Are Sticky Wages Stickier Than Sticky Buns?

Felix Salmon posts about the idea that employers don't like to reduce wages in a recession or economic downturn:

"David Leonhardt on deflation, Wednesday:

The drop in prices, which isn't over yet, will make life easier on millions of people. It's possible, in fact, that the current recession will do less harm to the typical family's income than it does to many other parts of the economy.
The reason is something called the sticky-wage theory. Economists have long been puzzled by the fact that most businesses simply will not cut their workers' pay, even in a downturn. Businesses routinely lay off 10 percent of their workers to cut costs. They almost never cut pay by 10 percent across the board.

Fedex press release, Thursday:

FedEx is now implementing a number of additional cost reduction initiatives to mitigate the effects of deteriorating business conditions, including:
Base salary decreases, effective January 1, 2009:
* 20% reduction for FedEx Corp. CEO Frederick W. Smith
* 7.5%-10.0% reduction for other senior FedEx executives
* 5.0% reduction for remaining U.S. salaried exempt personnel

Fedex is largely non-union, which means that most workers are taking a pay cut. I'm not sure this is necessarily a bad thing, if it avoids layoffs and reductions in service quality, instead spreading the pain around more thinly. But it does point to the possibility that this recession will indeed be different, and that it might mark the beginning of the end of sticky wages.( COULD BE. PROACTIVE FEAR OVERRIDING EVERYTHING ELSE )

There's been a huge shift in power in recent years from labor to capital: corporate profits have been rising much faster than wages for some time now ( DON'T TELL THAT TO PEOPLE WHO BELIEVE THAT ORGANIZED LABOR IS TOO POWERFUL ). It makes sense that capital would make use of its newfound power to reduce labor costs in a deflationary environment of rising unemployment. During the boom, companies laid off workers because those workers demanded, and cost, too much money. Now that workers have lost their negotiating leverage, we might start seeing more across-the-board pay cuts." ( COULD BE )

I would say that, in the case of FedEx, my understanding is that they are fighting for their life. In a possible bankruptcy situation, cutting wages is much easier. It might well be that in this current situation many businesses will end up near bankruptcy and that wage cuts could be higher than usual. It might also be that the fear and aversion to risk has effected workers to the point that lower wages in exchange for a job seems a good deal.

However, let me raise a few points:
1) Productivity is still rising
2) Worker's morale is not something you want to help depress in an already downbeat situation
3) As I pointed out in " I Don't Work In AIG Crap", workers who have made money for the company are not going to be happy taking a pay cut for other people's losses. It is possible that such treatment will lead them to look for another job, leading to the possible loss of the best employees of the business.

It might well turn out that wages aren't as sticky as they used to be, and it might also turn out to be a very bad thing for businesses and the economy, as well as the workers.