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Business: Middle-Class Workforce

Economy Series

Griff Witte
Washington Post Staff Writer
Monday, September 20, 2004; 2:00 PM

Over the next several months, The Washington Post, in an occasional series of articles, will explore the vast changes facing middle-income workers and the consequences for businesses and society. The workforce for middle-income is changing not just for factory workers but for managers, tech industry workers, travel agents and office clerks. The first article takes a look at the disappearance of many jobs that pay near the national average of $17 per hour, with benefits such as health care and pensions in the American workforce. Other stories in the series will address how companies are moving work to temporary employees and people in other countries, and will look at the prospects for new types of jobs to take the place of those lost.

Post staff writer Griff Witte was online Monday, Sept. 20, at 2 p.m. ET to field questions and comments about the article.


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Griff Witte: Good afternoon everyone, and thanks for being here with me. We're here to talk about what's happening to a segment of the middle class that has had a tough time hanging on in a volatile economy. If you haven't had the chance to read my story on this issue in this morning's paper, take a little time to do that now. (It's a bit on the longish side. Sorry about that, but I hope you enjoy it nonetheless). Anyway, it's an interesting topic that I know a lot of people have strong feelings on. I really look forward to receiving your questions, and I'll do my best to give some good answers.

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Edina, Minn.: Great story, though I think the trend has already jumped a notch to those with 4 year degrees. I'm in the IT industry in the Minneapolis area. I've recently given references for past employees with 4 yr college degrees, who made $65-$100k a year
5 years ago with bonuses and very reasonable health care premiums, who are now competing with 300-500 other applicants for jobs that start at 35-$45k, with no bonus pay and expensive healthcare plans.
After being laid off in May of 2001 I'm one of the lucky ones contracting on my own, week to week, paying my own individual healthcare, and self employment taxes (8%), along with personal income rates on my earnings, while much of the fortune 500 pays no income tax.
Something's wrong here.

p.s.
The average home within 10 miles of Minneapolis has also doubled to about 260K$ in this same time period, with food, energy, tuition, and insurance premiums up at least 50%. The CPI numbers published by the government are a joke.

Griff Witte: Thanks for the comment. You raise a good point that I try to make in the story, which is that a college degree certainly helps qualify you for more jobs, but it's no guarantee. College grads may have seen their wages rise overall in the last 30 years, but they've recently been an increasingly large share of the long-term unemeployed. Many are also taking big paycuts when they eventually do find work. Chuck Moore, who I profile in the story, illustrates this phenomenon. He's a man of many talents who has a bachelor's degree, yet a lot of his skills happen to be ones that can now be duplicated by machines or by workers overseas. So instead of the $40,000 a year job with benefits he had before, he's had to take a job paying half that with no benefits after nine months of unemployment.

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Rockville, Md.: Your story about job losses was pretty grim, but also typical of a dynamic economy where jobs are lost and created constantly. Don't you think that people need to stop thinking of a particular job/company as a lifelong position, though? It seems that people who have changed jobs more than once or twice during their career seem to be able to handle a layoff much better than those who have stayed at the same company for 20 or 30 years.

Griff Witte: You're referring to this idea of "creative destruction" that a lot of economists cite as reason to think that job losses in certain industries and among particular occupations, while painful for the people affected, are not necessarily a bad thing. The way the theory goes, the old, ineffecient industries are replaced by new, thriving industries that create enough jobs to compensate for those lost. That has certainly been the case in previous transformations in the country's economic history. We went from agriculture to manufacturing at the beginning of the century; we've gone from manufacturing to services/tech more recently. Many economists say that is likely to happen again. Others don't think so -- they feel something fundamental has changed that's going to permanently drag down the demand for certain workers. In any case, you're probably right that the idea of lifelong job security is dead or dying. The question is what happens to those people who came of age at a time when a lifelong job was the expectation and now are dealing with unemployment for the first time. These are the people who are going to have to get creative if they want to hang on to their standard of living.

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Ohio: I am looking forward to your series and only wish that more Americans had access and informed themselves on this subject.

In today's piece you note that median household income reported by the census bureau has increased by around $10,000 since 1967. I can't find that on their website and it sounds too high to me. Regardless, isn't it correct that a substantial part of that increase is attritable to an increase in 2 earner households and longer working hours rather than the effect of a growing economy?

washingtonpost.com: As Income Gap Widens, Uncertainty Spreads (Post, Sept. 20)

Griff Witte: Thanks for the question. The numbers are accurate, and you can take a look for yourself in the historical income tables on http://www.census.gov/
The increase in income is due to a variety of factors. One, obviously, is the fact that over the past 30 years you've seen a lot of women get into the workforce through full-time jobs whereas before they had been raising the kids or working part-time. So that's a factor in rising household income. But it's not the only factor. The fact is that the country, overall, has become more prosperous during the past few decades through rapid productivity gains. But those gains have not always been divided proportionately and some have seen a much, much greater share of the gains than others.

