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Downward Mobility


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DOWNWARD MOBILITY

In 1988, Allen Stenhouse had a steady annual income of $50,000, a 24-year career in insurance, a $279,000 condo in West Hartford, Conn., and a marriage of 14 years. He had worked his way up the hard way, going to Georgia State University at night. At 48, he had served as senior treasurer of the local United Way and was an active member of the Greater Hartford Arts Council. Two days before Christmas that year, Stenhouse was laid off as business manager of CIGNA Corp.'s health care department. After helping McKinsey & Co. cut his department's budget by 20%, Stenhouse learned that he would join the 2,000 others cut by CIGNA at that time.

Despite good outplacement help, intense networking, dozens of interviews, and hundreds of resumes mailed, Stenhouse has yet to find permanent work. He divorced in 1989, worked for minimum wage in the stockroom of a Marshalls Inc. discount store in 1990, and lost $13,000 of his savings starting up his own financial consulting business in 1991. Early this year, his condo was foreclosed and auctioned off. He owes the IRS $22,000 in back taxes and penalties because he withdrew his 401(k) retirement funds early. Several months ago, he sold his camcorder, photocopier, and fax machine to pay bills.

Today, Stenhouse lives on $1,039 a month in Social Security disability payments in a $575-a-month apartment. He has no medical insurance and pays for a psychiatrist out of his own pocket. "I have lost the fight to stay ahead in today's economy," he says. "I was determined to find work, but as the months and years wore on, depression set in. You can only be rejected so many times; then you start questioning your own self-worth."

ALL AT SEA. Stenhouse has lost more than his job: He has lost his place in society. Though his case is extreme, he's not alone. After years of layoffs, the specter of downward mobility is haunting legions of once-secure managers and professionals. They face permanent loss of the income, possessions, and status long considered the defining elements of the middle-class life. As corporate stalwarts such as General Motors, United Technologies, and IBM join a long list of downsizing companies, the economic trajectories of thousands of white-collar workers are plunging, producing deep social, psychological, and economic dislocations. Managers and professionals who once drew their status from well-paying corporate jobs now find themselves cast adrift, without a sense of personal identity for the present or economic security for the future.

Behind the curtained windows of comfortable suburbs such as Fairfield County in Connecticut, Lake Forest outside Chicago, and Danville near San Francisco, stunned families are discovering that the social escalator is going down for the first time since the Great Depression. "It's a shock of the highest order for these people to find themselves downwardly mobile, because they believed their educational credentials and work achievements would protect them from the kinds of devastation common among blue-collar workers," says Katherine Newman, professor of anthropology at Columbia University and author of Falling From Grace: The Experience of Downward Mobility in the American Middle Class. "Managers and professionals define their social identity through occupation more than anyone else, and in today's marketplace, many simply don't know where they fit or who they are anymore."

`DUMPIES.' Just as the last decade was defined by yuppies and their flamboyant material excesses, the 1990s may come to be the age of "dumpies" -- downwardly mobile professionals -- and their struggle to stay in the upper end of the middle class. The downwardly mobile aren't just being temporarily cut loose in a recession. Since the mid-1980s, as corporations have responded to global competition and technological change by merging and consolidating, downsizing and de-layering, some 2 million middle-management positions have been permanently eliminated.

As their well-paying jobs vanish forever, these executives are plummeting down the occupation ladder, accepting less income and status as they fall. "Like the blue-collar steel and auto workers of the early 1980s, most of these white-collars will never get back the earnings position they once had," says D. Quinn Mills, professor of organizational behavior and management at the Harvard business school. "These managers and professionals won't get the jobs back in the big companies that offered that special kind of status and security."

Painful as downward mobility is for those affected, it's also bad news for the economy as a whole. In the 1980s, highly paid managers and professionals working for big corporations were the cream of the consuming class, borrowing and spending as if tomorrow would always be better. But downwardly mobile families make lousy consumers -- and so do their neighbors, friends, and relatives, who are terrified that they may be next. The sharp decline in consumer confidence is a reflection of more than just the recession. It is also a measure of the sense of foreboding that increasingly is pervading America's executive class.

