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Older workers felled in this downturn
July 28, 2009, Tuesday
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RECESSIONS since the oil crisis in the early 1970s each had their own special causes and victims, but they also had something in common: they were over relatively quickly.
The current downturn, however, is deeper and already longer than any since World War II. This spells trouble for one especially vulnerable group - managers in their 40s and early 50s.
They tend to be more expensive than their younger counterparts; they may lack some of the high-tech savvy needed to succeed in a more efficient workplace; and they face a downsized job market that will stay that way much longer than usual.
According to Wharton finance and statistics professor Francis X. Diebold, co-director of the Wharton Financial Institutions Center, the employment picture is closely aligned with the depth of the recession.
"If the recession really did bottom out in February or March, and if we stay on track and start growing at a positive rate by the end of this year - which is by no means certain - it could still be 2013 before we see some significant employment optimism."
A generation ago, says Wharton management professor Peter Cappelli, director of Wharton's Center for Human Resources, "layoffs at this level were temporary. Not now."
Even if an equivalent job were open at another company, that company will most likely not fill the position or will hire from within.
In addition, Cappelli notes, in the 1990s, the economy experienced a "big wave of startups that would take on corporate people who had lost their jobs or bailed out of them. These days, we don't see those smaller companies on the horizon."
A survey in June by Watson Wyatt Worldwide reports that 52 percent of companies will employ fewer people than they did before the recession began.
One third of the 179 US-based companies polled indicated they still anticipate further layoffs, although this is down from 46 percent two months ago.
The numbers aren't encouraging. According to the US Department of Labor's Bureau of Labor Statistics (BLS), 14.7 million people were unemployed (9.5 percent) as of June 2009 compared with 14.5 million in May (9.4 percent) and 8.7 million (5.6 percent) one year ago.
The number of long-term unemployed - people without work for 27 weeks or more - increased from 1,621,000 in June 2008 to 4,381,000 in June 2009.
And the "underemployment" rate - which includes those too discouraged to look for work as well as those working part-time because they can't find a fulltime job - increased to a staggering 16.5 percent in June compared to 10.1 percent a year earlier.
For those 45 and over, last month's unemployment rate was 6.9 percent compared to 3.4 percent in June 2008 - "hovering at its highest point on record," says Matthew Freedman, a professor in the ILR School at Cornell University.
In the wake of the 2001 recession, the unemployment rate for this age group peaked at 4.6 percent in January 2003, compared to 6.4 percent in January 2009. (In June 2003, it was 4 percent.)
Freedman suggests that while white-collar management skills will always be in demand in some industries, middle-aged employees across the board "will have a harder time positioning themselves relative to younger workers who have new skills."
According to Wharton finance professor Franklin Allen, "earlier recessions were more cyclical; things got bad and then they got better. This one is different. Our industries have gotten out of line with what we need. The auto industry grew too big; financial services grew too big; both will probably have to shrink, along with many others.
"We will see long-term structural changes. Unfortunately, that means it's the older workers who will bear the brunt. The worst aspect of this recession is the waste of human capital."
While hiring picked up slightly in education and health care last month, manufacturing, construction, and business and professional services continued to weaken.
"Many companies, perhaps more so in this recession than in earlier ones, targeted mid-level managers for cuts," says Cornell's Freedman, partly because the service sector "saw dramatic expansion in the ranks of middle-level managers over the past two decades, which means they are a natural target" for cost-cutting.
In addition, "unionization has declined, so employers are not as hamstrung by labor agreements. This manifests itself in a generally more nimble workplace where employers have an easier time cutting workers overall."
Some jobs - for example, in auto manufacturing, publishing, retail and financial services - will most likely never come back.
"Laid off workers in their 40s and 50s are finding that the skills they have built up over many years are not as much in demand as they once were," states Freedman.
