Posted on 10/28/2002 12:17:35 PM PST by Willie Green
For education and discussion only. Not for commercial use.
In a reversal of the late 1990s, young workers are being jettisoned right and left as companies make more room for older people many previously thought of as corporate has-beens.
A year and a half ago, Malene Comes of San Jose, Calif., and her husband, Craig, were raking in $120,000 a year and living la dolce vita. The two computer technicians indulged in lavish trips, hired a cleaning lady, and ate out almost every night. Then, both were laid off. Today, they get bags of groceries from a San Jose food bank, have joined the ranks of the uninsured, and beg their parents for $1,045 in rent for their 600-square-foot apartment.
"We didn't think we could fall this low," says Malene, 30, who has a low-paying job helping mentally retarded adults. Craig, 36, works part-time at specialty retailer Brookstone Co. and as a substitute teacher. Together they make about $35,000 a year. Says Malene: "The fun days are over. Let's face that."
Economists may say the 2001 recession is over, but it doesn't look that way to unemployed and underemployed people like Malene and Craig Comes. During the boom years, they looked set to inherit the Earth. The best and brightest earned fat signing bonuses, big salaries and fancy perks. With their futures seemingly secure, many young and mid-career workers took on big debts as they splurged on expensive houses, cars and vacations.
Now, many of them feel like a lost generation, worried that their peak earning years are behind them even as their expenses jump. For the youngest, the costs of raising families and paying mortgages lie ahead. For those closer to middle age, the burdens are heavier. "These guys are despondent," says psychologist Alden Cass, managing director at New York's Catalyst Strategies Group who studies laid-off brokers. He knows ex-Wall Streeters who are tending bar, waiting tables or working at the likes of RadioShack and the Gap.
In a reversal of the late 1990s, young workers are being jettisoned right and left as companies make more room for older people many previously thought of as corporate has-beens. As opportunities for younger workers become more scarce, their elders are staying on or returning to work, often desperate to rebuild diminished retirement savings.
Traditional unemployment measures don't capture the challenge for young and mid-career workers, who are flocking to national job fairs in an often futile search for work. They don't include people who have become discouraged and dropped out of the labor force. A better statistic is the share of the population in a given age group that has a job, for which even a small drop is meaningful.
Older Fare Better
So how are different cohorts doing by that measure? At the height of the boom in early 2000, 88% of all men in the U.S. from the ages of 20 to 44, excluding those in the military, jail and other institutions, had jobs. By September 2002, only 85% had jobs. For women 20 to 44, the employed share fell from a peak of 73.5% in early 2000 to 70.6% in September 2002.
Although women aged 45 to 54 fared slightly better -- 73.5% of them remained employed, a small drop from 73.9% -- their male counterparts were hard hit: 84.8% of them had jobs, down from 85.9% a year earlier. Surprisingly, older workers are the only ones who have done well. The share of men 55 to 64 with jobs rose from 65.9% to 67.2% over the past year, and the share of women 55 to 64 with jobs grew from 51.7% to 54.4%.
Things are likely to get worse in the months ahead as companies cut jobs to restore profitability. Sluggish economic growth is the root of the problem. "We're looking for the continuation of a grudging, difficult, gradual recovery, with a not-insignificant possibility of a double dip" into recession, says Michael D. Andrews, chief U.S. economist for WestLB Global Financial Markets.
Stuck in the Middle
The bloodbath on Wall Street is a telling, if extreme, case of the plight of young and mid-career workers. Job cuts at brokerages since the bear market began are even deeper than after the 1987 stock market crash. All told, an estimated 15% of jobs that existed at the industry's 2001 peak will have been eliminated by yearend. It will likely be years before many of those jobs return, leaving people who've been laid off with little prospect of working again in their field.
And even when those jobs do return, they'll be filled with new strivers, says veteran Wall Street pay consultant Alan Johnson. Brokerages hire scads of young people, only a few of whom ever reach the top. "The people above 45 are more likely to be senior management -- and they are the ones making the layoffs," says Guy Moszkowski, a financial-services analyst at Salomon Smith Barney.
