Uh oh, first episode of wage deflation

FedEx is the first company to announce that it will cut its workers' wages:

FedEx on Thursday moved to slash employees’ salaries and other benefits in the face of what Fred Smith, chief executive, called “the worst economic conditions in the company’s 35-year operating history”.

The Memphis package delivery company, which has this year shed about $1bn in costs, reiterated that it expected earnings per share of $3.50 to $4.75 this year.

The pay cuts affect 36,000 of FedEx’s 290,000 employees and range from 5 per cent for mid-level salaried workers up to 20 per cent for Mr Smith. The reductions do not apply to hourly workers or contractors.

Note that FedEx is cutting wages even though it expect to continue to earn some very nice profits. Once one company gets away with breaking the taboo, expect the practice to spread quickly. If there were any remaining doubt that we are in a deflationary bust, this erases it.

Not good at all.

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haven't we seen wage deflation since 2000?

With the cost of living rising and then the more subtle things like offshore outsourcing, institutionalized age discrimination, discrimination against single mothers, etc. I think we have been having wage deflation or wage repression for years now.

Frankly FED-EX has some guts to announce this and also to plain give a wage reduction.

Many companies just plain fire people to thrash their workforce and hire in new people at much lower salaries and wages.

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