The newly dispossessed are increasingly aware that they often have nowhere to look but down. When big corporations began laying off white-collar employees in the early 1980s, 90% were quickly reemployed in a similar job in a large company at the same pay or better. In the late 1980s, only 50% got back in. Today, that figure is down to 25% and falling, according to Charles Sweet, president of A. T. Kearney Executive Search. "There just aren't those jobs anymore, and they can't hope to ever get them again," he says. "They're going to have to think of other ways of being employed."

That translates into taking jobs in smaller companies, performing interim work, or becoming self-employed -- mostly at lower compensation. "It's a buyer's market out there," says William Morin, CEO of Drake Beam Morin Inc., the largest outplacement firm in the country. "Smaller companies can pick up really talented people today for a lot less money." The head of human resources at a $10 billion corporation averages about $240,000 in base salary, according to Hewitt Associates, a compensation consulting firm in Rowayton, Conn. The same job pays about one-third as much -- $85,000 -- at a company with $100 million to $200 million in sales. For the head of management information systems, pay drops from $170,000 to $75,000, and for controller from $200,000 to $80,000. And benefits fall about 25%.

True, those are hardly poverty wages, but a $100,000 pay cut is a rude shock at any level, and a painful reversal of the traditional white-collar expectation that the next job will always be bigger and better. And executives who take up temporary work or become consultants often suffer greater declines in earnings and may lose all benefits.

BREAD AND BUTTER. Just as the pain of the last recession was felt most heavily by workers in the Rust Belt, middle management in service and high-tech companies is feeling a disproportionate pinch this time around. While middle managers represent only 6% to 7% of the nation's work force, 16.8% of corporate layoffs have come from their ranks over the past three years, according to a 1991 American Management Assn. survey. Filling jobs for managers in the $60,000-to-$80,000 bracket was once the bread and butter of search firms. Today, such searches are down 40% to 50%, says Sweet. Those jobs are likely to be scarce long after the recession ends, adds Gerald Roche, chairman of search firm Heidrick & Struggles Inc.: "Minimal management and minimal administration will be with us for at least a decade."

And even those who do manage to snag one of the dwindling number of big-company jobs often discover that the oversupply of bankers, salesmen, and others is depressing compensation levels. For example, corporate staff jobs that paid starting salaries of $140,000 in 1989 now offer $118,000 at the same company, according to Drake Beam Morin. Compensation for marketing and sales positions, $85,000 back then, is down to $76,000 (chart).

But managers and professionals who take hefty pay cuts are the lucky ones: At least they've been able to find jobs. Last May, 55-year-old Gerald Feldman of Hamden, Conn., who has an MBA, lost his $57,000 job as director of finance and administration for a midsize office-equipment retailer. He quickly got a part-time job working for a tax preparation service at $150 a week, but work was slow, and he recently lost the post. Feldman currently receives $270 a week in extended unemployment benefits. His wife, Elaine, 52, is the chief breadwinner, making $8 an hour working in collections for a retailer. They are four months behind on their mortgage and have received a notice of foreclosure on the house they have lived in for 26 years.

In the early 1980s, they took on a "humongous mortgage," Gerald Feldman says, to pay for college and advanced degrees for their three children: an attorney, a psychologist, and an environmentalist. But the debt proved too heavy a burden when the bottom fell out of the family income. Although the Feldmans have cashed in their life-insurance policies and savings bonds and sold jewelry, "I don't see any way we can save the house," Elaine Feldman says. "You get real discouraged and accept the fact that everything you dreamed of and planned for is not there anymore."

As neighbors watch friends' houses being foreclosed and sold, they are drastically changing the way they live. Even those who haven't lost their jobs are beginning to plan for the worst, mapping out edgy, defensive strategies in a bid to maintain some sense of security in a suddenly threatening world. Thousands of managers and professionals who are still working at their corporate desks are playing "What if?" at kitchen tables with wives and husbands. They are cutting family expenses sharply -- some by 50% -- and two-income families are trying to live on just one. Saving is vital because job searches have become career searches lasting up to 18 months, triple the average of the early 1980s.

