October 25, 2002
A Lost Generation of Job Seekers?
By Peter Coy, Michelle Conlin,
and Emily Thornton
The young and those in mid-career are bearing
the brunt of layoffs. And new jobs are harder to find, as older workers
A year and a half ago, Malene Comes of San
Jose, Calif., and her husband, Craig, were raking in $120,000 a year and
living la dolce vita. The two computer technicians indulged in
lavish trips, hired a cleaning lady, and ate out almost every night. Then,
both were laid off. Today, they get bags of groceries from a San Jose
food bank, have joined the ranks of the uninsured, and beg their parents
for $1,045 in rent for their 600-square-foot apartment.
"We didn't think we could fall this low," says Malene, 30, who has a low-paying
job helping mentally retarded adults. Craig, 36, works part-time at specialty
retailer Brookstone Co. and as a substitute teacher. Together they make
about $35,000 a year. Says Malene: "The fun days are over. Let's face
Economists may say the 2001 recession is over, but it doesn't look that
way to unemployed and underemployed people like Malene and Craig Comes.
During the boom years, they looked set to inherit the earth. The best
and brightest earned fat signing bonuses, big salaries, and fancy perks.
With their futures seemingly secure, many young and mid-career workers
took on big debts as they splurged on expensive houses, cars, and vacations.
"DESPONDENT." Now, many of them feel like a lost generation,
worried that their peak earning years are behind them even as their expenses
jump. For the youngest, the costs of raising families and paying mortgages
lie ahead. For those closer to middle age, the burdens are heavier. "These
guys are despondent," says psychologist Alden Cass, managing director
at New York's Catalyst Strategies Group who studies laid-off brokers.
He knows ex-Wall Streeters who are tending bar, waiting tables, or working
at the likes of RadioShack and the Gap.
In a reversal of the late 1990s, young workers are being jettisoned right
and left as companies make more room for older people many previously
thought of as corporate has-beens. As opportunities for younger workers
become more scarce, their elders are staying on or returning to work,
often desperate to rebuild diminished retirement savings.
Traditional unemployment measures don't capture the challenge for young
and mid-career workers, who are flocking to national job fairs in an often
futile search for work. They don't include people who have become discouraged
and dropped out of the labor force. A better statistic is the share of
the population in a given age group that has a job, for which even a small
drop is meaningful.
OLDER FARE BETTER. So how are different cohorts doing by
that measure? At the height of the boom in early 2000, 88% of all men
in the U.S. from the ages of 20 to 44, excluding those in the military,
jail, and other institutions, had jobs. By September, 2002, only 85% had
jobs. For women 20 to 44, the employed share fell from a peak of 73.5%
in early 2000 to 70.6% in September, 2002.
Although women aged 45 to 54 fared slightly better -- 73.5% of them remained
employed, a small drop from 73.9% -- their male counterparts were hard
hit: 84.8% of them had jobs, down from 85.9% a year earlier. Surprisingly,
older workers are the only ones who have done well. The share of men 55
to 64 with jobs rose from 65.9% to 67.2% over the past year, and the share
of women 55 to 64 with jobs grew from 51.7% to 54.4%.
Things are likely to get worse in the months ahead as companies cut jobs
to restore profitability. Sluggish economic growth is the root of the
problem. "We're looking for the continuation of a grudging, difficult,
gradual recovery, with a not-insignificant possibility of a double dip"
into recession, says Michael D. Andrews, chief U.S. economist for WestLB
Global Financial Markets.
STUCK IN THE MIDDLE. The bloodbath on Wall Street is a telling,
if extreme, case of the plight of young and mid-career workers. Job cuts
at brokerages since the bear market began are even deeper than after the
1987 stock market crash. All told, an estimated 15% of jobs that existed
at the industry's 2001 peak will have been eliminated by yearend. It will
likely be years before many of those jobs return, leaving people who've
been laid off with little prospect of working again in their field.
