Wage deflation is only just beginning in this economy, so you have to ask yourself some tough questions. What are your alternatives, as far as other employers, bargaining power with this employer, your competition via his hiring others, whether you can make the new setup temporary, etc.
Unemployment and employment changes lag the real economy, and wage trends up and down lag even more. So expect a lot more wage deflation to unfold. Beleagured employers can now dictate terms in this new environment, and employees will simply be happy to have a job. Of course, the wage deflation is primarily in the private sector which responds more to supply and demand–government workers have far “stickier” wages.
If it is any consolation, countless things now cost less. Our official inflation rate of approximately -.5% greatly understates the deflation now occurring.