COUPON CLIPPERS. That sort of planning can make the difference between peering over the precipice of downward mobility and plunging off it. Stephen Ness of Parsippany, N.J., was making a six-figure salary as a human resources manager before he was laid off from Simmonds Precision Engine Systems in March, 1991. But he had already lost one job in the leveraged buyout of Beatrice Cos. in 1985, an experience that made him cautious. From then on, the family bought its clothes at discount and clipped coupons for groceries.

Both Ness and his wife, Pat, had been frugal long before the management meltdown struck Corporate America. They started earmarking funds for their children's education about the time they bought their house, 17 years ago. By setting aside separate funds for Jennifer and Michael's education, Ness avoided the need to assume a crushing second mortgage on his house when the job market gave out under his feet.

And just as downward mobility can devastate a family, family support -- both emotional and financial -- can avert a crisis. Ness's wife, for example, is playing a key role in tiding the family over while her husband researches new jobs and perhaps a new career. She went from temporary to full-time work as an administrative assistant at a nearby American Telephone & Telegraph Co. operation, and the family went on her benefits program, saving $400 a month. Through her efforts and the family's planning, the Nesses have leveled off in their decline, buying time for the climb back up.

For others, the prospect of being kicked off the corporate fast track has led to a questioning of the values of money and materialism. They are rediscovering public-service values that were parked during the go-go 1980s. Occupations such as teaching and social work not only offer new measures of self-worth for people dumped from big corporations but also often provide a stable, if somewhat lower, niche in the middle class.

Bryson Edmonds, 31 years old, seemed headed for yuppie heaven. The son of a successful engineering executive in Birmingham, Ala., he received an engineering degree from the University of Virginia, an MBA from Harvard business school in 1989, and a job at PaineWebber Inc. in New York in 1990.

But times were tough on Wall Street, and people were being laid off all around him. On a weekend trip home, Edmonds was asked by some of Birmingham's business leaders, colleagues and friends of his father, to build a program promoting math and science education in the schools. Edmonds agreed, and quit PaineWebber -- four weeks before it downsized and fired two of his Harvard B-school classmates. Edmonds left before his annual bonus and gave up about $ 90,000 in total compensation. He now makes $60,000 a year as head of a special mathematics and science program at the Alabama School of Fine Arts, a Birmingham public school that draws its students from all over the state. Edmonds is building a staff and curriculum for a 120-student program in grades 9 through 12. "Doing this is very rewarding," says Edmonds. "I have family roots in Alabama. This is home."

ON THEIR OWN. Managers are even trying a bit of alchemy -- transforming themselves from office drones into red-blooded small-business owners. As generations of immigrants have known, owning your own business may be the surest way to clamber into the middle class. Now, it may be the best way to stay there. And owning a business may also be a way to restore the feelings of autonomy and achievement that managers and professionals once had in their work lives at big corporations. At night in their dens, they're running numbers on franchises and mom-and-pop shops up for sale. Many are talking to parents about going into the family business or tapping their inheritance to start one of their own. "The people who will come out of this as winners are those who successfully start their own companies," says Harvard's Mills. "I mean the 5% -- if that -- who become entrepreneurs."

One who may make the transition is Jack Karson, who gave up banking for fishmongering. Karson went straight to super-regional bank NCNB Corp. in 1983 after getting his masters degree in finance from the University of Alabama. He moved up fast, and by 1990 was vice-president in charge of credit policy for south Florida.

Still, with the industry in turmoil and opportunities shrinking, Karson began to suspect that he didn't have much of a future in banking. "I wanted to control my own destiny," he says. While he was still working at NCNB, he began researching small business on weekends and at night. Like many other seeking alternatives, Karson first considered franchises, but decided he didn't like the numbers.

Then he looked at buying into a company. Karson lives in Boca Raton, Fla., so he screened wholesale and service-industry companies that might do well in southern Florida. Four years back, Karson had won Miami-based National Fisheries Inc., a small private seafood wholesaler, as a client for NCNB. The owner wanted to expand. Just months before NCNB merged with C&S/Sovran Corp. and downsized, Karson bought in. He started at the bottom, processing fish at the company's facility in West Palm Beach. In six months, he'll move to headquarters, back to a clean desk. In America's social calculus, handling fish may be a step down from handling requests for loans. But the social escalator maybe moving up again a lot faster for Karson than for others.

