With good jobs going away, middle class downsizes

McClatchy NewspapersNovember 11, 2010 

WASHINGTON — The good paying, predominantly white-collar jobs that once sustained many American communities are disappearing at an alarming rate, keeping the unemployment rate stubbornly high despite the end of the Great Recession.

More troubling, these jobs in accounting, financial analysis, commercial printing and a broad array of other mostly white-collar occupations are unlikely to come back, experts predict.

There isn't a single cause to the trend. Some of it is explained by changing technology, some of it is the result of automation. Sending well-paying jobs to low-cost centers abroad is another big part of the story. So is global competition from emerging economies such as China and India.

The result is the same in all cases, however. Jobs that paid well, required skills and produced vital communities are going away and aren't being replaced by anything comparable.

"Unfortunately, the evidence is that you see a form of downward mobility of workers who are displaced from middle-skilled, stable career occupations," said David Autor, an economist at the Massachusetts Institute of Technology, in an interview.

Autor published a much-discussed paper in April, suggesting that the U.S. labor market has become polarized, with employment growth in the high-skill, high-wage end, and the low-skill, low-wage end. The vast middle, he concluded, is shrinking.

"The Great Recession has quantitatively but not qualitatively changed the direction of the U.S. labor market," Autor concluded, pointing to an accelerating trend that he said has been underway for more than a decade.

As it stands, 14.8 million Americans were unemployed in September, 6.1 million of them for six months or longer. The unemployment rate has hovered around 9.6 percent for half a year and few economists expect it to dip below 8 percent for years to come.

Lois Williams-Norman is on the upper end what could be called a middle-skill job, working her entire career in corporations as an internal financial and budget expert. Like millions of Americans, she's had to swallow her pride and step down the income ladder.

"I've gone from a six-figure income to seriously looking at positions that are going to be paying probably half as much. So over the past 10 years, my income has continued to decline year after year," said Williams-Norman, during an interview in the western New York city of Rochester, in between networking events where she searched for employment.

Her problems began in 2001 when she was downsized out of a job at Xerox Corp. after 20 years with the iconic company. Williams-Norman, who holds an MBA degree, was forced to take a 20 percent salary cut when she landed her next job at a pharmaceutical firm. She stayed there four years until her company was bought during the frenzy of mergers and acquisitions in the middle part of the last decade.

Finding work at corporate headquarters with eye care company Bausch & Lomb in Rochester, Williams-Norman was put on the street just 18 months later after private equity firm Warburg Pincus bought the company in 2007. She eventually landed with a small local manufacturer that tapped her strategic planning skills, but the economic downturn ended that job last year.

After going through four corporate employers in 10 years, Williams-Norman, who's in her 50s, has been out of work for more than a year. She's sober about her job search.

"I know a lot of them aren't going to come back, and the new jobs aren't going to pay as much," she said.

While older workers fight it out for a scant number of jobs, younger ones are voting with their feet, departing what once was prime turf for corporate America.

"We've had this white-collar workforce, highly educated . . . nevertheless, we've gotten almost no (employment) growth. In fact, there's been a decline; young people are leaving," said Ron Hira, a professor at the Rochester Institute of Technology and a co- author of the 2008 book "Outsourcing America," which warned about larger dangers from sending jobs abroad.

In cities such as Rochester, where multinational corporations such as Xerox, Kodak and Bausch & Lomb once lorded, the disappearance of middle-skill jobs tears at the very social fabric of community.

These corporations used to encourage their executives to join the Rotary Club or the Lions Club and to entrench themselves in community affairs. Through those efforts, these big companies were leading contributors to the United Way and other charities.

"This whole support system that we had doesn't exist anymore," said William Johnson, a former mayor of Rochester for 12 years and now a professor at the Rochester Institute of Technology. "There is an untold story that we need to understand, which contributes to this malaise, this sense of anxiety that people have."

When corporations shrink their work force and send jobs abroad, job losses cascade down the supply chain.

Tom Bertolone, 50, spent most of his adult life in commercial printing, working his way up to a management post, raising a family on a $68,000 annual salary. When Kodak, Xerox and other big global employers got smaller at home, their printing demands in Rochester narrowed or moved abroad.

Bertolone has been without a steady job for more than two years, and in April ran out of unemployment benefits. He has only eight years left on a mortgage but has fallen behind on payments, unable to land even a retail job because he's considered overqualified.

