Labor daze: Many in state out of work

2009-09-02T08:00:00Z Labor daze: Many in state out of workMike Ivey madison.com
September 02, 2009 8:00 am  • 

To product designer Michael Hartzell, one of the most difficult things is telling people he's jobless. It's especially true in Madison, a city long viewed as recession-proof.

"Being laid off has a real stigma attached to it," he says. "I haven't even posted it on my Facebook page yet."

Hartzell, 40, and a father of one, lost his position recently at Pacific Cycle during a companywide reorganization. Although he knew the end was coming, it didn't make it any easier. He's since found a bit of consulting work, but few firms are hiring, and competition for any full-time openings is intense.

"I'm not complaining or too down in the dumps," he says. "My wife has a good job with benefits, so we're doing OK for now."

As the nation readies to mark Labor Day 2009, Hartzell can take some comfort knowing he's not alone. Some 273,000 Wisconsin residents, or 8.7 percent, are unemployed, according to the latest figures from the Department of Workforce Development.

Economists continue to read the tea leaves, searching for signs of recovery. And there have been some indications the worst may be over. The stock market, housing industry and automobile markets have all shown some life in recent months.

But the real sign of recovery will come from the employment numbers.

"Until people start returning to work in substantial numbers, we will not really be experiencing recovery," says Terry Ludeman, a former state economist now working with the Madison-based development group Thrive.

Ludeman says it will take a "return to normalcy" in the unemployment rate to signal that companies have regained their confidence.

Of course, the billion-dollar question is when things will return to "normal."

Historically, unemployment goes up much faster than it goes down. When unemployment is rising, it shoots up by two percentage points a year. But when unemployment is coming down, it comes down about one percentage point a year.

Under that scenario, it could take three to five years of sustained economic growth of 4 percent annually just to bring the unemployment rate back down to where it was prior to the bursting of the bubble.

Some observers say the U.S. economy is going through a massive shift as much as a recession, with traditional private-sector manufacturing jobs, company-paid pensions and lucrative benefit packages likely gone forever.

"Hopefully, the suffering won't last too much longer," says Keith Bender, a labor economist at the University of Wisconsin-Milwaukee. "I don't think things are going to get much worse, but we're certainly not going to see the economy come roaring back with 6 or 7 percent growth."

Just getting back to pre-recession levels could prove daunting.

Wisconsin lost more than 31,000 manufacturing jobs between June 2008 and June 2009, the sharpest decline in 25 years, according to the Wisconsin Manufacturers Register. More than 400 manufacturing firms in the state closed during that period.

Government employees, who have historically enjoyed job security and top-notch benefits, also are feeling stressed. Pay raises have been rolled back, with workers forced to take unpaid furloughs as the state struggles with falling tax collections and a soaring deficit.

And this time around, the job losses have hit the professional white-collar sector hard: finance, engineering, media and professional services have all seen cutbacks. Those who've kept their jobs have absorbed wage cuts, the suspension of company 401(k) contributions, and time off without pay.

All told, Wisconsin has shed over 135,0000 jobs since December 2007, nearly 5 percent of total employment in the state.

Among the casualties is Brian Turany, the former program director at The Mic 92.1 who was axed in an 1,800-employee downsizing at Clear Channel Communications on Inauguration Day.

Turany, 33, who is married with no children, says he's been applying for two or three jobs every day over the Internet. He's now burned through his severance package and is finally resigned to applying for unemployment benefits.

"I've got a lot of lines in the water, but most of the time, you don't even hear back," he says.

Turany says he's likely finished with the radio business and is looking for a job in marketing, event planning or similar fields where he can use his communications skills. He's hoping to find something that will allow him to stay in the area.

"I guess I like Madison more than I like radio," says Turany, who helped fight to keep the station's progressive talk format alive in 2006 after management switched to an all-sports format.

Widening income gap

For those still drawing a paycheck this Labor Day, most are working longer and harder for less money.

Figures compiled by the Center on Wisconsin Strategy (COWS) for its biennial "State of Working Wisconsin" report, to be updated later this week, show the median wage in the state at $15.48 an hour, up just 32 cents from 1979 when adjusted for inflation.

Wisconsin wages were once higher than the national average, but that is no longer true. Nationally, the median wage stands at $15.74, an increase of $1.19 over the past 30 years.

