Economic Trends
By Gene Koretz
Downsized in a Down Economy
Ford Motor Co. (F
) says it will soon cut its payrolls by at least 4,000 to 5,000 white-collar workers. Agilent Technologies Inc. (A
) announces plans to eliminate 4,000 jobs. Gateway Inc. (GTW
) reports it is cutting its worldwide staff by 5,000. The drumbeat of layoffs by major corporations continues unabated.
Although restructuring and downsizing have become a permanent aspect of U.S. corporate strategy, the current surge appears unprecedented. According to outplacement firm Challenger, Gray & Christmas Inc., planned job cuts unveiled so far this year already exceed 1.1 million, up 83% from last year's 12-month tally and far above any annual total in the past dozen years.
For economy watchers, the big fear is that continuing news of hefty job cuts will undermine consumer confidence, sparking spending cutbacks that will further imperil the already shaky 10-year expansion. But for the growing number of laid-off workers--especially those severed from long-term permanent jobs--the burning question is the impact on their own economic futures.
A hint is provided by the Labor Dept.'s latest biennial survey of workers who lost long-term jobs (held for at least three years) in 1997 and '98. Conducted early last year when the economy was still red hot, its results indicate that even in the best of times many displaced workers take a big hit.
To be sure, reemployed workers did significantly better than in earlier surveys, finding jobs faster, suffering smaller pay losses, and posting larger pay gains. But a year or two after being laid off, over a fifth of former full-timers were either still unemployed or had left the labor force, and another 11% were either self-employed, working part-time, or doing unpaid family work.
Nearly 40% of reemployed workers had to change occupations to find work. Moreover, 39% of those back on full-time payrolls were receiving less pay than at their previous jobs, with more than half of these suffering nominal wage declines of at least 20%. (Adjusted for inflation, of course, the declines were larger.)
Worrisome as some may find it, the picture above is probably a best-case scenario, showing what happens to displaced workers in a dynamic high-tech economy when it is moving ahead on all cylinders. The fate of today's permanent job losers in a period of falling employment and plummeting profits will be far more onerous.
The outlook for displaced workers in their 50s and early 60s may be especially dicey. That's the age category that took the greatest economic lumps in the layoff surges of the early and mid-1990s. It's also the category many baby-boomers have recently entered.
Why Married Men Earn More
What explains the so-called marriage premium--the fact that married men tend to earn more than single men of similar backgrounds and educations? Economists have been divided on the issue.
Some believe that married men earn more because women tend to select mates with good earnings prospects. Others credit the institution of marriage itself, arguing either that it makes men more responsible and diligent or that it boosts their productivity by freeing them from housework and allowing them to focus more on their jobs.
In a new study in the journal Economic Inquiry, Hyunbae Chun, of Queens College in New York, and Injae Lee, of New York University, claim to solve the puzzle. Analyzing 1999 survey data covering nearly 2,700 men, they find that married men earn an average of 12.4% more per hour than never-married men, after adjusting for age, work experience, education, and other factors that may affect both wages and marriage prospects.
The two researchers find no evidence that the marriage premium reflects the better economic prospects of men who tend to get hitched. Rather, it appears related to the state of being married--and specifically to the likelihood that wives shoulder household tasks.
Chun and Lee report that the wage gap declines as wives put in more hours working outside the home. While married men whose wives aren't employed earn about 31% more per hour than never-married men, for example, men married to women with a full-time job earn only 3.4% more.
Thus, having a wife who devotes most of her time to raising the kids and other housework evidently pays off for dad in his work on the job. All of which implies that the marriage premium will inevitably shrink as more wives spend longer hours at outside jobs.
Guess Who Taxes Pollution Least?
Economists have long argued that an efficient way to control pollution is to make those who cause it bear some of the costs via environmentally related or "green" taxes. These can run the gamut from retail taxes on gasoline to landfill charges on waste disposal.
By dint of its economic heft, the U.S. is commonly regarded as the world's biggest polluter. Yet the Organization for Economic Cooperation & Development reports that it imposes the lowest green taxes as a percent of gross domestic product of any industrial nation. While the average for OECD countries in 1998 was 2.7% of GDP, for example, the U.S. level was estimated at less than 1%.
Between 1994 and 1998, a majority of OECD members boosted their green-tax ratios, with Denmark's and Turkey's both rising by a full percentage point to 5% and 3% respectively. By contrast, the U.S., Germany, and France actually reduced their green-tax levels over the four-year period.
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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