"Initially, you try to find the same job, or something comparable. I've seen people start out that way, but then after six months or maybe nine months . . . they just start looking outside that industry . . . a lot of them are professional people who were making decent money," he said, adding that he and others in his situation are now resigned to working for considerably less. "Once your unemployment runs out, $8 an hour is better than zero."

Revere Copper

In Rome, a few hours' drive to the east across New York's midsection, the loss of middle-skill jobs is felt in an unusual indirect way. Accountants used to come in from nearby Syracuse to pore over the books of a copper mill owned by Revere Copper Products Inc., a company founded by the famed crier who warned of the coming British.

"They used to have 150 people in their accounting office in Syracuse. Today they come into Revere and they scan the materials, and our accounts and ledgers and computer files, and they'll just transmit that to India. And they'll have a lot of the analysis of our books done in India," said Brian O'Shaughnessy, Revere's chairman.

He declined to name the firm, but noted that the independent accounting firm has substantially thinned its ranks, as have its competitors who bid to win his business.

"Instead of 150 people in Syracuse, they now have about 25 or 30, so all of a sudden you've seen a lot of accounting jobs go offshore," he said.

That might seem surprising, since the conventional wisdom is that the U.S. has become a service-driven economy.

In a 2007 study, Princeton University economist Alan Blinder estimated that 1 in 4 U.S. jobs potentially could be sent offshore because of technology, low-cost labor and the fact that service sector jobs are so much more abundant in the U.S. economy.

"I'm not totally convinced that the deep recession has accelerated the trend toward offshoring. There are certainly examples of that. But the main effect seems to be that firms learned to get by with less labor, whether domestic or foreign," said Blinder, a former vice chairman of the Federal Reserve. "That said, as employment expands and labor markets normalize, we should see the offshoring trend reassert itself."

Blinder identifies accountants and providers of similar financial services as prime targets. Accounting blogs set up to lure these jobs to India boast of a $47,000 saving per U.S. accountant whose job is sent offshore.

Historical trends also reveal the mounting loss of middle-skill jobs.

According to data in the MIT study by Autor, skilled professional employment rose by 28 percent from 1979 to 1989, while employment in office and administrative jobs jumped 11 percent.

Then, from 1999 and 2007, those employment gains slowed to 11 percent and 1 percent respectively. And from 2007 to 2009, spanning most of the Great Recession, there was no job growth for professionals, while office and administrative employment fell by 8 percent.

This loss of middle-skill jobs — what Autor calls polarization of the job market — intersects with another discouraging trend, the concentration of wealth at the highest rungs of the wealth ladder.

Research from University of California-Berkeley economist Emmanuel Saez shows that from 1993 to 2006, average real income per family grew by an annual rate of 1.9 percent. But when subtracting out the top 1 percent of income earners, the rate of growth is 1.1 percent annually. Instead of income growth of 28 percent over the 15-year period, it's almost half that, 15 percent.

This suggests that the top 1 percent of earners in the nation captured almost half of the growth in income over a period of stellar growth in the U.S. economy. And this came against the backdrop of disappearing good-paying union jobs in manufacturing, and what now appears to be an escalating departure of well-paying middle-skill jobs.

"The middle class think they will be rich someday. The chance that people are going to become super rich is negligible. In fact, what we know is that income mobility up the ladder is slowing down, it's not increasing," said Robert Reich, an economist and former U.S. labor secretary, in a recent interview. "It's harder now for a kid born into a middle-class family to make it. It's harder for a kid in a lower middle class to do well . . . the story is obvious and so clear that it really needs to be laid out to people."

Reich, the author of a new book on the topic called "Aftershock," advocates taxing the wealthy and providing greater tax relief to the vast middle class. But that only tackles income, and not the more difficult issue of jobs moving abroad or being replaced by automation and technology.

For some in the Rochester area, the answer lies in reviving the dwindling manufacturing sector, perhaps finding ways to make railcars or windmills in the U.S. under some sort of favored production.

"The only way you generate wealth is you make it, you mine it or you grow it. Just exchanging things back and forth, services, it doesn't generate wealth. It just moves it, and I think there's starting to be a realization of that," said Bob Trouskie, a regional director for the Workforce Development Institute, a union-affiliated employment and retraining group partly funded by the New York legislature.

ON THE WEB

Autor's MIT study

Blinder's offshoring paper

MIT presentation of printing offshoring

Problems face Rome, NY's Revere Copper

The after-Revolution of Paul Revere

Hard times in white-collar Rochester

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