Job-Insecurity Worries Are Well Founded
Henry Farber's view on job insecurity has, as he puts it, "evolved." The Princeton University labor economist had been skeptical that the many "anecdotal" stories in the press about a huge wave of corporate downsizing truly indicated that a larger proportion of the work force had in recent years been laid off than in earlier years.
In the presidential campaign, Republican candidate Bob Dole has picked up the story. He speaks of "the Clinton crush of small growth, stagnating incomes, declining wages, and job insecurity" from which America needs to be rescued.
Mr. Farber is aware of the "dramatic" costs of job loss to employees. His research shows that from 1991 to 1993, workers who lost a job and found another suffered a decline in real weekly earnings of about 14 percent. It wasn't so clear to him, though, that the job-loss rate was any higher.
But Farber has just processed some new statistics gathered last February by the Census Bureau and - bingo! - there is evidence. About 50,000 households were asked if a member of that household had left a job in the previous three years and why. The result: 15.1 percent of working-age people lost their jobs.
That's a high number. The previous survey, conducted two years earlier for 1991-93, found that only 12.8 percent lost their jobs, Farber notes. Yet this was a period of economic recovery following the 1990-91 recession, when layoffs were high because of poor business conditions. The 15.1 percent job-losers number was even greater than the 13.3 percent for the 1981-83 period when the nation experienced its worst recession since the 1930s. And it was far higher than the 9 percent in the last period of similar prosperity, 1987-89.
"I am willing to be convinced by the numbers," Farber says.
The Bureau of Labor Statistics, looking at the same Census Bureau Statistics, plans to release its own analysis as early as today. After Farber pointed to an anomaly in the data, the BLS set about revising estimates made in August that 8.4 million people left their jobs involuntarily from 1993 to 1995. That was 7 percent fewer than the 9 million laid off from 1991 to 1993. Thomas Nardone, a BLS economist, said the bureau's revision would push up the 8.4 million figure, but would not say by how much, since the revision process is incomplete.
Considering the Dole charge that the economy is underperforming, the nonpartisan BLS undoubtedly wants its revised numbers to be as accurate as possible.
The BLS study includes those who lost their jobs due to three factors: plant closing, slack work, and position or shift abolished. These are the usual reasons companies offer for downsizing.
When Farber looks at those three categories, there is no change between the 1991-93 and 1993-95 periods. About 9.5 percent of 20- to 64-year-old workers lost their jobs. This would hint that the BLS, using similar methods of calculation, will report little or no change between the periods when it releases its new numbers today or later.
To reach the 15.1 percent level noted above, Farber adds in another category - "other" - to the three reasons counted by the BLS. This category has historically been so small that the government has not chosen to include it. But in recent years, the number of job losses for "other" reasons has become much larger. Farber doesn't know, but suspects the growth has something to do with the number of workers offered buyouts.
Mr. Nardone says inclusion of that category is a "valid choice" in analyzing the statistics.
Looking at the 1991-93 data in more detail in a recent National Bureau of Economic Research paper, Farber found that older and more-educated workers - including managers - have seen their rate of job loss increase more than other groups. However, the older and more educated were still less likely to lose their jobs during this period than younger and less-educated workers.
This week the American Management Association in New York released results of a survey of 1,441 large and mid-size firms showing that of 49 percent reporting job cuts, an average 7.1 percent of the workers at the companies lost their jobs. That is the lowest level in the survey's 10-year history. But at the same time these companies on average were hiring almost as many new workers, presumably with different skills. The average net job loss was only 0.7 percent. So upsizing has joined downsizing.