Economic woes mean smaller paychecks

Allison Linn Senior writer • Profile • E-mail

Troy Anthony Powell has been running Tap’s Barber Shop for nine years and has seen business get better every year — until this year.

With the economy in a slump, Powell said loyal customers who used to come in for a haircut every week or even more often are now coming in every two or three weeks instead. Whereas some customers used to tip $5 or $10 on a $15 or $25 service, now that’s down to $3 or even just a promise that “I’ll get you next time.”

And when they do sit down in the barber’s chair, the conversation often turns to the economic pinch that everyone seems to be feeling these days.

“Within the last two months I’ve really seen a decline in business because I think a lot of people out there, they’re struggling, they’re having economic problems,” he said.

That’s translating into financial doldrums for Powell, 42, as well. This year, Powell expects to make about half as much money as he did last year in his suburban Minneapolis shop.

As the effects of the nation’s financial crisis ripple across the country, many Americans are left holding jobs but taking home less money than they have been accustomed to earning. Hundreds of msnbc.com readers who responded to a Gut Check America call said they have seen their hours or wages cut, or that their tips and commissions have fallen sharply, because of the weak economy.

The responses reflect a national trend. According to the Bureau of Labor Statistics, the number of people who are working part-time but would like full-time work has risen by 1.6 million, to 6.1 million, over the past year. That figure increased by 337,000 people in September alone, the Labor Department said.

Heidi Shierholz, an economist with the Economic Policy Institute, said the sharp rise in the ranks of the underemployed has come as a big surprise and will likely end up being yet another blow for working families and the economy as a whole. That’s because it translates into less money to buy both necessities and discretionary items. That means less consumer spending, a key driver of the U.S. economy.

For Powell the drop in income means that he and his wife, a paralegal, are shopping and going out less, and probably will not be taking any trips this year. Powell has been able to keep his three other barbers on staff at the Richfield, Minn., shop, but he had to scrap a plan to provide them with health insurance.

Still, Powell said he has savings to fall back on, and he feels he has built up his business enough to weather the storm.

“I’m cutting back, but I do still feel like I’ll be all right,” he said.

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