(Reproduced with permission from Knowledge@Wharton, http://www.knowledgeatwharon.com.cn. Trustees of the University of Pennsylvania. All rights reserved. Shanghai Daily condensed the article.)
The current downturn, however, is deeper and already longer than any since World War II. This spells trouble for one especially vulnerable group - managers in their 40s and early 50s.
They tend to be more expensive than their younger counterparts; they may lack some of the high-tech savvy needed to succeed in a more efficient workplace; and they face a downsized job market that will stay that way much longer than usual.
According to Wharton finance and statistics professor Francis X. Diebold, co-director of the Wharton Financial Institutions Center, the employment picture is closely aligned with the depth of the recession.
"If the recession really did bottom out in February or March, and if we stay on track and start growing at a positive rate by the end of this year - which is by no means certain - it could still be 2013 before we see some significant employment optimism."
A generation ago, says Wharton management professor Peter Cappelli, director of Wharton's Center for Human Resources, "layoffs at this level were temporary. Not now."
Even if an equivalent job were open at another company, that company will most likely not fill the position or will hire from within.
In addition, Cappelli notes, in the 1990s, the economy experienced a "big wave of startups that would take on corporate people who had lost their jobs or bailed out of them. These days, we don't see those smaller companies on the horizon."
A survey in June by Watson Wyatt Worldwide reports that 52 percent of companies will employ fewer people than they did before the recession began.
One third of the 179 US-based companies polled indicated they still anticipate further layoffs, although this is down from 46 percent two months ago.
The numbers aren't encouraging. According to the US Department of Labor's Bureau of Labor Statistics (BLS), 14.7 million people were unemployed (9.5 percent) as of June 2009 compared with 14.5 million in May (9.4 percent) and 8.7 million (5.6 percent) one year ago.
The number of long-term unemployed - people without work for 27 weeks or more - increased from 1,621,000 in June 2008 to 4,381,000 in June 2009.
And the "underemployment" rate - which includes those too discouraged to look for work as well as those working part-time because they can't find a fulltime job - increased to a staggering 16.5 percent in June compared to 10.1 percent a year earlier.
For those 45 and over, last month's unemployment rate was 6.9 percent compared to 3.4 percent in June 2008 - "hovering at its highest point on record," says Matthew Freedman, a professor in the ILR School at Cornell University.
In the wake of the 2001 recession, the unemployment rate for this age group peaked at 4.6 percent in January 2003, compared to 6.4 percent in January 2009. (In June 2003, it was 4 percent.)
Freedman suggests that while white-collar management skills will always be in demand in some industries, middle-aged employees across the board "will have a harder time positioning themselves relative to younger workers who have new skills."
According to Wharton finance professor Franklin Allen, "earlier recessions were more cyclical; things got bad and then they got better. This one is different. Our industries have gotten out of line with what we need. The auto industry grew too big; financial services grew too big; both will probably have to shrink, along with many others.
"We will see long-term structural changes. Unfortunately, that means it's the older workers who will bear the brunt. The worst aspect of this recession is the waste of human capital."
While hiring picked up slightly in education and health care last month, manufacturing, construction, and business and professional services continued to weaken.
"Many companies, perhaps more so in this recession than in earlier ones, targeted mid-level managers for cuts," says Cornell's Freedman, partly because the service sector "saw dramatic expansion in the ranks of middle-level managers over the past two decades, which means they are a natural target" for cost-cutting.
In addition, "unionization has declined, so employers are not as hamstrung by labor agreements. This manifests itself in a generally more nimble workplace where employers have an easier time cutting workers overall."
Some jobs - for example, in auto manufacturing, publishing, retail and financial services - will most likely never come back.
"Laid off workers in their 40s and 50s are finding that the skills they have built up over many years are not as much in demand as they once were," states Freedman.
(Reproduced with permission from Knowledge@Wharton, http://www.knowledgeatwharon.com.cn. Trustees of the University of Pennsylvania. All rights reserved. Shanghai Daily condensed the article.)
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