But Wall Street is hardly the only street in America filled with the abruptly jobless. Many younger people flocked to technology and telecom companies that have been devastated by the capital-spending slump. The once-mushrooming info-tech business will add virtually no jobs this year, according to the Information Technology Association of America.
Outsourced Out
Why are young and mid-career workers bearing the brunt of the cutbacks? One reason is that many got bigger raises than old-timers during the boom, so they're no longer much cheaper to employ. At the same time, they often lack the deep institutional knowledge and personal ties with clients and customers that are especially valuable in tough times. Says Michael Recca, president of Sky Capital LLC, a startup brokerage firm: "Everybody in this market prefers a veteran."
The 20-to-44 group has other woes to contend with, too. Age-discrimination rules, by shielding older workers, may end up disproportionately exposing younger ones to layoffs. Young people have been whacked by layoffs in unionized businesses such as heavy manufacturing, airlines, and phone companies, where the least senior are often the first to go.
Even global outsourcing may play a role. Gartner Inc. researcher Frances Karamouzis says a New York company that recently laid off 500 people is retaining its generally older software system designers while dumping its younger coders and programmers. Says Karamouzis: "The work is going off to India, where they get much better value."
Back to School
Many laid-off workers, realizing that the jobs they lost may never return, are striking out in new directions. Dan Arol Jahns, 32, who lost his six-figure job at Goldman, Sachs & Co. in August 2001, chased a lifelong dream of becoming an actor. He first found work playing a chess piece at a Toys 'R' Us Inc. store opening. Since then, he has landed roles on stage and TV.
Most, though, are more prosaic. A record 31,000 people took the Foreign Service exam this year, more than double last year's total. The number of those taking the law-school placement test is up 17% this year, and B-school applications for this fall's class were up 25% to 30%.
Applicants had better hope conditions improve by the time they get out: Only 70% of the graduates of BusinessWeek's top 30 business schools landed jobs by graduation last spring -- a lower percentage than during the last recession. "We expect [2003] is going to be another tough year," says Kim B. Clark, dean of Harvard Business School, where nearly 20% of 2002 grads had still not found work by graduation.
'Attractive Again'
Only workers nearing retirement age are faring well: A greater percentage of those over 55 are working today than a year ago. In part, that's because older workers are prized for their experience and stability: "It's not at all surprising that we're seeing people who have come from an Old Economy set of values becoming more attractive again now," says Barry Honig, president of New Jersey-based executive-search firm Honig International.
Companies such as AMR Corp., parent of American Airlines, are trying to retain older workers as they cut jobs because of the brain drain they suffered in the past from offering early-retirement incentives. They also want to avoid the high upfront costs of employee buyouts.
Smashed Nest Eggs
But for the silver-haired generation, rising employment is not entirely by choice. Many are staying on the job or reentering the workforce because they need the money: The bear market has smashed their nest eggs. Shel Hart, a vice-president at staffing firm Spherion Corp., says 40% of executives aged 55 and older who are applying for jobs now are doing so because of damage to their retirement portfolios. James Alexander, 55, retired from Westinghouse in April 2001, but a year later, after losing big in stocks, moved from Pensacola, Fla., to Sandusky, Ohio, to take a job as a plant manager at a consumer-products company -- at a 30% cut in compensation.
Young people who can't find jobs and older people who can't afford to quit: All in all, it's not a pretty picture. But until the economy revs up, it's a fact of working life.
I hear this a lot but the other side of the equation is never mentioned. Consider this scenario:
A company employs 100 people who make an average of $40,000 a year to sell a widget that retails for $100. The company sells 100,000 of these widgets a year. That's an annual payroll of $4,000,000 a year but the consumers have to pay a total of $10,000,000 for these 100,000 widgets.
Now the company moves the factory overseas to take advantage of lower labor costs and that widget now retails for just $40. So while $4,000,000 a year in local income is lost, consumers now have an extra $6,000,000 in their pockets to spend on other things because they are paying 60% less for these widgets. That extra $6,000,000 a year could be used in local restaurants, home improvements (putting contractors to work) or to buy boats (putting more boatmakers to work).
