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Americans adapt to earning less, but paychecks may never recover

Richard Siegel is not among the unemployed. Between running a charity, writing songs and doing stand-up comedy, he's got gigs aplenty. He's just making about half of what he once did.

BALTIMORE - Richard Siegel is not among the unemployed. Between running a charity, writing songs and doing stand-up comedy, he's got gigs aplenty.

He's just making about half of what he once did.

Despite the gradually improving job market, millions of Americans are earning less. They are the jobless - but also those who can only get part-time work, those who have landed new jobs with lower salaries than what they once earned and others simply getting smaller paychecks in the jobs they've had all along.

It's a problem that could affect their earning power for the rest of their working lives, a study on the similarly punishing 1982 recession suggests. And it packs a financial wallop now.

The downward pressure on wages caused by fierce job competition ripples through the economy to grocery stores, retailers and businesses getting less money from reduced-income customers, and it's a hardship for workers trying to figure out how to pay their bills.

In Siegel's case, he brought in about $60,000 a year before his primary job as promotions director for a comedy club was eliminated. The 49-year-old Parkville, Md., resident now relies on his remaining part-time work, which cuts his annual earnings to less than $30,000.

"You can't live on that," said Siegel, who has joint custody of his 12-year-old son, Charlie. "I've been getting some help from my family and a patient landlord."

Unlike the unemployed, now at 10 percent of the population or 15 million people, workers with diminished earning power are a poorly measured part of the labor force. The federal government doesn't track the entire group on a regular basis, only the number of Americans working part-time despite wanting full-time employment.

More than 9 million people were stuck in that situation in April, including workers whose hours had been cut because of slack business conditions. That's more than double the number from three years ago, before the recession began.

And they aren't the only workers feeling the income pinch.

Nationwide, half of employers froze pay for at least some workers last year and 13 percent made salary cuts, according to a survey by WorldatWork. The human resources association announced in January that more than one-third of the pay-freezing companies didn't have plans for raises again this year. Many of the firms that cut salaries last year also didn't expect to reverse course soon - 15 percent said the reductions would be permanent.

In Maryland, 70,000 state employees haven't had cost-of-living raises since the 2007 fiscal year. This fiscal year they're losing three to 10 days of pay through furloughs, depending on how much they make. The same number of furlough days are planned for the fiscal year that begins July 1, though Maryland Gov. Martin O'Malley is hoping those will be the last required to help balance the annual budget.

"It was either that or lay off a couple thousand people," said Patrick Moran, director of AFSCME Maryland, part of the American Federation of State, County and Municipal Employees union. "Our members came to the conclusion that it was better to keep people employed."

Losing a job during a rough economy can have a lifelong impact on earnings.

Americans who were part of mass layoffs during the 1982 recession took 30 percent pay cuts on average in the short term and never fully recovered, according to a 2009 study by researchers at Columbia University, the Social Security Administration and Congressional Budget Office. Fifteen years to 20 years later, they were making 20 percent less on average than similar workers who weren't laid off.

That recession had been the worst since the Great Depression - until the latest one began at the end of 2007.

"While these earnings losses vary somewhat among demographic groups or industries, no group in the labor market is exempt from significant and long-lasting costs of job loss," co-author Till von Wachter of Columbia University said in congressional testimony last month.

It's not happening to everyone, but laid-off workers are frequently accepting lower pay at new jobs or through temporary consulting positions these days, said Mitch Halbrich, a senior managing director in the Baltimore office of the Mergis Group, a staffing agency.

"Any money is better than no money," said Halbrich, who focuses on white-collar fields such as accounting, finance, information technology and human resources.

Andy Bauer, a regional economist for the Federal Reserve Bank of Richmond's office in Baltimore, isn't expecting a quick return to rising salaries - not with so many unemployed Americans looking for work. Even Maryland's better-than-average jobless rate of 7.5 percent is at a 27-year high.

"Once we've removed this excess supply of labor from the labor market, then you should start to see wages moving forward again," Bauer said. "It's going to take some time, unfortunately, just because we have such a large part of the labor force that's unemployed or underemployed."

Nottingham, Md., resident Jan-Ryder Hilton, 33, sees a long future of scrimping and saving ahead. He lost a $40,000-a-year job in May 2009 and landed a contractual position this year that will pay him about half as much. Many of his friends are struggling, too. It seems like the new normal to him, not a temporary speed bump in the road to prosperity.

"My perspective is that the economy is not going to get back to what it was," he said. "It's just a matter of living life this way, and trying to live within your means."

Some families are finding they can't make it, now that their incomes have been reduced. Among the homeowners turning to Baltimore's St. Ambrose Housing Aid Center for help avoiding foreclosure are workers earning less than they did a year or two ago. In some cases, "considerably less," said Anne Balcer Norton, the nonprofit's director of foreclosure prevention.

"People are making the difficult choices they need to make - they're spending less, they're trying to budget - but still ... it's a real challenge," Norton said.

Salary cuts to a variety of workers weren't enough to completely offset increases elsewhere in Maryland. The state was one of the few where net earnings rose last year, a study by the U.S. Bureau of Economic Analysis found. The gains came from state residents working in D.C.; wages paid by Maryland employers fell slightly.

The hit was sizable in some sectors.

The average weekly wage for finance jobs in Baltimore, for instance, dropped from $1,720 in the summer of 2008 to $1,540 last summer, according to the latest data from the state Department of Labor, Licensing and Regulation. That's a $9,400-a-year cut.

Hilton, the Nottingham resident, can beat that.

"I lost about $20,000 a year," he said. "Pretty devastating."

He's teaching computer and multimedia-technology courses at the Community College of Baltimore County, which he enjoys much more than the insurance claims adjuster job he was laid off from last year. The trouble is that it's contractual work with no benefits, and it could end any semester.

He feels fortunate that he's not trying to make a go of it alone. He rents an apartment with his girlfriend, a manager for the American Red Cross. But his drastic drop in income has been stressful all the same. And it's a strain on their relationship.

"Anytime we want to do anything, get out of the house, you have to constantly feel guilty about every dollar you spend," Hilton said. "Buying each other gifts for Christmas, it was horrible. She had a birthday (in May), and I didn't have a dollar to my name, and I couldn't afford to put anything on a credit card."

He's thought about pursuing a master's degree so he could land a full-time teaching job with better pay. That would require three years of study "and probably $10,000 more in debt," he said. Before he goes that direction, he's trying to find an information-technology job.

Siegel, the Parkville resident, has been getting by on his main part-time job - running the Funniest Celebrity Charity Fund, which raises money for nonprofits by persuading politicians, athletes and other people with name recognition to show off their stand-up comedy chops.

He spent months looking for a job in promotions or public relations to replace the position he lost in early 2009. "I must have sent out 100 resumes without getting any reply whatsoever," he said. "I hang out with senators and congressmen, and yet I couldn't pay my bills."

So Siegel, like Hilton, is switching careers. He just finished his first semester in a master's degree program for counseling psychology at the University of Baltimore, financed with student loans.

In the meantime, he's looking for another part-time job - one in his new field. He's confident that the change of specialties and additional education will position him for better earnings than he had before the recession, not worse.

"I know I'm going to have a future that's going to be financially rewarding, and I couldn't say that a year ago," Siegel said.

(c) 2010, The Baltimore Sun.

Distributed by McClatchy-Tribune Information Services.