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Midwest rural area: From your article:

"The optimists among economists -- and there are many -- point to trends that could help mitigate the pain of job losses and lead to future growth. One is the coming mass retirement of baby boomers, which could leave plenty of openings for those trying to break into the workforce."

I am among the oldest of the baby-boomers (born in 1946) and I won't be retiring any time soon, nor will my husband (born in 1944). We will be working into our later 60's if possible. Both of us have lost pensions through pension restructuring or layoff. We are saving as much as we can in 401(k)s to supplement what is bound to be a reduction in social security.

Social historians say the "stay-at-home-mom", one-income family of the 1950's was an aberration. The ability to retire at 55 or 62 of the past two decades is going to be an aberration also. We're back to the part where people work until they keel over, if they can find jobs.

Griff Witte: You raise a really interesting point and it will be intriguing to watch over the years to come to see whether your theory bears out. You're right that many people are not retiring as early as they used to, in part because people are simply living a lot longer but also out of necessity. If you don't have a secure retirement waiting for you, it's hard to hang it up. Scott Clark, one of the subjects of my story, is a prime example of this. He had plotted out a retirement that was to begin in his mid-50s, but when his factory job went away, so did that plan. He figures to be working as a contractor until he's about 70, meaning that's one less job for someone in the next generation to take.

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Indianajpolis, Ind.: This subject is long overdue. For the past several years I hear the daily spin. I'm tired of hearing the debate on tax breaks framed in a manner that implies companies need tax breaks so that they can "give" workers a job. The reality is that workers and companies having a relationship of mutual benefit where companies profit from the labor of a good worker; and good workers provide a good days work for a good days pay.

Griff Witte: This is an interesting issue that's obviously getting a lot of attention in this election season. Whether the tax cuts help or hurt, a lot of economists are looking into the question of why companies have been more reticent to hire this time around than they have been in previous recoveries. A lot of theories out there, but no firm answers.

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Richmond, Va.: You note that median inflation-adjusted income has gone up $10,000 since 1967. A lot of other things have gone up as well. College tuition has gone up greatly (in 1967 the University of California did not charge tuition to in-state residents). Medical costs have gone up sharply. Housing costs have increased greatly. So while your statement may be technically true, it is meaningless. What does a $35,000 lifestyle (in 1967 income-adjusted dollars) cost today?

Griff Witte: That would be a great topic for an econ PhD dissertation. It's hard to know whether the household making a median income is better off with $43,000 today than the household making $33,000 a generation or two ago. One interesting take on the question that I've read recently is a book called The Two-Income Trap. It takes a look at how the middle-class family of today fares in a world where there are an increasing number of dual-income families, but the cost of such big-ticket items as college tuition, mortgages, day care, etc has far outstripped inflation.

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Washington, D.C.: Great article! I'm never sure what some people are proposing as solutions to this problem though. I would say that this should encourage future generations and some people that have lost their jobs to get more education. I was listening to a similar report on the radio a few months back and one of the economists being interviewed basically said that this was a natural trend that happened as newer technology was developed, but more jobs would be developed even though we don't know what these jobs will be necessarily. But we couldn't tell farmers 100+ years ago that their children would be doing mapping the world with satelites either. I know this is hard because noone wants to see people losing their jobs, but if there are more efficient ways at producing something, shouldn't we use them? I mean, in the end, we benefit in terms of cost savings when companies find more efficient means to produce products.

Griff Witte: You raise good points. The difficult plight of some of those in the middle class who have seen the ground shift beneath them is easy enough to recognize; what's harder is figuring out what to do about it. Both major political parties have their own ideas. And there are a lot of economists who agree with you that nothing necessarily needs to be done; that the jobs will come if you just allow the economy to run its course, and let businesses innovate. Others say it's not going to be that simple this time. We shall see.

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Santa Cruz, Calif.: You say that the reason for loss of jobs is that they have been moving offshore. This goes against the common belief expressed by such venues as the Economist magazine that the job losses are due to automation. Since you are making such an inflammatory statement that goes against reputable analysis, what is your source?

Griff Witte: I don't say it's just jobs going offshore. I say that's a part of the equation, but that automation plays a big role as well with computers being used to duplicate a lot of "routine" jobs that used to pay a middle class wage. Chuck Moore had that experience in his last job. He built a computer program that worked so well that he became expendable. Technology, of course, ends up creating a lot of jobs as well over the long term. But in the short-term, it can cause disruption in the lives of workers who used to command a certain level of pay but might not have the right skills to command the same kind of pay in new industries.

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Denver, Colo.: Stemming the rise of the Wal-Mart Economy and the erosion of good jobs in the US will take cooperation on all parts of our society -- government, business, workers, etc -- to achieve. What, if any, role do labor unions play in this mix?

