Down and Out in White-Collar America

Down and Out in White-Collar America

Date: Monday, June 16, 2003 11:56 AM



JOB DESTRUCTION NEWSLETTER

www.ZaZona.com


Suppose somebody wrote a long article about oceanography but never
mentioned the fact that there is water in the ocean? Fortune magazine
managed a similar feat. A long comprehensive article was written about
how tough it is to find a job, and yet there was not a single mention
of H-1B or nonimmgrant visas.

Since the author is obviously not stupid it's obvious that the issue
was deliberately avoided. The corporate controlled media hopes that by
not mentioning H-1B it won't become an issue with American workers.

This article is worth reading, but keep in mind that the bias is quit
blatant.



http://www.fortune.com/fortune/careers/articles/0,15114,457284,00.html

THE JOB MARKET

Down and Out in White-Collar America

Professionals have never had a tougher time finding a job. It's not
just the economy; the rules of the game are changing.
FORTUNE
Monday, June 9, 2003
By Nelson D. Schwartz


As far as Brian Hill's four kids are concerned, nothing has really
changed. Dad still dons a suit and tie every morning and catches the
7:45 a.m. train to downtown Chicago, spends the day at a desk by a
window on the 11th floor, and returns home to the leafy suburb of
Winnetka in time for dinner and maybe a game of catch in the backyard.
But the 40-year-old engineering exec has been out of work for three
months now. His last job was with a small energy-consulting firm. Now
his office is an outplacement center where he searches for work along
with some 30 other professionals. Hill is relatively lucky--down the
hall, 58-year-old Mike Thompson has been looking for more than a year,
often going months without landing even an interview. Hill is out there
making the rounds, and seems enthusiastic when potential employers tell
him that his resume is great and that he "shouldn't be on the street
for long." His attitude is still good, and as Hill will tell you,
that's more important than fancy degrees or work experience. "Getting
up every morning and going downtown helps me keep focused," says Hill
after another day of working the phones and searching the Net. "My kids
think I'm still working. My oldest knows I'm looking for a job, but not
that I'm out of work."

Finding a job has always been hard, of course, even for someone like
Hill, who holds a bachelor's in engineering as well as an MBA. But
whether you're a newly minted college grad or a seasoned exec with
Fortune 500 experience, the job market now is the harshest it's been in
decades--bleaker than the "white-collar recession" of the early 1990s
and by many counts even more severe than the downturn of the early
1980s. "I've been in this business for over 20 years, and it's the
worst I've ever seen," says David Hoffmann, CEO of DHR International, a
Chicago-based recruiting firm. "Nothing even comes close to this."

At first glance, the pain seems hard to understand. After all, at 6.1%,
the unemployment rate is still well below the 7.4% it averaged in the
1980s and early '90s. The stock market has gained 13% since January,
while corporate profits are up 15% from last year's levels. And for all
the talk of double dips and deflation, the economy is growing--by 1.9%
in the first quarter, according to just-released government numbers.

So what's keeping people like Hill and Thompson from finding jobs? The
rudderless recovery and economic uncertainty deserve much of the blame.
But it's bigger than that. Increasingly, supereducated and highly paid
workers are finding themselves traveling the same road their
blue-collar peers took in the late '80s. Then, hardhats in places like
Flint, Mich., and Pittsburgh were suffering from the triple threat of
computerization, tech-led productivity gains, and the relocation of
their jobs to offshore sites. Machines--or low-wage foreigners--could
just as easily do their work.

The white-collar crowd was concerned, but they knew that those three
forces would also help get the American economy humming. And they did.
Now that trust has come back to haunt them. Technology has allowed
companies to handle rising sales without adding manpower. Gains in
productivity mean one white-collar worker can do the work that would
have taken two or three of his peers to do ten years ago. All that has
led to slower wage growth. Back in 2000 wages for professional and
technical workers were growing by nearly 5% annually--today they're
rising by less than 2% a year.

The scariest blue-collar parallel, however, is only just beginning to
be felt in the white-collar world: overseas competition. Like
automakers that moved production from Michigan to Mexico or textile
firms that abandoned the Southeast for the Far East, service firms are
now shifting jobs to cheaper locales like India and the Philippines.
It's not just call centers anymore. Indian radiologists now analyze CT
scans and chest X-rays for American patients in an office park in
Bangalore, not far from where Ernst & Young has 200 accountants
processing U.S. tax returns. E&Y's tax prep center in India is only 18
months old, but the company already has plans to double its size.
Corporate America is quickly learning that a cubicle can be replicated
overseas as easily as a shop floor can.

None of this bodes well for the jobless white-collar workers who are
hoping that a more robust recovery will bring the next paycheck. The
numbers of those who are searching are staggering. Of the nine million
Americans out of a job, 17.4% are managers or specialty workers,
according to a study of Labor Department data by Hofstra University
economist Irwin Kellner. During the 1990-91 recession only 10% of that
group was unemployed. Even after the much deeper recession of the early
1980s, just under 8% of unemployed workers were white collar. Sure,
there are more white-collar workers today, but joblessness among them
has risen faster than their share of the overall job market.