This is a simplistic scenario to be sure but bottom line is that cheaper consumer goods is not always a bad thing. And the money saved by cheaper consumer goods is often spent someplace else (or invested). Imagine how much more expensive everything would be if all consumer goods were manufactured here in the U.S.A. by factory workers at union scale.
I would prefer that manufacturing stay in America too. But between government taxation and regulation, not to mention the artificially set wages forced by unions, you can't really blame them all that much.
Thank you. Well said.
My salary got downsized by 1/3 in the 1990 recession. I was able to continue working without missing a pay check which helped a bit. My pay got back to normal within a couple years. It didn't take me long to figure out to have a rainy day reserve fund..
I'm one of those fools! In 1999 I spent close to $11,000 on my MCSE at Boston University. Two nights a week and Saturday mornings in school for nearly an entire year and a whole lot of cramming in between. Just looking at those MCSE ExamCram books sends shivers up my spine!
When I graduated in early 2000, I was very fortunate to realize that the house of cards was coming down and I held on to my current job.
Can't say the training was a total waste though as I have occasion to put it into practice at work and it definitely has made my position there a little more secure. But I still can't look at an MCSE ExamCram book without cringing and regretting all the money I spent on it.
Aside from a handful of high profile business schools, the MBA is objectively worthless. And what makes a degree from Stanford, Wharton, or Harvard valuable is not the content of the coursework, but the fact that all the "right" people attend, so you get to rub elbows and exchange business cards with the optimates.
I once attended a w(h)ine-n-cheese gathering of the alumni from my business school and the desparation was palpable. It reminded me of a singles bar in the '70's at 3AM on a Sunday morning. The room was filled with people who were all at some level aware that they had just wasted two or three years of their lives and an equivalent tens of thousands of dollars, yet they hoped to be discovered like starlets at the soda fountain. Pathetic.
If ever you feel tempted to purchase an indulgence, or enroll in an MBA program, drop me a line and let me dissuade you. Your money would be better spent in day-trading or as seed capital to set up your own business. Or if you want to really improve your chances in the business world, spend the money on golf lessons and get yourself a membership in a toney country club.
My degree was a double major in management and information systems. At this point, I am so disgusted with the job hunt that I am researching the possibility of going into business for myself . . . as a tailor and costumer.
Reality!
Thank you, FDR.
There will be no revolution, the black segment has already been replaced by the hispanics as a voting block to be catered to. The white americans will also become a minority of insignificance at election time, and certainly in no position to start a revolution - they will be so outnumbered by the year 2100, that it would be a joke. The old European customs and religions will die off in America along with the old white guys.
Massive immigration keeps prices low, profits high, and labor cheap. The true price of labor, is far far below what our previous closed economy used to have to pay. American companies no longer have to pay an inflated wage, and they wont. No company in their right mind will pay more than the world price of labor. In all likihood, unions will all but disappear except for the service industry, e.g. teachers, police, etc, and manufacturing will soon disappear entirely from the American continent.
There are hundreds of millions of workers in INdia, China, Mexico, and Eastern Europe that are ready and willing to take the jobs that Americans do not want. The Republicans and the Democrats are both for huge increases in immigration to take these jobs. The immigrants seem to have no problems at all finding plenty of work, thousands of them come here each day , each week, each month, day in and day out. By 2050, with current trends continuing, America will have 400 million people, and by the end of the century it will have a billion.
There are currently only a very few people who want to change the way we are headed, and each year they are even more outnumbered. The days of young americans earning $100,000 are gone forever.
A point well taken, and deserves repeating. Whoever is blessed enough to have a job in this current economy is a fool if they aren't socking away every extra dollar they make.
I have a steady job, and my wife and I are putting away a 9-12 month supply of cash in a separate savings account (this ENTIRELY apart from the 401k, IRA, etc). We are nearly 2/3 of the way there. Until we have that in place, we are not buying ANYTHING we don't need. No dining out except special occasions, and no movies or magazine subscriptions. We get videos from the library and live on the cheap. I've forgone buying a new TV to replace our 12-year old model, and we are buying our clothes from TJ Max and Ross Dress for Less. In today's economy, you are a fool not to save.
As anyone who remains in the field can attest to. The attitude has changed significantly from one of security to one of gratitude.
In some was that is not a bad thing.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.