A、Prices soar. B、Debt repayment becomes more difficult. C、Consumers are encouraged to wait for even lower prices. D、The cost of

Everyone knows about unemployment. But millions of working Americans are now facing a less familiar and perhaps more troubling problem: shrinking wages. It’s a phenomenon that takes many forms. Some workers have had to swallow outright pay cuts. Others have lost their jobs and, in the tough labor market of today, have had to settle for new ones at less pay. Still others—including employees at such giants as AT&T, Boise Cascade and Starwood Hotels—have had to accept pay freezes that, when rising prices are factored in, amount to reduced compensation. To add insult to injury, companies everywhere are reducing bonuses and overtime and eroding health and pension benefits.
    The numbers are grim. For the 500,000 workers laid off since January, the average job search has stretched to a 19-year high of nearly five months—about twice the duration of the typical severance package. According to outplacement firm Challenger, Gray & Christmas, 17% of those who do find work—nearly double the historical percentage—are settling for less pay. The net result of the various pressures on pay is in the first three months of 2003, median weekly earnings adjusted for inflation fell 1.5%, according to the U.S. Labor Department. That’s the biggest drop since 1991, according to Jared Bernstein, an economist at the Economic Policy Institute, a research group based in Washington. Wage erosion partly explains why the Federal Reserve Board openly frets about the threat of deflation, a downward spiral in prices that can cripple an economy by making debt repayment more difficult and encouraging consumers to wait for even lower prices. Adding fuel to the deflation debate, the cost of goods to both consumers and manufacturers fell in April, officials reported last week.