Most Americans would accept a pay cut to avoid being laid off: According to a survey

Although the Great Resignation started in early 2021, it wasn’t until 2022 that this trend of employees leaving their employment freely started to spread across the nation. In 2022, the number of people quitting their jobs will reach a record high of 50.5 million, breaking the previous record of 47.8 million set in 2021, according to CNBC, data from the Bureau of Labor Statistics.

In order to maintain long-term profitability, both large corporations and small businesses continued to lay off workers throughout 2023, even as new job vacancies supported a burgeoning U.S. labor market. (Photo: Nasdaq)

Pay cutbacks are rarely brought up as a possible alternative prior to layoffs

In an article from GOBankingRates, major enterprises and small firms both continued to lay off employees during 2023 in the sake of long-term profitability while fresh employment openings fueled a hot U.S. labor market.

A recent study discovered that, despite workers’ readiness to accept lower compensation in lieu of losing their jobs, pay cutbacks are rarely brought up as a possible alternative prior to layoffs.

An NBER study of recently laid-off employees found that “Employer reluctance to offer wage cuts becomes more puzzling in the face of widespread worker willingness to accept them.”

According to the NBER working paper “Sticky Wages on the Layoff Margin,” 60.6% of survey participants would take a 5% wage drop to keep their employment. Meanwhile, nearly a third of respondents (32.4%) and more than half (52.3%), respectively, said they would accept a pay decrease of 25% if it meant continuing in their current position.

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Despite the fact that those results exceeded expectations, the study found that, in practice, when layoffs are imminent, neither employers nor employees frequently take the initiative to discuss or adopt decreased pay agreements, pay cut.

Less than 3% of respondents claimed that their employers had offered them a salary cut to keep their jobs, according to the study’s co-authors Pawel M. Krolikowski, a senior research economist at the Federal Reserve Bank of Cleveland, and Steven J. Davis, a professor of economics and international business at the University of Chicago Booth School of Business.

Furthermore, only seven out of the 2,567 respondents to the study brought up the idea of taking a pay cut to keep their positions.

In their study, Krolikowski and Davis discovered that cooperative wage reduction agreements between employers and employees might prevent 28% of layoffs. These agreements would be advantageous to both parties because the employee would still be able to keep their job and the firm would still be able to save money, reports from Nasdaq.

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