"White-collar workers and college graduates are in a state of shock,"
says Kellner. "It appears these job losses are permanent. They're not
necessarily coming back when the economy does."

At the bleeding edge of the blue-collarization trend are techies--not
just the twentysomethings who jumped on dot-com jobs either, but people
like Jim Klinck, a 52-year-old IT exec out of West Windsor, N.J. Klinck
joined MetLife straight out of college, and by the late 1990s was
responsible for software application development throughout the
company, reporting directly to the CIO. Once upon a time, working for
an insurance company was about as secure a white-collar job as you
could find. Klinck never expected to go anywhere else. But in the fall
of 2001, after spending 27 years at the insurance giant, Klinck was
laid off along with hundreds of other MetLifers.

Klinck earned more than $200,000 a year at MetLife, managed more than
1,000 people, and knows languages and programs ranging from Fortran to
PeopleSoft, but cold-calling for jobs has been--well, cold. "I thought
it would take a while, but I didn't think it would take this long,"
says Klinck, who looks for work from his home. So far he's been
consulting to keep busy and landing about two interviews a month. "If
I've sent people my stuff and haven't heard back in a week and a half,
I call them," he says. "Honestly, it's not something I like to do, but
you learn how to do it. It's just about kick-starting yourself."

As someone who has been out of work for more than six months, Klinck
has earned the title of "long-term unemployed" according to the Labor
Department classification. Traditionally a college degree or
senior-executive experience protected people from the threat of years
of unemployment. Not in this economy, says Jeffrey Wenger, a labor
economist with the liberal Economic Policy Institute (EPI). An analysis
of Labor Department data by EPI found that in 2002, 18.1% of the
long-term unemployed had college degrees, up from 14% in 2000.
Similarly, 20.1% were from the executive, professional, and managerial
category, compared with 14.2% in 2000. "Not only are college-educated
workers becoming unemployed more often, but they're staying unemployed
longer," says Wenger. "I think they're surprised at how the economy can
mistreat you."

Business school students aren't just studying in Starbucks; they're
worried they'll end up working there. At the University of Chicago
Graduate School of Business, 96% of grads in 2000 had an offer when
they collected their sheepskin. Only 72% of last year's grads were as
lucky--and this year isn't shaping up any better. Even at Harvard the
percentage of grads without job offers has gone from 3% in 2000 to 13%
now. For schools further down the food chain, almost half the class
will graduate without even one offer.

While the situation for budding execs or out-of-work ones like Jim
Klinck is tough, keep in mind that the overall unemployment rate for
white-collar workers is just 3%, about half the overall unemployment
rate of 6.1%. So why does it seem so bad? Because three years ago only
1.5% of white-collar workers were jobless. "It's relative," says
Wenger. "It's about the direction of the numbers and what you're
accustomed to. If you're poor, 3% unemployment is like manna from
heaven. But if you're a professional worker who never expected to be
out of work, it's rough."

The economy will recover from its current doldrums. No one doubts that.
But trends playing out half a world away--in places like the steamy
southern Indian city of Bangalore--should temper any job seeker's
excitement. That city, which boasts high-speed fiber-optic cables under
its chaotic and crowded streets, is the center of India's high-tech
industry. Along with New Delhi, India's capital, Bangalore is a magnet
for American companies looking to move jobs to places where skilled
labor costs a fraction of what it does in the U.S.

Plunging bandwidth prices make talking and sharing data over the
Internet easier and cheaper for companies. At first the work was mostly
limited to call centers--phone American Express with a query about a
corporate card bill, and there's a good chance you'll be talking to
Delhi. But in the past two or three years companies have turned to
India and the Philippines for much more sophisticated tasks: financial
analysis, software design, tax preparation, even the creation of
PowerPoint presentations. Sometimes this work is outsourced, with a
local company providing the manpower. In the case of giants like Ernst
& Young, a more accurate term for this trend is "offshoring"--the
workers are E&Y employees; they're just located overseas.

This phenomenon is still in its infancy, but it's already sending
ripples through the service economy. E&Y's Bangalore tax-preparation
center has been operating full-time for only 18 months. Yet already
it's paying off. "There's no question [the office] has allowed us to
lower prices in the U.S. and capture market share," says Alan Kline,
E&Y's Americas director of tax operations. "We're not H&R Block. Each
return we do is a custom job. But this has allowed us to lower prices
and be much more competitive. We're getting new jobs because of India."
E&Y's Bangalore office is the mirror image of a similar center in
Indianapolis, says Kline, and the firm uses the same metrics to
evaluate the performance of the 200 chartered accountants (the local
equivalent of a CPA) in Bangalore as it does with the 200 CPAs in
Indiana. "The work product is almost identical," raves Kline. "You
cannot underestimate the quality of the people. It's amazing how good
they are."

