Underemployment and Its Consequences

The next time you hear a politician talk about the number of jobs saved or created by the stimulus package or listen to a commentator on CNBC talking about the improving labor market hark back to this story. It’s from the WSJ and it’s the unfortunate reality that isn’t and maybe can’t be addressed.

The story talks about a few Americans that have seen their world turned upside down by the recession. Here is one family’s experience:

After being laid off by the New Jersey battery plant in 2006, Mr. Crane took a job stocking shelves at Costco in the fall of 2006. His pay was $10.76 an hour — the same money he earned when he was hired by Delco in 1983, just out of high school. “It’s sad,” says Mr. Crane, who had been earning about $28 per hour at Delco, before overtime.

In late 2007, he took a job at Lowe’s while working at a series of fast-food jobs on the side, as well as a stint at Pathmark supermarket. He still works at Lowe’s, earning $15.96 an hour selling lawnmowers, outdoor furniture and Christmas ornaments. At night, he pumps gas at a Quick Check for $13.70 an hour.

Typically, he works between 61 and 63 hours per week. It wouldn’t be so bad, he says, if the hours were consecutive. But with the gap between jobs, he can only sleep a few hours a night now — sometimes just an hour. Last week, he managed to clock 87 hours and barely saw his son.

“That’s all I do — every day — I just keep working,” he says. “I’ve got to. I’m not going to lose everything I have.”

His wife, who had been a stay-at-home-mother, also took a job. She earns about $20,000 working at a nursing home.

Last year, they collectively earned of about $42,000. This year, they expect between $48,000 and $50,000.

Mr. Crane was a heavy equipment operator at a Delco plant earning more than $100,000 a year when he was laid off.

This is the sort of thing that I suspect you like I see every day. People who have seen their standards of living slashed and now work just to survive with little hope of better days ahead.

There is an emerging consensus that somehow, someway the government needs to expand the amount of money it collects in order to deal with a deficit that some consider out of control. Honest pundits readily concede that the only way that can be accomplished is to tax more and to tax broadly. That may be a truism from an abstract policy perspective but the reality is that the stones from which those would extract more money are indeed truly quite dry.

Workers like Mr. Crane have no capacity to absorb more calls on their earning capacity whether through higher taxes of any form or sort, increased health insurance premiums or taxes either overt or covert on energy usage. They exist on a razors edge with no margin for error or any change in the amount of money they now willingly pay.

Americans, no matter how dire the situation may have appeared in the past, have always forged ahead on the assumption that their lot would improve through their own efforts. I’m not certain that hopeful outlook prevails any longer and to the extent that it has diminshed the door is being opened to radical social change. People with little faith in the future, particularly those who feel that something has been taken from them, are most prone to favor radical social reordering. How that plays out in a country as individualistic as the U.S. is a question open to a lot of speculation.

The situation with underemployment did not arise solely from the recession. It is the product of a conscious decision of a large portion of corporate America to outsource jobs to less expensive locals. On its face, it made business sense at least from a short-term perspective. Long-term, it may turn out to be a decision of colossally negative implications for those who profited including the political class that traded its obligation to protect the populace for campaign cash.

Consider Mr. Crane’s current ambitions as you ponder the implications of underemployment. Men and women with this view of the future tend to listen attentively to promises for a better tomorrow no matter how radical the road plan for getting there might be.

Mr. Crane no longer sees his new life as temporary. He no longer dreams of going and fixing equipment at the factory and operating big machines.

“My new goal is to become a manager at Lowe’s,” he says. “That will pay $17 an hour. I’m hoping this happens in the next couple of years, by the time my son is in high school.”

About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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