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In California, former auto worker Maria Gregg was out of work five months last year before landing a new job -- at a nearly 20% pay cut.

In Massachusetts, Kevin Cronan, who lost his $150,000-a-year job as a money manager in early 2009, is now frothing cappuccinos at a Starbucks (SBUX, news)for $8.85 an hour.

In Wisconsin, Dale Szabo, a former manufacturing manager with two master's degrees, searched for years for a job comparable to the one he lost in 2003. He's now a school janitor.

They are among the lucky. There are 14.5 million people on the unemployment rolls, including 6.4 million who have been jobless for more than six months.

But the decline in their fortunes points to a signature outcome of the long downturn in the labor market. Even at times of high unemployment in the past, wages have been very slow to fall; economists describe them as "sticky." To an extent rarely seen in recessions since the Great Depression, wages for a swath of the labor force this time have taken a sharp and swift fall.

The only other downturn since the Depression to see similarly large wage cuts was the 1981-'82 recession. But the latest downturn is already eclipsing that one. Unemployment has stood above 9% for 20 straight months -- longer than the early 1980s stretch -- and is likely to remain above that level for most of 2011, putting downward pressure on wages.

More settle for less

Many laid-off workers who have found new jobs are taking pay cuts or settling for part-time work when they get new ones, sometimes taking jobs far below their skill levels.

Economists had wondered how far this dynamic would go in this recession, and now the numbers are starting to show it: Between 2007 and 2009, more than half the full-time workers who lost jobs that they had held for at least three years and then found new full-time work by early last year reported wage declines, according to the Labor Department. Thirty-six percent reported the new job paid at least 20% less than the one they lost.

The severity of the latest downturn makes it likely that many of the unemployed who get rehired will take wage cuts, and that their wages won't return to pre-recession levels for years, if ever, says Columbia University labor economist Till von Wachter. "The deeper the recession, the lower the wage you're going to get in the next job and the lower the quality of your next job," he says.

While difficult for individual workers, lower wages can make U.S. industries and companies overall more competitive and allow employers to hire more workers than they would otherwise. In the long run, that may make the nation more prosperous.

South Seas Island Resort, which employs about 300 in Captiva, Fla., cut jobs during the downturn, but has now begun adding staff.

"Right now I view this as an employer's market," says Rick Hayduk, the managing director, who says the resort is attracting senior people at lower salaries than before. "The past 24 months have taken a toll on a lot of individuals," he says. "I think they abandoned their hopes to receive compensation similar to what they did when they lost their jobs. We have been able to re-evaluate some of our starting wages."

The upshot: The resort will keep labor costs flat this year, even as revenue picks up and the resort selectively adds workers.

Overall, U.S. wages continue to grow, but at a slow pace. Wages and salaries for civilian workers were up 1.5% before adjusting for inflation in the 12 months ended in September, according to the Labor Department's comprehensive Employment Cost Index, which compares wages in the same jobs and doesn't reflect wages of people switching careers. Over the same period, consumer prices rose 1.1%.

'Facing reality, rethinking dreams'

Gregg, 45, the California auto worker, says she at least had a chance to prepare for tougher times. She spent two decades working for New United Motor Manufacturing, a Fremont, Calif., joint venture between General Motors (GM, news)and Toyota Motor (TM, news), before the plant closed in April 2010. The factory had warned workers seven months earlier that it was closing. "I was preparing myself beforehand and getting all my bills lowered," she says.

She considered pursuing her dream of starting a small business, perhaps an ice-cream parlor. She contemplated going back to school. But she says that with her income cut from $1,200 a week at the auto plant, where she was a technician, to $450 in unemployment checks, she couldn't afford those things, in part because she was supporting her daughter, who had just entered college.

She recently joined a startup energy technology firm. The pay is $28 an hour, $6 an hour less than in her prior job, but she jumped at it. Though she's already cut back on travel, eating out and shopping, she wonders how she might make up the wage gap over time.

"I do want to make more money," Gregg says. "The only way I'm going to get back to that is if I go back to college and get more of an education."

Problem lingers for decades

Von Wachter, the Columbia economist, has studied three decades of Social Security data in order to track the paychecks of workers from the 1981-82 recession who experienced sudden mass layoffs. Those workers saw their earnings drop 30% on average, compared with similar nondisplaced workers. Even after 15 to 20 years, those workers lagged behind: Their wages were still 20% lower than those of their counterparts who didn't lose their jobs in the original layoffs, according to his research.