Another former banker, J. Thomas Byrom of San Francisco, is also hoping that self-employment will give him a way back up the social escalator. Last summer, the 45-year-old was making $117,000 as senior vice-president in charge of branch analysis at First Nationwide Bank. The Stanford University MBA had spent 18 years climbing the banking ladder and was sitting pretty on an expensive 2.4-acre homesite in the San Francisco suburb of Danville. Then, he found a separation package on his desk one day and left with 3 1/2 months' severance. Byrom is now selling insurance on commission as a Northwestern Mutual Life Insurance Co. agent. His wife, Rebecca, has started a business raising herbs in their garden to craft into wreaths and other gifts. She's hoping for a profit of $10,000 to $15,000 next year. So far, Thomas Byrom has sold 15 policies, with a goal of 100 the first year out. That would give him a six-figure income. "It's fun, and I'm committed," he says. "Getting fired will affect my life for the better, even though it will be rocky here for a couple of years."

It's rockier still for the tens of thousands of laid-off managers and professionals going into consulting. Consulting is one of the fastest-growing occupations in the U.S., but not so much because people are making a good living at it. For many, the term is a polite fiction to cover doing menial work for cash to pay bills while searching for permanent employment.

That kind of "consulting" can be dangerous. A mid-level manager who was laid off from his $60,000 aerospace-industry job about a year ago found himself driving a limo. At one point, he was putting in 80 hours a week. That left almost no time for the thing that was most important -- his job search.

SPIRITUAL AID. If the chill of downward mobility is forcing some to take shelterin self-employment, it's also causing many to seek sanctuary in the church and synagogue. From the Asylum Hill Congregation Church in Hartford to the North Shore Synagogue in Glencoe, Ill., religious organizations are playing a growing role in helping individuals cope. Church-backed centers are helping their congregation members form networks, providing them with job listings, and coaching them on interviewing with recruiters and headhunters. Quietly, many are even lending money to help members pay their mortgages.

Perhaps most important, churches and synagogues are helping their congregations overcome the shame that can accompany layoffs and downward mobility. The First Presbyterian Church of Lake Forest, in a Chicago suburb, set up a Career Resource Center in September, 1990, after one of the church's deacons lost her job in the mid-1980s. "She said no one should go through that experience alone," says Thomas Slocum, a volunteer at the center.

The center has been a boost to Christine Verdonk, who recently saw her family-owned and -operated electroplating business in Chicago go bankrupt. "The principal thing it did was give me support from my neighbors and peers," she says, "especially on the days when I didn't feel like getting up." Through the center, a retired vice-president of Amoco Corp. is now helping Verdonk write her resume.

Eugene Stahnke is getting practical help from a church-sponsored group in his search for new employment. The 45-year-old corporate attorney was laid off in July, 1991, after 12 years at Echo Inc., a Japanese-owned outdoor-equipment manufacturer in Lake Zurich, Ill. Some 20% of the administrative staff at Echo was cut with him. The Career Renewal Center of Holy Cross Catholic Church in surburban Deerfield, Ill., is providing Stahnke with an attorney from Chicago law firm Ross & Hardies who counsels him on the legal-employment market. It also put Stahnke into contact with a communications professor at De Paul University who is helping with interview techniques.

HAMBURGERS AND CHICKEN. Stahnke has rallied family members to fight the sudden threat of downward mobility, and they responded by scaling back their lifestyle immediately. Stahnke used his severance to pay off credit-card balances, and his wife cut the food budget 40% by switching to chicken and hamburger from roast beef and dining out. The only clothes he has bought in the past eight months were shirts and a belt for interviews. His wife, Robbi, got a job as a secretary in October at a local steel company. Their sons' parochial school has been letting them pay less than full tuition. So far, they've kept up their mortgage payments.

Coping with downward mobility will be the single most important economic and social conundrum facing many managers and professionals in the 1990s. The era of consumption is gone, replaced by an age of retrenchment, adjustment, and climbing back.

