The economy seems better than it was two years ago. The Dow Jones has hit the 12,000 points mark and unemployment rate seem to be going down as the months passes by. On a recent statistics by BLS, the unemployment has dropped to 9% in January.
However, there are still a Â lot of companies that are struggling to make it. Some have already filed bankruptcy and shut down their operations while others are still experiencing slow sales or cash flow problems. The unemployment rate is still high in some areas Â as more people are still getting laid off. In my circle of friends and families, a lot of people that were closed to me were either got laid off or has experienced reduction in salary.
- My brother, who worked as a cost accountant in the manufacturing industry, was laid off because of slow sales.
- My cousin, who also worked in the manufacturing industry as a technical specialist, was also recently laid off because of slow sales.
- My friend, who worked in logistics, has seen a big dropped in shipping of imports and exports. He was also laid off last year because the company filed for bankruptcy. Fortunately, he Â found a job after two months but he is only working part-time in the same industry.
- My friend, who is a mortgage loan officer/processor, also got a pink slip. I think this is long coming as he was fortunate to have lasted this long.
- Another friend, who works for the State of California, had experienced furloughs and reduction in salary last year.
It seems that during the hard times, most companies will cut the number of employees first before they cut salaries. Although, cutting salaries would be good for everybody because companies do not have to re-hire and re-train employees when sales start to pick-up. It’s also good for employee morale.
It is tough to lose a job especially if you are the only breadwinner in the family. Unemployment benefits can only do so much financially that is why having an emergency fund is a must especially at times like this. In may also affect you emotionally knowing that you feel helpless. On top of this, you also need to be aware of the tax issues that you may not know about such as what to do with your retirement, the cobra health insurance, tax deductions and credits that you can use, and any taxable income that you need to report. For some, this may be a good time to change career by going back to school, which is the strategy that my brother and cousin is doing. My brother is pursuing a master’s degree while my cousin decided to continue with his bachelor’s degree. They can also use the educational tax credit such as the American Opportunity Credit (for my cousin) and the Lifetime Learning Credit (for my brother).
My employer is also getting hit with budget problems. Fortunately, they have not considered laying off people and they have not cut our salaries yet. However, for a year, we won’t be receiving the full 4% matching contribution on our 401(k) retirement plan. Any reduction in employee benefits is also considered a reduction in salary. In my case, I have to fork out an extra 4% out of my salary in order to keep the same monthly contribution so that I can meet my retirement goal. In essence, my employer has cut our salaries by 4%. I think a salary reduction is still much better than not having a job at all so I really can’t complain much especially if the people around me don’t even have a job.
How about you? Has your employer made any recent cuts?