Managing White Collar Job Loss: Causes of and Responses to Recycling

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Managing White Collar Job Loss: Causes of and Responses to Recycling
By Andrew D. Carson, Ph.D.

The process through which employers make use of an employee's skills, then lay him or her off; then the employee is hired by a new firm, which makes use of the employee's not quite so current skill set, then lays him or her off; and so on in a cycle. Recycling reportedly results in significant loss in wages. "The average earnings decline including lost raises was 21 percent for workers forced to fine full-time jobs between 2001 and 2003" (Rose, 2007, p. 2).

Rose (2007) also reports that although the recycling of workers with less education and generally lower incomes has remained relatively constant over the past several years, the rate for better educated workers has apparently increased dramatically in the past 5 years. Thus, many older, well educated workers--possibly with 15 or more years experience in the same company--are now recycled into lower paying jobs with poorer prospects, and with the likelihood of further recycling remaining a threat.

There may be several reasons for an increase in recycling among well educated workers. First, as the world economy becomes increasingly flat, companies will be under increasing pressure to reduce costs, which will drive reductions in the labor force. Brown (2007) predicts that in the next few years, "millions of middle class jobs -- from programmers and back-office technicians to Wall Street analysts and architects--will soon find their way from U.S. office parks to the cubicles of Bangalore and Mumbai."

Because well educated, experienced workers are expensive, employers will be pressed to let them go if they can find means of getting their work done less expensively. Perhaps firms feel that they can outsource their work tasks, or reassign them to younger employees with less experience, but perhaps with more recent, up-to-date skill sets acquired through education. This has long been a concern in such occupations as engineering and computer programming, but this career pattern may be spreading to other occupations as well.

Although this may sound like age-based discrimination, such discrimination is often difficult to prove, and employers must discover ways to reduce costs in order to stay in business. To make the layoff pill easier to swallow, employers laying off workers over age 40 may offer severance pay, but only on condition that the worker waives all right to sue the employer for age-based discrimination.

Second, it is possible that the value of much white collar (high education, experienced) work has itself declined over time. The increasing reliance on the
flat-world platform, may have simply made white collar work more of a commodity. The value of white collar work may have declined by 20% in the past few years. This will obviously be more of a possibility in those white collar occupations with widely used skill sets that are likely to be the first to be automated into the flat-world platform, but the overall trend may serve to depress all white collar occupations except the most creative and technologically cutting-edge.

Finally, a major driver of this trend is the continuing consolidation of capital and corporate staff into an ever smaller number of very large corporations. Particularly in the case of leveraged buy-outs leading to corporate acquisitions and mergers, where the buying parter assumes substantial debt to make the purchase, there is tremendous pressure to reduce costs leading up to and following the purchase. Such buyouts are therefore associated with restructuring and layoffs to gain efficiency and reduce expenses. In fact, when such a buyout occurs and efficiencies are not gained through massive restructuring and layoffs, it may be very difficult for the resulting corporate "marriage" to work, and for the resulting entity to be economically viable. A good example of such a failed corporate marriage is the purchase of Chryslyer my Dailmer-Benz, in which a failure to sufficiently integrate the two companies resulted in huge corporate losses and the recent decision to sell Chrysler.

There may be several solutions or at least rational responses to these problems:

1. Individuals entering ANY field through an educational background heavy in technical skill must make a decision to invest in heavy and continuing technical education in order to maintain a current skill set, or plan on a career patter that will either result in recycling and lower eventual income for those workers remaining in the technical jobs, or a transition to less technical positions, such as sales. However, there is no guarantee that any such efforts will stave off eventual recycling, perceived skill obsolescence, and loss of wages.

2. Individuals may reduce their level of risk by becoming independent workers (e.g., starting their own consulting firm or other type of company) as early in their career as possible, and then over time growing their income and corporate worth. Such a career pattern may result in more risk and less income initially, but it may translate to more security and more income and net worth eventually.

3. One might preemptive approach one's employer, if one is concerned that one's relatively high salary places one at risk for layoff, and volunteer to take a slightly lower salary in return for various benefits, such as additional education (to enhance one's skill set), vacation time, or perhaps even a shorter work week. Companies might be willing to grant such requests in order to retain the employee's extensive experience, because the employee has solved the company's immediate problem: how to reduce wages. Bargaining for a shorter work week, or one with hours compressed into fewer work days, may be the best option for such workers, because the worker could then launch his or her own personal enterprise more readily (see 2 above for the advantages of this).

4. One could just find a new job, and accept the loss of wages as someone outside of one's control, like a hurricane. And to a large degree it is something outside of one's control. By all accounts, one should be able to find new work fairly quickly, even if one reaching one's earlier level of compensation. Vocational psychologist Donald Super has described various career patterns, noting that a general trend is for obsolescence and decline to occur in its later stages. Perhaps, under increasing pressure of the flat, global economy, such decline just occurs earlier in life now.

5. One might return to school and complete a new degree in order to "refresh" one's skill set. However, one might also just get a new job and also pursue a new degree, even if part-time. An emerging and relatively lower cost option is to obtain such a degree online.

6. Finally, and only as a last resort, if one feels that the layoff is in fact in violation of age-based discrimination laws, the worker might contact a lawyer to investigate the issue. Bear in mind that speed may be of the essence in such a plan; Federal (US) law may restrict such claims to the first 180 days after the incident. However, one's chances in such actions will probably be relatively low, and one will generally be better off choosing one of the other options. In addition, legal actions may result in significant expenses, stress, and require the investment of time that might be more profitably put to working in other ways.

References

Brown, S. (2007). Why White Collar Job Outsourcing Will Transform America's Suburbs. Retrieved July 2, 2007, from the Reason Public Policy Institute web site, http://www.freetrade.org/pubs/briefs/tbp-019.pdf

Rose, B. (2007, July 1). Layoff fears part of 'new normal.' The Chicago Tribune, Section 5, pp. 1-2.

Websites

Daimler-Chrysler Merger: A cultural mismatch? (online case study). Center for Management Research.
http://www.icmr.icfai.org/casestudies/catalogue/Business Strategy1/BSTR009.htm

Why White Collar Outsourcing Will Transform America's Suburbs, by Seth Brown. On Reason Public Policy Institute's site.
http://www.rppi.org/whitecollarjobs.shtml

Job Losses and Trade: A Reality Check, white paper by Brink Lindsey, Center for Trade Policy Studies.
http://www.freetrade.org/pubs/briefs/tbp-019.pdf

Monopolies, Mergers, and Restructuring, article from About.com, adapted from material provided by the U.S. Department of State.
http://economics.about.com/od/
smallbigbusiness/a/monopoly.htm