Bad news and callousness

A story in today's New York Times announces that the "deepening cycle of job loss" might last into 2009 -- bad news for those of us who were hoping for a short recession. Economists are making this prediction based on gloomy sales numbers that U.S. automakers reported on Tuesday. The news reminds me of a pet peeve: the Bush administration's attitude toward job loss. Robert Kimmitt, deputy secretary of the Treasury, wrote an op-ed piece in the Washington Post entitled, "Why Job Churn is Good." He points out that while 55 million Americans left their jobs in 2005, there were 57 million hires that same year. This indicates a flexible and dynamic economy, Kimmitt says, which allows America to compete globally.

The economist in me (I majored in economics in college) likes this argument. But personal experience has hardened me to this blythe treatment of disruption in families' lives. Maybe it can't be helped. Maybe we'll all be better off in the long run, and our economy will have successfully shifted from manufacturing to service -- or whatever the new frontier is.

Here's some of the Times' story today:

Joblessness has accelerated, and employers have slashed working hours even for those on their payrolls, shrinking the size of paychecks just as workers need them the most.

Now, add to that unsavory mix the word from automakers that sales plunged in June — by 28 percent for Ford, 21 percent for Toyota and 18 percent for General Motors — a sharp sign that consumers are pulling back, making manufacturers more likely to cut production and impose more layoffs. Until recently, the weak labor market has been marked more by the reluctance of employers to create new jobs than by mass layoffs.

This sort of news always worries me when Dan is between jobs. I fear that employers will just decide they can't afford that new hire after all -- at least not for now, while the economy is still sliding down and no one can see the bottom.

As for Kimmitt, as I have whined here in the past, employers are still doing old-economy things like offering two weeks' vacation to new hires, even people in their 40s with master's degrees like Dan and me. The rewards, at least in terms of vacation time, are based on longevity. And let's face it, people out of work have less and less bargaining power when the economy sours. So, often, we take the two weeks -- or the lower salary, or work that is far less challenging.

Not surprisingly, when Kimmitt published his piece in January 2007, responses came from the Midwest. Newspaper editorialists in Pennsylvania and Kansas pointed out that "churn" might be fine for urbanites, but rural workers suffered disproportionately.

From the Centre Daily Times in mid-Pennsylvania (no free link available):

For some, churning is positive if the person moves from a job with lower pay and unattractive working conditions to a better situation. But for others, churning results from forced movement -- layoffs or restructuring -- not a deliberate move to a better job.

Contrary to Kimmitt's rosy assessment, statistics on layoffs and plant closures suggest churning is liable to result in long periods of unemployment, forced shifts to other industries and lower wages. Lost wages and decline of steady work are particular problems today for workers living in rural areas and those employed in manufacturing industries or with jobs requiring few skills and little education....

Kimmitt's argument falls short by ignoring the transaction costs associated with shifting jobs. As anyone who has ever lost a job knows, re-employment rates depend on the condition of the local economy or the national economy and often are tied to whether you are willing to bear the cost of relocating.

Low-skill workers, particularly in rural America, are the most vulnerable to displacement caused by increases in productivity and international competition.

Rural workers tend to be less educated than urban workers and were more likely to be displaced. Rural workers also were less likely to be re-employed during the 1997-2003 period than urban workers and for rural workers the length of time out of work was 20 weeks longer than for urban workers.

Upon re-employment, urban workers were more likely to work full time compared with rural workers. And rural workers were more likely to receive a wage less than that provided in their previous employment compared with urban workers.

Yes, such evidence makes me feel very whiny when I complain about reductions in vacation time. But we spent one period when Dan was out of work (in Pennsylvania) for 20 months, and I feel I earned my right to complain after that. Especially in light of people like Kimmitt making little of the personal toll.