Despite trillions for economy, next job might mean less pay

McClatchy NewspapersFebruary 15, 2009 

WASHINGTON — Tania Jackson was earning a comfortable six-figure income at a local real-estate development company before the gale-force winds of recession began blowing her way last month.

As the company's residential, commercial and government real-estate projects dried up in the economic downturn, Jackson's job as director of external affairs was eliminated in a cost-cutting move in late January.

"I was devastated," Jackson said. "I always tell people I had my dream job and there were a lot of times where l literally could not believe someone was paying me to do this job everyday. It was so much fun because I really love being out in the neighborhoods. I love interacting with all the different groups from all over the city. I love going to meetings. . . . But looking around at what was going on in the economy, I guess it was inevitable."

After ravaging blue-collar and lower-paid workers in the construction, manufacturing and retail sectors, job losses from the "Great Recession" are moving their way up the income ladder into areas such as management, financial and professional business services, where more college grads and higher-earning workers such Jackson are employed.

The number of unemployed workers with at least a bachelor's degree has nearly doubled since January 2008 to 1.87 million last month. Their unemployment rate has likewise nearly doubled to 3.8 percent, which is nearing the 3.9 percent level last seen in early 1983 — the aftermath of the 1981-82 recession, said Lawrence Mishel, the president of the Economic Policy Institute, a left-leaning research organization.

"We clearly will be hitting historic levels of unemployment very soon for people with a college degree," Mishel said. "I don't know how far unemployment will go up, but we're far from done."

After the last recession ended in late 2001, much of the job growth during the recovery was in lower-paying service sector fields, while many high-paying jobs were outsourced overseas. It wasn't until 2005 that higher-paying industries began to grow faster than lower-paying industries such as retail trade, hospitality and agriculture, according to data from the policy institute.

If that situation repeats itself in current recession, many college graduates could end up taking lower-paying jobs that typically go to less-qualified workers.

"As the economic restructuring takes place, there's no question some people will be taking pay cuts and pretty substantial pay cuts. And that includes those with more education," said Gus Faucher, the director of macroeconomics at Moody's Economy.com in West Chester, Pa. "This is going to be the biggest downturn since the Great Depression and it a lot of people are going to take a big hit."

History and common sense suggest pay cuts are the norm in recessionary periods.

From 1981 to 1983, while the economy reeled and recovered from a 17-month recession that lasted from July 1981 to November 1982, some 3.4 million full-time workers with at least three years in their current positions lost their jobs.

Nearly 1.6 million were rehired during that same period, but 51 percent of these workers wound up making less money. In fact, a whopping 34 percent reported earnings that were at least 20 percent less than their previous job.

Similar results occurred for the nearly 2 million who found new jobs during and after the 1990-1991 recession.

And the most recent recession, from March to November 2001, saw nearly 5 million full-time workers lose their jobs. Some 2.5 million found new jobs from 2001 to 2003, but this time, 57 percent reported lower earnings, with an average pay reduction of 16 percent.

Jackson, who has a bachelor's degree in anthropology from the University of California, Berkeley, said she's hoping her next job pays as much as her last, but she's prepared to take a pay cut when that opportunity comes along.

"I've adjusted my parameters," Jackson said. "If I was looking for a job a year ago, I would have told prospective employers 'I need to make more money, more incentives. It needs to be a better deal.' Now I'm just sort of looking to plateau," salary wise, she said. "I don't have the luxury of sitting at home and waiting for the perfect job to fall in my lap, but I have enough wiggle room that I don't have to take the first job that comes my way."

The economic stimulus plan, which could create from 1.2 million to 4 million jobs in the next few years, puts heavy emphasis on infrastructure spending for construction of roads, bridges, schools and power grids.

Mishel explained that when $1 billion is spent on construction, it creates 7,000 construction jobs and another 4,100 jobs in feeder industries. And additional spending by these workers creates another 12,000 jobs, Mishel said.

"So jobs are gonna filter out to all sectors of the economy. We shouldn't think about it like 'infrastructure spending creates jobs in construction and nowhere else.' This is what people don't seem to understand about how this works," Mishel said, adding that the Obama administration and the congressional Democrats haven't done a good job of explaining the process.

With the exception of engineers and designers, however, college grads looking for higher-paying, stimulus-related employment might be disappointed, Faucher said.

"Those jobs are kind of tough to generate through government spending," he said. "They tend to be very skill specific, so it's a more difficult task."

The best opportunities, Faucher said, appear to be in stimulus plans to improve the nation's energy and information technology infrastructure. "And we're not quite sure what's going to happen there, so we'll have to wait and see," he said.

Brian Bethune, the director of financial economics for Global Insight's U.S. macroeconomics group, was less optimistic.

Bethune said the stimulus plan's energy and information technology projects were unlikely to create many high-paying positions and the healthcare IT portion could actually reduce the number of administrative and support positions in the health-care field.

These kinds of concerns and the barrage of bad economic news make it hard for Jackson to maintain faith in the faltering job market.

"It's hard. Everyday you turn on the news, there's something about the economy getting even worse. Every day I start to feel like 'this is bad. This is really bad.'"

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McClatchy Newspapers 2009

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