Next to fall: your salary?
Are salaries across the nation set to fall next? That’s what David Leonhardt of the NYTimes thinks. The next slump is
likely to revolve around the worst slump in worker pay since — you knew this was coming — the Great Depression. … income for the median household — the one in the dead middle of the income distribution — will probably be lower in 2010 than it was, amazingly enough, a full decade earlier. That hasn’t happened since the 1930s.
This is a scary prospect. As consumers, we’re already feeling the pinch of inflation - the rising costs of everything, from food to medical bills. That means you have to spend more just to maintain your current lifestyle. Now, if David is correct, we could be in store for “an effective pay cut of somewhere between 3 and 7 percent for the typical family.”
Your earn/spend ratio is harder to maintain in recessions, but this is also the most critical time to keep it in balance. If you’re living within your means - ie, earning what you spend - now, then when the economy rebounds (when, not if), you’ll be in much better shape to get your savings back on track.