For many, the restructuring of Corporate America may provide opportunities for new careers or new goals. For others, it can mean the realization of old dreams of entrepreneurship. For a few, the economic changes translate into a simple struggle to stay in the middle class.

Allen Stenhouse still sends out resumes every day. He went on four job interviews in the first week of March alone, including one for a marketing post at Bess Eaton Donut Flour Co. in Rhode Island. He is determined to recapture the piece of the American Dream that he lost somewhere along the way.JOB DEATH, GRIEVING AND RECOVERING

Dealing with downward mobility matches the stages of dealing with death. You

deny the reality of job death, it happens, you suffer, grieve, adjust your

values, then act to recover

IT'S ALL AROUND YOU . . .

Well-paying jobs in large corporations are permanently disappearing for many

managers and professionals. Only a quarter of those laid off will be reemployed

in big companies. The rest will work for smaller companies, consult, or

"temp" -- at 20% to 50% less pay

BUT IT CAN'T HAPPEN TO YOU . . .

You see friends, relatives, and neighbors losing their jobs and failing to find

new ones. But your company is too profitable, or you're too powerful within the

organization. And you'd never be out of work for long: You've got marketable

skills and a golden resume

. . . UNTIL IT DOES

Welcome to downward mobility. You spend months trying to find another job as

good as the one you just lost. You use up all your savings. You get another job

with a much smaller company at half the pay, but that doesn't last long either.

This time you get no severance package

NOW WHAT?

You face reality and realize your family income will be drastically reduced for

years. Kiss the credit cards and vacations goodbye. Everybody in the family

works -- your spouse, your kids. You turn to your church or synagogue for

networking, mortgage money, maybe even soup

YOU START THE CLIMB BACK

You change tactics as your job expectations change. You go to school at night

and do interim jobs in the day. You join the family business, start a new one,

or go into teaching. Like struggling generations before you, you focus family

resources on your kids' education

PREPARING FOR THE SLIDE -- AND HOW TO SURVIVE IT DOWNSCALE NOW

Start living the New Frugality. Even if you still have your job, cut your cash

outflow -- especially if you're a two-income family. Prepare a battle plan that

assumes you might be laid off tomorrow, out of work for 18 months, and

reemployed at 50% less

TURN TO FAMILY If you do lose your job, it's a family crisis, not just a job

problem. You need your family's emotional support -- and maybe their financial

support, too. Working spouses and children can provide critical emergency

income to ease a decline in living standards

RETHINK VALUES Odds are, your next job will be worse and pay less than your

last. Merit, achievement, and loyalty no longer guarantee advancement. So stop

totally identifying your status with occupation, income, and expensive toys.

Decide how much money is really enough

REACH OUT Since your next job may be in a completely different industry,

network for jobs through organizations that have nothing to do with your

current occupation. Try alumni associations, women's and men's groups, gyms.

But don't wait to be laid off before networking

GET NEW CREDENTIALS If you remain in business, pick up an MBA, learn a

language, and add as many salable skills as possible. Study at night or on

weekends while you still have that well-paying job. Join other corporate

refugees in going to graduate school for social work or teaching

CALL YOUR PARENTS Receiving a portion of your inheritance early can make a big

difference. In a bad pinch, money from your folks can stop the slippery slide

of downward mobility. It can pay the mortgage and the kids' education bills, or

provide the capital to start over on your own

WORK FOR YOURSELF Most executives laid off these days think about owning a

business. It's risky -- but at least you can't be fired. Start researching

franchises, consultancies, mom-and-pop shops, or the family business you didn't

want to go into before. Turn a hobby into a business

DO GRUNT WORK

Plenty of people are performing menial work for quick cash to pay bills. It's

not the worst thing in the world -- within limits. Don't get caught up working

80 hours a week painting houses or driving a limo while neglecting your search

for another job

Bruce Nussbaum in New York, with Ann Therese Palmer in Lake Forest, Ill., Alice Z. Cuneo in Danville, Calif., and Barbara Carlson in Hamden, Conn.


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