Griff Witte: Labor unions are in a tough spot because they don't want to be seen as being completely anti-free trade, but they also have an interest in protecting the jobs that already exist and, by extension, their present members. As the economy becomes more globalized, it's a tougher balance to strike. Labor unions are also hamstrung by the fact that their numbers just aren't what they used to be. They're down to just under 13 percent of the workforce, which is about the same as the percentage who work in jobs that are temporary, contract or on-call.

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Binghamton, N.Y.: You have investigated the cost to hourly-paid individuals of their job loss. One earlier report on PBS indicated that if a person older than age 50 lost their job since 911, they are "unemployable". It seems that older person's, like me, have not been able to return to jobs with similar pay to those lost since 911. I used to earn in excess of $150k as an Account Executive selling high-tech systems to telephone companies, when now I bearly manage to earn $25k working several jobs much lower paying jobs including one as a substitute teacher. Have you thought of investigating the job loss of these older Americans due to age discrimination since 911?

Griff Witte: I don't know if this is a problem strictly limited to the post-9/11 economy, but it certainly is a problem for a lot of older Americans. For a variety of reasons, it becomes much harder to train for a new job when you're 55 than it had been when you were 25. By 55, there are mortgage payments to make, kids' college tuitions to pay, etc. It's harder to drop everything and go back to school. You're right, too, that there are employers out there that would rather have someone younger just because they figure they'll get more out of training that person in the long run. Instead of just a few more years of work until the employee retires, you get a few decades (if the job's around for that long).

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Mobile, Ala.: Most thought-provoking article I've read in months amid all of this swift-boat vivasection. But I wonder: What solutions have been suggested to the disappearance of the middle-class job? Are all possible solutions merely legislative? It's not like you can "rescind" automation. have the experts suggested where new jobs are supposed to come from and who is supposed to create them?

Griff Witte: Thanks for the comment, and the question. As I mentioned before, solutions are tougher to identify than problems. Both campaigns have been speaking to this issue in recent months. Kerry, of course, has been talking about ending tax breaks that he says provide incentives for companies to go abroad. Bush has been promoting his idea of an "ownership society" in which employees have more control over their health care and their retirement funds. There are a lot of solutions, too, that go beyond the political arena. On the most individual level, it's a good idea for those in school to try to anticipate where the jobs are going to be in the decades to come and get the necessary training. The Labor Department puts out some good publications that could help in this regard. Have a look at http://www.bls.gov/

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San Carlos, Calif.: Intellectual jobs are disappearing overseas as well. Startups in Silicon Valley are being pressured by their venture capitalists to do development in India. Many software employers are moving sophisticated technical jobs (writing manuals, developing software) to India whenever possible.

Education isn't the panacea it's claimed to be. Knowledge workers are much, much cheaper in the third world than in the U.S; biotechnology and software development can easily go the way of the textile and furniture industries.

Griff Witte: The theory for some time has been that the low- to mid-level tech jobs may go abroad, but that the innovation will always be centered here in the U.S. and that will provide for an endless stream of new jobs. There are those who believe, though, that there's no reason other countries such as China and India won't be loci of innovation in their own right. If that happens, the question is whether that necessarily means the U.S. will lose ground, or whether the U.S.'s boat can rise along with India's and China's, etc.

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Washington, D.C.: The concept of the "middle class" seems to be so fleeting and general. If you'd asked me where I put my family, I would have said middle class. But then your article used an income level that surprised me (it's much lower than i expected). Is there a standard definition for middle class that I've just missed somewhere along the line? Great article, by the way. I'm eager for more!;

Griff Witte: Ask just about anyone in the U.S., and they'll proudly proclaim, 'I'm middle class.' Doesn't matter whether they're the poorest of the poor or the richest of the rich, most people want to identify as being in the middle. It's a very American phenomenon. Definitions of what 'middle' actually means vary. Some say it's the middle third of the income distribution scale. Some say it's everyone between half the median and double it. There's no one, standard definition. I think for most people, it's more of a state of mind than it is a hard-and-fast number. And, of course, it varies depending on where you live: To be truly 'middle class' in the DC area requires a lot more money than it does in rural South Dakota.

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East Lansing, Mich.: One of the graphics that goes along with the story says that post-secondary teachers will be in very high demand in the next twenty years or so (second only to nurses). As a current PhD student, I find this hard to believe - we are constantly told that the employment opportunities in academia are limited and very competitive. Can you explain this prediction?

Griff Witte: Interesting question. I don't know for sure, but my guess is that if education is going to be the coin of the realm down the line, someone's going to have to do the teaching. There may be an over-supply of PhDs out there at the moment, but there are going to be a lot of people heading back to school so they can qualify for the jobs of the future, and they're going to need good teachers.
By the way, journalist is also projected to be an occupation with significant growth. Let's hope for both of our sakes that the predictions are right.

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Griff Witte: I have to run, so I won't be able to get to all the other questions. But many thanks to those who submitted. It's been fun.

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