And even when those jobs do return, they'll be filled with new strivers,
says veteran Wall Street pay consultant Alan Johnson. Brokerages hire
scads of young people, only a few of whom ever reach the top. "The people
above 45 are more likely to be senior management -- and they are the ones
making the layoffs," says Guy Moszkowski, a financial-services analyst
at Salomon Smith Barney.
But Wall Street is hardly the only street in America filled with the abruptly
jobless. Many younger people flocked to technology and telecom companies
that have been devastated by the capital-spending slump. The once-mushrooming
info-tech business will add virtually no jobs this year, according to
the Information Technology Association of America.
OUTSOURCED OUT. Why are young and mid-career workers bearing
the brunt of the cutbacks? One reason is that many got bigger raises than
old-timers during the boom, so they're no longer much cheaper to employ.
At the same time, they often lack the deep institutional knowledge and
personal ties with clients and customers that are especially valuable
in tough times. Says Michael Recca, president of Sky Capital LLC, a startup
brokerage firm: "Everybody in this market prefers a veteran."
The 20-to-44 group has other woes to contend with, too. Age-discrimination
rules, by shielding older workers, may end up disproportionately exposing
younger ones to layoffs. Young people have been whacked by layoffs in
unionized businesses such as heavy manufacturing, airlines, and phone
companies, where the least senior are often the first to go.
Even global outsourcing may play a role. Gartner Inc. researcher Frances
Karamouzis says a New York company that recently laid off 500 people is
retaining its generally older software system designers while dumping
its younger coders and programmers. Says Karamouzis: "The work is going
off to India, where they get much better value."
BACK TO SCHOOL. Many laid-off workers, realizing that the
jobs they lost may never return, are striking out in new directions. Dan
Arol Jahns, 32, who lost his six-figure job at Goldman, Sachs & Co.
in August, 2001, chased a lifelong dream of becoming an actor. He first
found work playing a chess piece at a Toys 'R' Us Inc. store opening.
Since then, he has landed roles on stage and TV.
Most, though, are more prosaic. A record 31,000 people took the Foreign
Service exam this year, more than double last year's total. The number
of those taking the law-school placement test is up 17% this year, and
B-school applications for this fall's class were up 25% to 30%.
Applicants had better hope conditions improve by the time they get out:
Only 70% of the graduates of BusinessWeek's top 30 business schools
landed jobs by graduation last spring -- a lower percentage than during
the last recession. "We expect  is going to be another tough year,"
says Kim B. Clark, dean of Harvard Business School, where nearly 20% of
2002 grads had still not found work by graduation.
"ATTRACTIVE AGAIN." Only workers nearing retirement age are
faring well: A greater percentage of those over 55 are working today than
a year ago. In part, that's because older workers are prized for their
experience and stability: "It's not at all surprising that we're seeing
people who have come from an Old Economy set of values becoming more attractive
again now," says Barry Honig, president of New Jersey-based executive-search
firm Honig International.
Companies such as AMR Corp., parent of American Airlines, are trying to
retain older workers as they cut jobs because of the brain drain they
suffered in the past from offering early-retirement incentives. They also
want to avoid the high upfront costs of employee buyouts.
But for the silver-haired generation, rising employment is not entirely
by choice. Many are staying on the job or reentering the workforce because
they need the money: The bear market has smashed their nest eggs. Shel
Hart, a vice-president at staffing firm Spherion Corp., says 40% of executives
aged 55 and older who are applying for jobs now are doing so because of
damage to their retirement portfolios. James Alexander, 55, retired from
Westinghouse in April, 2001, but a year later, after losing big in stocks,
moved from Pensacola, Fla., to Sandusky, Ohio, to take a job as a plant
manager at a consumer-products company -- at a 30% cut in compensation.
Young people who can't find jobs and older people who can't afford to
quit: All in all, it's not a pretty picture. But until the economy revs
up, it's a fact of working life.