"This recession has clearly been as brutal on Wisconsin as the 1980s recession was," says Laura Dresser, associate director at COWS, a UW-Madison think tank. "We've lost the same share of jobs at this point, and while our unemployment level is lower, it has actually risen more rapidly than it did in the 1980s."

The state's unemployment rate hit an all-time high of 12.7 percent in February 1983, with a record 303,000 people out of work.

In fact, Dresser argues that Wisconsin has never really recovered from the recession of the 1980s, which hammered the state's backbone industries like automobiles, papermaking and heavy equipment manufacturing. She notes that the median income for a family of four in Wisconsin in 2006 stood at $72,495 - which, when adjusted for inflation, is nearly $6,000 below where it was in 2000.

"We've slipped into another recession before family incomes even recovered from the last one," says Dresser, who holds a doctorate in economics from the University of Michigan.

Moreover, the headwinds facing working people come as the gap between the wealthy and everyone else has never been wider. Income inequality in the United States is at an all-time high, surpassing levels seen during the Great Depression, according to a recently updated paper by University of California, Berkeley professor Emmanuel Saez.

While the income gap has been growing for decades, Saez calculates that in 2007 the top 0.01 percent of American earners took home 6 percent of total U.S. wages, a figure that has nearly doubled since 2000.

Put another way, the top 10 percent of American wage earners now command 49.7 percent of total wages, a level that Saez reports is "higher than any other year since 1917 and even surpasses 1928, the peak of the stock market bubble in the roaring 1920s."

Saez says that beginning with the economic expansion of the early 1990s, the economy began to favor the top tier of Americans, leaving much of the rest of the country behind. Boosted by soaring pay for CEOs, the top 1 percent captured half of the overall economic growth over the 1993-2007 period, he says.

Little to celebrate

Before upper-income earners started to pull away from the middle class in the 1990s, belonging to a labor union often meant better pay and benefits.

Back in the 1950s, nearly a third of all U.S. workers belonged to a labor union, but that percentage has been falling ever since. By 2007, the percentage of unionized workers had dropped to 12.1, although it ticked up slightly in 2008 to 12.4 percent, according to the U.S. Bureau of Labor Statistics, largely because the number of nonunion jobs has dropped with the recession.

So when President Obama was elected in November with the support of organized labor, union leaders hoped that better days might be ahead.

But any hopes a new administration would help reverse the deunionization trend largely evaporated following the bankruptcy of Chrysler and General Motors earlier this year. As part of those reorganizations, the United Auto Workers were forced to open existing contracts, rolling back wage and benefit promises for both current members and retirees gained through decades of negotiation.

In Wisconsin, the damage to the UAW has been more like a death sentence. GM has already shuttered its facility in Janesville, sending more than 2,000 workers to the unemployment line. And Chrysler, now co-owned by Italian carmaker Fiat Group, is planning to close its Kenosha engine plant by the end of 2010, causing another 800 lost jobs.

"I'm afraid those jobs are never going to come back," says UW-Milwaukee's Bender.

Construction, one of the few remaining private-sector industries with high unionization rates, has also taken its lumps with the decline in the housing market. That, in turn, has adversely affected electrical workers, plumbers and bricklayers.

And the union representing 850 workers at Mercury Marine in Fond du Lac has apparently lost its fight to keep the boat engine maker from moving jobs to a nonunion plant in Oklahoma.

Still, the president of the state AFL-CIO, David Newby, says all is not lost. He's hopeful Congress will pass the Employee Free Choice Act, which would make it easier for employees to form unions, along with some sort of meaningful health care reform.

"Providing health care for workers is a loadstone around the neck of every private-sector company in the nation," says Newby. "It's the main reason America is no longer competitive with the rest of the world."

Newby says organized labor is one of the few entities out there still fighting on the side of workers at a time when most people are being told to go it alone.

"We really did go all out in the last election in terms of educating people, talking about the issues and what labor can do," he says. "Honestly, I'm a lot more skeptical about Wall Street and the top CEOs being able to get us out of this."

Root of the problem

While the bursting of the real estate bubble and the resulting meltdown of the banking sector may have sparked the current crisis, many observers say the nation's problems run much deeper.

Some economists even look all the way back to President Nixon and the opening of trade relations with China in the 1970s, when U.S. and multinational corporations began to realize they could reduce costs and increase profits by shipping manufacturing jobs to developing nations.

