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Worst Idea Of The Year? Economist Says: Let's Just Cut Salaries By 10% To Fix Unemployment!

If we were having an actual national emergency, rather than corporations happily sitting on piles of cash and handing out record bonuses and dividends

If we were having an actual national emergency, rather than corporations happily sitting on piles of cash and handing out record bonuses and dividends, this might --- might make sense. But since the only "emergency" here is corporate greed, I can only speculate as to why it only makes sense to take money from workers.

I think it would make a lot more sense to take 95% from CEOs:

With 9.5 percent unemployment and millions more underemployed, it seems like a daunting, almost impossible, task to find jobs for everyone. But Ken Maryland, president of ClearView Economics, has an idea: Cut everyone's pay by 10 percent.

"EVERYBODY -- from the president down to the chambermaid -- takes a 10% cut in compensation," writes Marlyand for Marketwatch. "This freed-up compensation expense is then used to re-employ the 8% (12.3 million) of the unemployed. Net-net, the nation's compensation bill has remained unchanged, and the unemployment rate is now 4.5%! Voila!"

The 4.5 percent Maryland refers to, is the optimal unemployment rate, which allows for employee turnover and doesn't risk inflation. While his idea may seem crazy, companies have begun to do it in small fashion, as Maryland points out, by having furloughs and pay cuts.

Maryland says this has a chance because there's an "inherent fairness" to the idea since everyone will be receiving the pay cut. But not really, since the employed would have to take the pay cut, while the unemployed will receive a significant increase in pay by suddenly having a paycheck.

Not to mention, the drop in pay doesn't mean a mortgage that's locked in will suddenly be cheaper or a car payment miraculously fall 10 percent. Maryland also says an issue with the idea would be making sure everyone falls in line, pointing out that unions would have a fit (although I'm not sure that CEO, whose pay increased more than anyone in business over the past 30 years, would be too happy with the idea as well).

Not to mention the biggest flaw in this proposal: Namely, why would you trust executives to hire people after they cut salaries?

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