are general, how can the economy keep going? Less income means less spending. Tightening one’s belt can be acceptable if only it is temporary. Salary cuts and massive sacking of workers are an introduction to economic collapse. What is needed is a policy for economic stimulus to keep the production and consumption chain going.

1 Comment

  1. Royce Christian said,

    December 13, 2008 at 6:25 am

    Why is it that government has inherently lead to the problems in the economy our first calls is for another law to fix the one already created by government? One day lawmakers are playing at civil engineers, the next they are masquerading as doctors and health specialists, but I digress.

    “Economic Stimulus” plans aren’t going to work. In fact, it’s going to make things worse because when the plan doesn’t work, and that money is injected into the economy, the government needs to print more money out of thin air so it has something to spend. Meanwhile it is running up an increasing debt, which means even more money is created out of no where to fund whatever spending they wish. The stimulus packages are going to be returned to the pockets of the workers, pensioners, business owners or whatever division of society it is that receives it because they know uncertain times are ahead. So you have a currency that’s becomming increasingly worthless, government that’s increasingly in debt, and an economy that’s increasingly going to the dogs. Any immediate benefit by stimulus packages is going to be outweighed by all the future negatives — in short, economic stimulus packages are band aides for bullet wounds. Not to mention that the ‘tax’ governments are spending is acquired through theft, but that’s another argument for another time.

    Your discussion on whether workers should accept salary cuts is fleeting in this context. While a salary cut may push down the price of goods, making things more affordable, in the end many of those workers are going to be out of a job anyway. A salary cut won’t change the fact that the market has been warped by the external influence of the state, to the point where it’s going to hell and taking us with it.

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