I haven't diaried in a while, so this long form writing excercise shows a real lack of practice.
My concern, as suggested by the title, is that this recession has -- and will continue to -- accelerate and widen the gap between high- and medium-pay employment types. In general, I fear that multiple historically repsected "professions" will no longer be considered truly viable career options in the US.
Mine included.
Since the late ‘90’s, chic business analysts have been predicting that overseas outsourcing would weaken the American middle class. There has never been much indication that this theory holds any water. White collar wages remained strong through most of the Clinton and Bush II years, and jobs with strong compensation were not difficult to find, if one was qualified. Although the industrial and manufacturing sectors – most notably in Detroit – were not left untouched, it is easy to argue that this decay would have occurred regardless of globalized labor. No singular factor is wholly to blame – just a long series of wastes and neglects.
Of course, things have changed. Hundreds of thousands of new college graduates – carrying billions of dollars of exotic debt – find that their resumes will probably only be reviewed by their parents. Many of the millions of recently unemployed have desperately accepted jobs that offer significantly decreased wages and sparse benefits. Many analysts and leading publications treat this situation as if it’s a temporary spasm, with an eventual return to normalcy.
In reality, it is optimistic to view this employment crisis as one result of a singular anomaly.
It has been more than a year since Wall Street raised the white flag, and still, employers are operating on shrunken payrolls. It is tempting to assume that American business has become more efficient. Indeed, worker efficiency statistics have shown robust increases since last September (link). The official percentage increase of 6.6% is the greatest increase since 2003 (underwhelming). At the same time, production costs have fallen off a cliff.
To draw a ratio between productivity increase percentage and unemployment percentage would certainly qualify as comparing apples to daffodils, but when the unemployment gap is fully double the productivity increase, it is rather clear that more than just fat has been trimmed. American business is demonstrably accomplishing less, with fewer workers, for smaller compensation – because that’s all it can afford to do.
One wonders what’s happening in the vacuum. Was the workforce bloated and inefficient prior to September, 2008? Probably not obscenely. Can lack of consumption account for the decrease in product? Perhaps partially. Do the resources exist for a return to previous levels of consumption – and thusly a return to normal employment levels? Is such a rebound desirable, or simply the initial symptom of yet another collapse? These are questions that economists and government officials are simply not asking nor answering for the public. And I doubt that I’m the only one asking.
The real loser in the equation is the educated white-collar worker. The majority of the Recovery Act dollars will rightfully go to construction and blue/green collar enterprises, to the eventual benefit of us all. After years of relative neglect, the service, labor and industrial wings of the American workforce will likely show a strong and quick recovery. These are jobs that require experience but not education.
The American educated workforce, however, faces an uncertain future, and it’s fundamentally ironic. The one gold-plated, iron-clad path to success and stability is no longer a guarantee of anything but debt.
What’s also ironic is that the Great Recession is only partially to blame for this change – and the productivity/employment figures I’ve discussed make very handy supporting evidence. I’ve come across an obscure paper prepared for the Brookings institute 3 years ago, by two Harvard economists (link). The premise of the paper, as stated in its abstract, pointedly addresses my concern:
"...The majority of the increase in wage inequality since 1980 can be accounted for by rising educational wage differentials, just as a substantial part of the decrease in wage inequality in the earlier era can be accounted for by decreasing educational wage differentials.
Although skill-biased technological change has generated rapid growth in the relative demand for more-educated workers for at least the past century, increases in the supply of skills, from rising educational attainment of the U.S. work force, more than kept pace for most of the twentieth century. Since 1980, however, a sharp decline in skill supply growth driven by a slowdown in the rise of educational attainment of successive U.S. born cohorts has been a major factor in the surge in educational wage differentials. Polarization set in during the late 1980s with employment shifts into high- and low-wage jobs at the expense of the middle leading to rapidly rising upper tail wage inequality but modestly falling lower tail wage inequality."
As the paper goes on to argue, the stability of compensation for the educated middle class worker was weak and in jeopardy of further weakening. The Economist magazine commented on this paper in April of 2008, saying,
"Wages for skilled workers have soared while wages for the unskilled have stagnated, because too few young Americans are obtaining undergraduate and graduate degrees. So sure, Microsoft would probably love to pay its workers less than it does. That doesn't mean that the competition for skilled workers hasn't become so intense that business and economic growth now suffer."
Funny, isn’t it, how much 5 months can change things? The Great Recession has intervened and suddenly devalued the educated middle-class American, and made him/her eminently more affordable. Which isn’t funny at all. Coupled with the general lack of clarity about the shape of recovery and the capacity and needs for production, this historic phenomenon has deadly teeth.
Just as with the housing crisis, the question is one of value: How much is an item truly worth versus how much someone will pay for it? Furthermore, will the economy, as it is currently organized, support and sustain the pay expectations of a sizeable pool of educated workers?
I can only judge this question from a personal perspective. In my work as a consultant, I have watched helplessly as millions of dollars worth of contracts have gone to other consultants at a fee level so low as to be utterly unsustainable. Often times, the undercutting will yield little to no profit – or perhaps even come at cost to the winning firm. In order to make these ridiculously low fees possible, the firm management is removing health insurance, hiring professionals on part time or temporary status, or at ridiculously low pay grades. This strategy works because so many people are desperate for employment, and will accept even the most draconian terms.
After nearly a year of these kinds of absurd practices and artifically low fees, our clients have come to expect that everything they ask of us should come at a 50% discount from 2008 rates. If it goes on much longer, pay cuts are inevitable. Once enough firms regionally have cut pay to stay competitive, the new average becomes status quo. For people like me, such a cut would mean that I could make just as much money if I were to take a job in a blue collar sector. My education and certifications would have been money and effort wasted.
My situation is not isolated.
Health care reform is matter of life and death, and it is necessary. But anyone who’s watched DC long enough knows that the doctors and insurers are not going to suffer monetarily from any of the government regulations or cost-saving initiatives. A primary driver of cost in the medical industry is the quantity and expense of procedures and specialized treatments. While these procedures have been obscenely overused and have made treatment far from affordable, they have created a healthy bevy of middle-income, educated-class jobs. And those jobs will bear the brunt of reform – not the doctors, not the administrators, not the insurers.
The pool of "professions" is shrinking. Opportunities in new fields may be opening, but for those of us already in the work force or already graduated, these opportunities are simply unavailable or impractical. Not to mention that they barely even exist beyond rhetoric and will.
A major cultural and business shift is afoot. When we emerge from this downturn, business will certainly not be "as usual."