Tuesday, August 5, 2008

Workers tighten belts as pay falls

Fewer full-time jobs, less OT, contract givebacks hit employees' wallets hard.

Jennifer Youssef / The Detroit News

As if the high cost of gasoline and groceries and the slumping housing market weren't bad enough, Metro Detroit workers are battling another economic force: the shrinking paycheck.

From the auto industry to retailers to home builders, companies are cutting payroll costs as they try to stay alive through one of the worst economic slowdowns in Michigan history. Some companies are turning full-time workers into part-timers; others are eliminating overtime; still others, particularly in the auto industry, are implementing new labor contracts allowing two tiers of workers, one making half the pay of the other.

Also feeling the pay pinch are self-employed workers such as house cleaners and hair stylists who are trying to make do with fewer customers.

Metro Detroiters are dealing with their shrinking paychecks by paring back their spending and looking for second jobs.

"The people we're seeing were living paycheck to paycheck and struggling anyway," said Dorothy Guzek, a financial counselor at GreenPath Debt Solutions. "They were doing OK, but because they lost a couple of hours of work, it put them behind."

The Farmington Hills-based financial counseling firm is seeing a lot more clients, up to 40 each week, Guzek said. Some 80 percent have had their work hours cut.

Average weekly earnings and hours for workers in two of Michigan's largest industries, manufacturing and construction, are flat or down, according to the Michigan Department of Labor and Economic Growth.

Employees at manufacturing companies lost $50 a week, comparing May 2008 with May 2007, and were down $2 a week comparing June 2008 with June 2007. June showed a slight uptick in auto worker earnings, according to labor department figures, after being down in May year-to-year. That doesn't take into account the tens of thousands of auto and construction workers who lost their jobs altogether.

If they haven't already left the state, laid-off workers are either still looking for work or have settled for jobs that are part-time or lower-paying, or often both.

Sharon Rose of St. Clair Shores was working 32 hours a week as a hairdresser, but business has been so slow that she's lucky to get 24 hours now. As a single mother, 27-year-old Rose was already having a hard time paying the rent, filling her gas tank and taking care of her daughter.

Nowadays, she skips the afternoon trips to Starbucks with her co-workers, brings her lunch from home and is looking at downsizing to a one-bedroom apartment because she can no longer afford the two-bedroom she's been renting for two years.

"It's just really hard," she said. "Sometimes I feel like giving up, but I know that's not an option. I don't want me and my daughter to be homeless."

Lower pay vs. being laid off

When the economy is weak, many companies cut workers' hours "just to keep their heads above water," said John Challenger of outplacement firm Challenger, Gray and Christmas. "They are looking at ways to save money, short of layoffs, to cut costs."

Layoffs are usually a last resort because once someone has been let go, "the die is cast and they'll be losing a valuable worker," Challenger said. "No one wants to (fire workers) when they're cutting into muscle."

The recent minimum wage hike in Michigan -- from $7.15 an hour to $7.40 on July 1 -- could force companies to further cut employee hours, said Mark Perry, an economics professor at the University of Michigan Flint campus.

"If companies want to stay in business in this competitive atmosphere, these cuts have to be made," Perry said. "If the option is cutting hours or losing your job, I think most people would choose lower pay."

Rose is holding on to her job at the salon, but she's considering picking up another part-time or full-time job at another salon or waiting tables on weekends.

"We'll make it," she said. "One way or another, we'll make it."

'It just kinds of stinks'

Thousands of workers across Metro Detroit are making the same tough choices, as they learn to live with their shrinking paychecks.

Before he took a buyout a little over a week ago, 46-year-old John Baisley, an electrician at American Axle & Manufacturing Holdings Inc., was earning $30 an hour, $2 less than he was before Axle workers went on strike over their labor contract in February. (His pay would have dropped further to $26 on Monday, if he hadn't taken the buyout.) Baisley also hadn't been getting eight hours of overtime a week that had been routine before the strike.

Between the pay cut and fewer hours, Baisley was taking home several hundred dollars less than he had been in the previous 13½ years he's been with the manufacturing company. To adjust, Baisley and his wife, Suzanne, ate out less and left their less fuel-efficient 1998 Chevy Malibu at home and shared the 1999 Saturn that gets better gas mileage.

Baisley also doesn't take his 1979 Camaro Z28 to costly drag racing events in Lapeer anymore.

While he looks for another job, the couple will live off their savings. It has helped that the Baisley family of Clinton Township has lived frugally, stashing away John's overtime pay.

"We've always lived on a 40-hour paycheck anyway, so it's not going to be real terrible," he said. "It just kind of stinks that you have to do it."

Dawane Richards has reduced his spending, too, since losing his $12-an-hour job stocking shelves at Farmer Jack after the grocer left Michigan last summer.

After job hunting for six months, the 30-year-old Detroiter found a job as a waiter. But he's making about 25 percent less than before.

His tips are down and he's worried that his days at the restaurant are numbered because fewer customers are dining there.

He said he misses going out with his friends for a drink. And he can't remember the last time he bought his girlfriend a gift or smoked his favorite cheap cigar.

"I'm making it, but I don't know for how much longer I can keep going like this," he said. "I'm lucky I got a job at all, but, I don't know, it's tough. It seems like I'm working all the time and not getting anywhere."

You can reach Jennifer Youssef at jyoussef@detnews.com.