White-Collar Workers Falling Through Cracks

President-elect Bill Clinton, who has vowed to put America back to work, will be hard pressed to rescue a vast new group of workplace refugees: the army of white-collar employees squeezed out of jobs since 1990.

Middle-managers and other white-collar victims of a transforming U.S. economy account for more than 4 in 10 of those unemployed since mid-1990, a greatly higher share than in past downturns, according to the newest estimates.

But White House policy-makers will be able to do little in the short run to counteract the cost-slashing campaign in corporate America or the wrenching restructuring of defense and other industries that has spread distress into office suites around the country, economists say.

“Should we as taxpayers be trying to create jobs for white-collar bureaucrats, when the marketplace is telling us they’re not needed anymore?” asks Mickey D. Levy, chief economist at CRT Government Securities in New York.

The issue of opportunity has grown acute for workers whose collars are white, blue or pink, a predicament tied more to structural shifts in the economy than the ups and downs of recession and recovery. The number of private sector jobs actually fell slightly in the last year, an astonishingly feeble performance for an economy that appears to have been growing since mid-1991, albeit sluggishly.

In recent days, the list of white-collar casualties has lengthened, with corporate retrenchments announced by Bank of America, Occidental Petroleum, Chevron and Bristol-Myers, to name just a few.

And recent signs of an economic pickup may provide only limited relief. “It’s totally unprecedented,” said Mark M. Zandi, an economist for Regional Financial Associates in West Chester, Pa., who calculates that at this stage of a recovery, employment levels should be 6% higher than they are, based on history. “Businesses have done everything they can not to hire people.”

In this austere climate, jobs in heavy industry, finance and other fields frequently have been replaced by lower-level services that typically offer employees less pay and leaner benefits for health care and pensions, if any benefits at all.

“There are few new jobs out there, and the ones that are out there are distinctly inferior to the ones that were out there before,” said James L. Medoff, an economist at Harvard University.

According to Medoff’s research, white-collar workers account for 44% of the newly unemployed since July, 1990. That is double the figure from the 1981-82 slump; just 13% of the newly unemployed came from the white-collar ranks in the 1980 recession. (Technically, the term “newly unemployed” includes people who left their jobs voluntarily, as well as those just entering the labor market.)

“My advice to the Clinton people is that it’s really important for you to create jobs--but they’ve got to be good jobs, because a lot of people lost good jobs,” Medoff said.

Frank Taylor is a witness. The 42-year-old Orange County resident left his high-paying job--”in the six figures”--with a financial holding company 18 months ago. But since a promising venture with a real estate brokerage firm fell through, he has lived the up-and-down life of an executive-turned-consultant.

And while he is upbeat about some “strong possibilities” for his future right now, Taylor recognizes the dislocation that many in the financial industry are facing.

“The salespeople, the clerks, the tellers--where are they going to go?” he asks.

So far, Clinton has suggested two main ways to spark short-term job opportunities: added federal spending on the nation’s “infrastructure”--physical assets like highways, bridges and airports--and a tax credit to reward private investment in new equipment.

The infrastructure spending could total $80 billion over the next four years, a strategy that would create thousands of temporary construction and maintenance jobs. The tax credit for investments might prompt a wave of new equipment orders, sparking the factories that make those products to expand their payrolls.

Optimists say that such moves would cause helpful ripple effects in the economy, stimulating business and, ultimately, added jobs in fields that have nothing to do with plugging potholes or producing machinery.

As soon as a city hires unemployed workers to paint its bridges, “those workers cash their checks in local banks,” contends Audrey Freedman, a labor economist in New York. “They patronize local stores. They’re able to do more for their families.”

But in today’s business environment not everyone is convinced that the effects would be so dramatic.

More than ever, employers worry about the expenses of health care, retirement and even litigation that can arise from their employees. Intense competition, international and domestic, adds to the pressure on costs. Major industries, such as retail and commercial real estate, still suffer from over-expansion in the 1980s.

As a result, some economists argue that employers will hold off as long as possible before they start hiring, even if the economy picks up. What’s more, public works jobs and the investment tax credit are poorly targeted to the needs of the white-collar unemployed, they argue.

“I’m concerned that we may be shooting the wrong bullets at a tough problem,” cautions Stephen S. Roach, senior economist at the Morgan Stanley investment firm in New York, who would like to see the President-elect encourage firms to hire workers through incentives such as a tax credit.

While Clinton’s aides have circulated a private analysis that an investment tax credit alone might create 1.4 million jobs by the end of 1994, many analysts are doubtful.

“If people are getting the impression that a lot of jobs are going to be created fairly fast, then I think they’re drawing the wrong conclusions,” said Allen Sinai, chief economist at the Boston Co. investment firm.

Indeed, Clinton’s entire economic package may turn out to be a “minor event” for short-term job growth, Sinai calculates, possibly adding 10,000 more jobs a month when it is in effect later next year. In perspective, the U.S. economy was producing more than 400,000 jobs a month during boom times in the 1980s.

Others fear that political pressure to create jobs could prompt the new Administration to pay for wasteful tasks that do nothing for the real needs of the economy.

“I’m concerned that the focus of the policy-makers is solely on creating jobs, regardless of whether the jobs are productive or permanent,” said CRT’s Levy.

There is a paradox within the debate over short-term jobs: The essence of Clinton’s economic strategy is for the long term, targeting problems that threaten the nation’s standard of living in the coming years. Instant relief for the unemployed was never the key focus, his advisers agree.

Clinton’s campaign themes of improving education, worker training and increasing investment in research and technology, for example, all are intended to enhance U.S. competitiveness in the global economy and could take years to pay off. Even such items as infrastructure spending and new tax incentives for business--now mixed up in the job debate--originally were proposed as ways to raise U.S. investment and, ultimately, productivity.

But if the job picture does not improve quickly, public pressure for a quick fix could rise, forcing Clinton to accelerate spending in a quest to squeeze some short-term economic benefits out of what was originally a long-term strategy.

“Clinton campaigned on a putting-America-back-to-work program,” said Ross DeVol, an economist for the WEFA Group in Bala-Cynwyd, Pa. “He needs to do something that is very visible.”