A Lost Generation of Job Seekers?

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.

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.

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.

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."

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.

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.

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.

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.

Actually, this is the WORST thing for everyone to do. It guarantees a downward spiral (the "Paradox of Thrift"). Right now people should be digging into savings and taking on debt to buy things in anticipation of better times ahead.

Unfortunately, during the go-go, cocaine powered Clinton years, NO ONE saved like they should have. During the years of above average economic growth, debt of all kinds went up. Everyone gambled their money in the stock market. It was ridiculous. My wife's decorator was daytrading, for crying out loud!?! One time, she mentioned a highflying tech stock she bought and I decided to see how much research she'd done. PE? Didn't know. Competitors? Didn't know. Market share? Didn't know. Apparently, the stock chart showed a "cup and handle" pattern which gave a buy signal. Of course, she's blown all her gains and lost most of her principal since the bubble burst.

Gimme a break. You're encouraging people to go into debt? In times such as this? What you're saying is typical of wall street hucksters and money-grubbers...."keep building up that credit card debt", "don't worry about being good stewards of your families' finances", "keep right on spending."

I've had enough of this financial drivel that passes for patriotism. The wise ones are storing away their grain for future storms on the horizon. You'd best do likewise, else you're gonna be like the proverbial grasshopper.

"There will be no revolution..."

IMHO, a revolution is unavoidable unless big-time changes are made ASAP. Loss of jobs and wealth to other countries is only one factor in the growing discontent in this nation, but it's a big one. It's not quite "haves" and "have nots" yet, but when more people find their jobs outsourced in order to keep fewer and fewer investors happy, that's a recipe for disaster. Hopefully it won't come to that, but I don't see much to be optimistic about.

Scouts Out! Cavalry Ho!

"There will be no revolution..."

Scouts Out! Cavalry Ho!

"There will be no revolution..."

Scouts Out! Cavalry Ho!

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.

That's a good thing ... I was out for 8 months ... luckily I had about 8 months worth of savings and JUST made it thru. The stock market crash completely wiped out the 401K BUT I still have my house equity. BUT if I get laid off again before I can resave that 8 months safety money, which doesn't happen over night ... I'll be picking out that sweet spot the live in ... under the bridge. In 25 years of engineering .... I have NEVER seen it anywhere near as bad as now. That means since the late 70's thru the 80's and the 90's. I took a job that is only distantly related to my disipline and took a 25% pay cut to boot. Luckily the kids are gone and the cars are paid for ... the're getting old though (200,000 miles on one) but the payment is right. I would hate to think about how it would be if I still had a couple of kids at home and a car payment. Problem is that the retirement money is now gone and companies DO NOT HIRE people over 50 (except MAYBE McDonalds). I have to face the fact that I am in my last good paying job and make to best of it.

" . . . when more people find their jobs outsourced in order to keep fewer and fewer investors happy."

I don't know about the "fewer and fewer investors." I read recently that the majority of stocks are held by pension funds. (If I recall correctly, the book was Peter Drucker's Post-Capitalist Society) If that is the case, than we have the paradox that while people's careers are foundering, at least their pension funds should be doing well. But they are doing well precisely because the companies are able to maintain or improve profitability by reducing their cost of input. Unfortunately this means exporting our manufacturing jobs.

So, while an American worker's buying power diminishes (because salaries are not keeping pace with cost of living increases), his mutual funds, 401K, and pension fund should be doing pretty well. And because his buying power is shrinking, he is forced to buy cheaper, foreign-produced goods, rather than spend the few extra dollars to "but American", if, indeed, that option is even offered. So it's a vicious cycle, mollified only slightly by the hope that American-owned companies (and their American investors) will prosper. Thus, the pension funds, at least, are secure.

Of course, you've got to actually have a job in order to have a pension fund.

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).

The company is not going to retail the widget for $40 after the move. They will retail the widget for $105, "in order to pay for costs associate with relocation of operations." The difference in labor costs between the M$ 4 of U.S. based operations and the (unspecified but lower) foreign based operations will go directly into the corporate executives' pockets.

True, the executives will then spend that money on marble toilets and private jets. Meanwhile, though, the 100 people are not spending any money because they don't have any to spend.

My God, I'm sounding like a Democrat here. Still, I don't see how the above scenario could be defended as a good thing to happen.

They made 120K in one year, apparently have no children, their rent is only 12K a year and they're taking food from charity? How infantile are these overgrown children? What exactly did they blow their money on? Food, clothes and trips? Are they sorority girls fresh out of college? I really have no sympathy.

Yeah no sh!t. As a grad student I make "poverty"-level wages but I ain't starved to death yet-- one makes the concessions. 35k is alot of money, to ME. Hell I could move out of the $300/mo apartment and get a $400/mo apartment-- I could get Kraft mac and cheese instead of generic... I could even replace my running shoes more than once a year...

You're right, wide, these folks were (are) dumbasses and they brought (are bringing) their economic "hardships" on themselves... Some of us know how to live Spartan... Blows my mind that they beg their parents for rent money...

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.

I stopped reading right there. Age-discrimination laws are ignored with impunity. The government won't side with you unless you're an official minority, and companies know that even with losing a class-action suit, their expenses are less than keeping the old farts on board.

This is based on the widely-held belief that only management means anything, and there are always younger folks, or overseas outsourcing, to do the dirty work, and still be disposable. Who wants a twnety-something fast-track VP to have to deal with a 55-year-old worker who has lived and breathed his job for 35 years?

Exactly. Saving is nothing other than investment, i.e. an allocation of capital.

Putting cash in your mattress hurts the economy, certainly. Putting your money into financial instruments such as bonds, CMOs, etc. strengthens the general economy as well as your own portfolio.

Consumer spending for the sake of consumer spending depletes invested capital and creates a negative return. It discourages companies from developing new products and increases the real cost of capital for all borrowers.

I am a bit harsh, yes. But not unfair. They are indeed working, and not asking for my help, but:

Today, they get bags of groceries from a San Jose food bank...

They're cooking for themselves now, which is a start, but they don't need the food handout. (The "lavish trips" in their recent past says to me that they don't have kids.) You can eat, and eat well, cooking for yourself on less than $50 a month per person.

...have joined the ranks of the uninsured...

My taxes pay for any emergency care they would need for a car accident, etc.

...and beg their parents for $1,045 in rent for their 600-square-foot apartment.

30 and 35 years old and hitting up the folks for rent? My eyes are rolling so far in the back of my head that I can't even see.

No. NFW. You gotta look out for yourself; you have no obligation to "help the economy". Taking on debt in this environment is nothing more than a crap shoot. You're betting that the money you make in the next five years (e.g., car loan) is best spent on a fancy new car rather than making your mortgage payment and eating for six months while you are looking for a new job.

I don't know which is more annoying, these disgraced yuppies mewling about having to cook their own food, or the old goats I deal with who treat me like I'm an idiot because both I and my wife have to work to support our modest household. "I supported three kids on my salary, and my wife stayed home to raise 'em," I hear, as though I flunked some elementary responsibility course back in the '80s. I try to point out that times have changed - that my son's private school (an essential expense due to the failed public schools)probably costs more per month than his mortgage, and that the price of matters like insurance, cars, home costs, etc. are off the chart when compared to the 1960s. But all forays into reality fall on deaf ears.

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