It is just before 6 am and I logged on to the New York Times. Two headlines say it all:
The first story is about the difficulties in getting A.I.G to reduce or not pay $198 million to employees of the trading unit. The same unit that is part of the cause of this recession.
But the Treasury’s special master for compensation, Kenneth Feinberg, is running into legal hurdles because those bonuses fall outside new rules against bonus payments at companies receiving government assistance. The bonus agreements at issue were struck before last year’s emergency rescues by the Treasury and the Federal Reserve, and thus are not directly covered by the new rules.
The problem is a recurring one. A.I.G. payments early this year to the same employees elicited public outrage, though government officials said then that they had little legal authority to rescind pre-existing contracts.
The second story is about people who still have jobs, but have taken deep pay cuts and/or demotions in pay grade to keep their jobs.
In recent decades, layoffs were the standard procedure for shrinking labor costs. Reducing the wages of those who remained on the job was considered demoralizing and risky: the best workers would jump to another employer. But now pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.
State workers in Georgia are taking home smaller paychecks. So are the tens of thousands of employees in California’s public university system. The steel company Nucor and the technology giant Hewlett-Packard have embraced the practice. So have several airlines and many small businesses.
Let’s face it. AIG is not solely responsible for the economic crisis. Many of the rest of us were also riding high and spending beyond our means. The couple in the paycut story is an example. Both seem to have their self esteem tied up in the amount of money they make.
But most of the rest of the world must now scale back while a company which played a large role in the collapse still gives out bonuses. Makes you wonder. Hope the bonus recipients save the money for their rainy day.