Nearly a year after losing his job at a Vermont plywood maker, 40-year-old Robert Hudson is back at work. Here is the catch: His paycheck is half that of his old job -- and the same as when he was 18 years old.

In the past year, more than five million people exhausted their unemployment benefits, according to the government. Now, some are returning to work at jobs that pay considerably less than what they were earning before, a trend that threatens to slow an economic recovery.

Wages and benefits paid by private companies increased just 1.2% -- adjusted for inflation -- for the year ended September 2009, the smallest change since the U.S. began measuring in 1975, the government reported last week. Some economists expect the figure to continue downward in coming months and to turn negative for the first time since such records have been kept.

"These losses can become permanent because you have to start again and work your way up," said Till von Wachter , an economics professor at Columbia University in New York.

The wage cuts come as the unemployment rate, at 10.2%, is at its highest level in more than 26 years. To help those who can't find jobs after extensive searches, President Barack Obama has signed a measure adding 20 more weeks of federal unemployment benefits.

Those returning to work are taking an average 40% pay cut from their old jobs, estimated Kenneth Couch , an economics professor at the University of Connecticut. He based the number on the experiences of Connecticut residents during the 2001 recession and similar studies elsewhere during the 1981 recession.

In the past, Prof. Couch said, it has taken six years before people were earning an average of 80% of their old paycheck, with younger workers creeping closer to their old wages more quickly than older workers.

The decline in wages is affecting people in all sectors of the economy. Lynn Felske, 45, a certified public accountant in Pleasanton, Calif., took more than a 20% cut in pay after being out of work for 9 ½ months. She typically works on one job for several months and moves quickly to the next, without ever more than a week off in between.

"I used to get what a controller would get," Ms. Felske said. "Now, I'm getting paid the same grade as an accounting manager. A year ago, I would have said no to this salary."

Catina Martin, 37, was laid off in January as an assistant in the sales department at Hartford Insurance in Charlotte, N.C. She recently took a job at a warranty company and took a pay cut of $13,000 -- about 25% -- setting her back to the same salary she was earning when she joined Hartford a decade ago.

After 30 days, she will get health insurance benefits. But she said: "In terms of the money situation, it's going to be hard to get that back."

For Mr. Hudson, the new job marks his first economic step backward since he began working. Two years ago, he sold his Boston home to take a job at Rutland Plywood Corp. in Vermont, running the night shift in a mill, supervising 50 people. His salary was $45,000, plus a bonus of as much as $8,000. His wife stayed at home with their two children.

Last November, he was laid off. He said he sent his resume to 1,000 employers, while collecting weekly unemployment checks of about $420.

"Eventually, I had to lower my sights to something that I could turn into reality," said Mr. Hudson.

Over the summer, he took an entry-level job at U-Haul Co., earning $9.50 an hour, the same wage he had at age 18 driving a truck delivering industrial supplies. Health insurance will kick in if he stays six months.

Since getting the new job, he has continued to cut back on spending to adapt to his new reality. He shut off his home phone, using a less-costly cellphone, and sold his second car. "I'm spending money only on essential bills," he said.