And how cheap. Starting pay for an American accountant, says Kline,
typically ranges from $40,000 to $50,000. In Bangalore the accountants
are paid less than half that. Those kinds of savings make outsourcing
and offshoring irresistible for Fortune 500 giants desperate to cut
costs. Last year NeoIT, which advises companies on moving IT and
back-office work overseas, helped U.S. companies transfer nearly 1,000
jobs offshore, primarily to India and the Philippines. By April 2003 it
had already shifted an equal amount. "Companies are saying, 'I've had
enough of pilot programs,' " says Atul Vashistha, NeoIT's CEO. "They
want significant savings and productivity gains."

In the next 15 years Forrester Research predicts that 3.3 million
service jobs will move to countries like India, Russia, China, and the
Philippines, with the IT sector leading the way. The financial services
industry is expected to be another major job exporter, according to
consulting firm A.T. Kearney, shifting more than 500,000 jobs, or 8% of
its U.S. workforce, abroad by 2008. "The debate at major financial
services companies today is no longer whether to relocate some business
functions but rather which ones and where," concludes Kearney managing
director Andrea Bierce. "Any function that does not require
face-to-face contact is now perceived as a candidate for offshore
relocation." That may be a slight exaggeration, but there's no doubt
that U.S. financial services firms are making explosive moves overseas.
GE Capital's International Services unit, which provides everything
from risk calculation to IT services and actuarial analysis for GE
worldwide, has grown from 634 employees to 17,000 during the past five
years. More than half those workers are in India, and they're not being
used for mindless data entry--in India every employee has a college
degree, and more than 1,200 have MBAs.

Even health care--the one industry in America that has proved it can
raise prices almost at will--is picking up on the benefits of
globalization. In the U.S., radiologists are among the best-paid
medical specialists, often earning more than $300,000 a year to
evaluate MRIs, CT scans, and X-rays. In Bangalore, though, T.K.
Kurien's team of 15 U.S.-trained and -licensed radiologists interpret
chest X-rays and CT scans from U.S. hospitals for less than half what
it would cost here. Kurien and his doctors work for Wipro, an Indian
tech giant that does more conventional outsourcing for clients like
Delta and Putnam Investments. "We know the level of urgency as the
image comes in over the Internet from the U.S.," says Kurien. His team
can decide which scans need attention stat and which can wait. Like
much of the more sophisticated offshore work, this is all
brand-new--Kurien's team set up shop only last November. But he's
optimistic that more X-rays will find their way to Bangalore as U.S.
insurance firms fight rising health-care costs.

Not surprisingly, the disappearance of well-paid white-collar jobs has
caused a stir among American pundits and politicians who barely made a
peep when blue-collar union positions were evaporating in the Rustbelt.
Lawmakers in New Jersey, Maryland, and three other states have proposed
legislation forbidding companies from shifting work on government
contracts abroad. In Silicon Valley the rise of Bangalore and India's
high-tech economy is often blamed for the shortage of good IT jobs.
"It's the flip side of globalization," says NeoIT's Vashistha. "What
happened to manufacturing over the last 25 years is now happening in
services. You can't really fight it."

Indeed, the truth is that trying to stop those jobs from going
elsewhere may be as dubious an exercise as using tariffs to protect the
steel industry. That's not to say the dislocations and adjustments
caused by offshoring and the other factors racking white-collar workers
won't be painful or long lasting. But the answer lies in adaptation
rather than stagnation. Ravi Aron, who worked for Citigroup in his
native India and is now a professor at Wharton, says the government
should encourage both workers and companies to invest in retraining and
the acquisition of specialized skills. "Workers should ask, 'Where in
the value chain can I position myself?' " says Aron.

There is an upside to offshoring. As companies increase profits and
become more competitive, they are likely to reinvest in other
areas--and that could mean new jobs back in the States. E&Y's Kline
insists that his firm has actually hired more higher-paid execs in the
U.S. to supervise the new accountants in India. "As we grow the
business, we need more midlevel people," he says.

Of course, that's cold comfort to jobless white-collar folks like Brian
Hill. He already has two degrees, and he's staring hard at payments for
the mortgage and medical insurance, not to mention the cost of raising
four kids. The best hope for Hill and millions like him right now is a
pickup in the economy, especially corporate investment. The
government's latest job report on June 6 provided little
encouragement--unemployment hit a nine-year high. Yet Hill is
cautiously hoping that he'll land a new gig soon. His type of work,
helping independent energy firms and utilities compete, requires plenty
of face time--and it's not about to be shipped off to Bangalore. In the
past week he's had three interviews. "Things are starting to happen,"
he says. One morning soon, he may even be able to go to an actual job,
instead of to an outplacement center.

Feedback: nschwartz@fortunemail.com



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