The trend continued during the Clinton and Bush years, with U.S. markets opened wide to foreign competition under pacts like the North American Free Trade Agreement. The founding of the World Trade Organization in 1995 and China's admission to the group in 2001 were likewise major events.

"It wasn't just American companies that were moving jobs to China," says Donald Hester, University of Wisconsin-Madison professor emeritus of economics. "Germany and France were also discovering a very inexpensive, well-trained, highly literate labor force, and I credit the Chinese for that. They have spent much more on training their workforce than India, for example."

At the same time, the U.S. trade deficit soared, going from $91 billion in 1995 to $731 billion by 2007, although it did decline last year as consumers reduced their spending.

But lacking exports to pay for electronics made in China or oil imported from the Middle East, Americans began to borrow from abroad and consume far more than they produced. The popularity of gas-guzzling SUVs and light-duty trucks only deepened the deficit.

To keep an economy based largely on consumer spending rolling, banks loaned middle-class Americans cash for bigger homes, more expensive cars and limit-free credit cards. They then bundled those loans into securities for sale to foreign investors. When those loan payments became too burdensome and cash-strapped borrowers started to default, the bubble collapsed, bringing the U.S. economy to its knees.

"One thing I hope we've learned in the middle of this big experiment is that you can't not make anything and still have a functioning economy," says Newby. "You can't just have an economy based on financial service and business management."

And borrowers continue to have trouble meeting their debt obligations. More than 13 percent of American homeowners were either behind on their mortgage payments or in foreclosure as of the end of June, according to the latest figures from the Mortgage Bankers Association.

In Wisconsin, 6.9 percent of homeowners with prime, fixed-rate mortgages were behind on payments through the second quarter of 2009. While lower than the 8.9 percent national delinquency rate for fixed-rate borrowers, Wisconsin - along with Illinois, West Virginia and Utah - had the largest percentage increases over the first quarter.

The new normal

Since December 1997, 6 million jobs have been shed nationwide - many in the high-paying manufacturing, construction and financial services industries. The question is, what might replace them?

Obama has talked about new industries: green technology jobs in alternative energy, health care for an aging population or education for the next generation. The problem is those jobs could require large government subsidies and higher taxes that could limit private-sector investment.

Moreover, jobs in those fields may not pay like working in a unionized auto plant, building high-rise condominiums or marketing securities to the wealthy. It could all add up to some adjustments in lifestyle and expectations for a nation that had grown fat and happy on cheap oil, open spaces and easy credit.

Bender says Americans may well have to change their attitudes about the size of their home or the amount of stuff they consume. He says the housing bubble and the rush to upsize created a situation in which people were forced to work extra hours just to meet their borrowing obligations.

"We were mortgaging the future, and now things have come due," he says.

One term that has been tossed around is the "new normal."

The new normal could be characterized by higher rates of savings and lower consumer spending, lower corporate profits and reduced production, excessive bank reserves and less lending. It all could add up to a lower standard of living for the average working person.

For some, the term has even come to mean a future in which America no longer dominates the world economy, passing the torch to the billion people in China much the way the colonial empire of Great Britain lost its global supremacy to the United States in the 20th century.

Many factors remain in play: the impact of immigrants on the labor force; the pending retirement of millions of baby boomers; and the promise of new jobs in high-tech fields.

Roberta Gassman, secretary of the state Department of Workforce Development, is bullish on the future of job growth in the state although she says it won't come easy.

"Wisconsin is becoming the nation's biotech leader," she says. "Although these job numbers are at relatively low levels, they are increasing all the time. In the next five years, we will see new jobs created, occupations that don't exist today, and they will be the result of new research and discoveries."

Gassman also notes that Wisconsin has been gearing up its educational system for years in anticipation of a changing economy and workforce.

"We are working to provide career ladders for individuals who have no education or training beyond high school," she says. "We've got an excellent technical college system, offering pathways to careers in health care, advanced manufacturing, technology and the skilled trades. Many of today's workers will have to learn new skills for new jobs, and we have many programs to help them. Higher skills mean higher wages in jobs of the future."

Still, for those out of work or worrying about their job this Labor Day, the issue comes down to employment. And if past recessions offer any road map for the future, Wisconsin and the nation as a whole are in for a long, slow recovery.

"Hey, I've still got my health," says unemployed radio producer Turany. "And I've put 5,000 miles on my bike this summer. My biggest expense has been three new tires."

mivey@madison.com

Copyright 2014 madison.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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