April 10, 2003

 

Hello ladies and gentlemen and thank you for letting me talk to you on behalf of the Minnesota Job Clubs Consortium. 

 

The Minnesota Job Clubs Consortium is a group of 67 faith-based and non-faith based support groups for workers in transition.  We currently represent over 7000 job seekers in the Twin City Metro area.  Our purpose is to share ideas, resources, job leads, and help coordinate efforts so we are not going in 50 different directions.  Our goal is to help those in transition with support, education, and networking.  We would like nothing better than to put our selves out of business, by finding every one of our members work.

 

The main topic of this talk is the problems faced by the skilled, experienced, white-collar worker in this unusual economic downturn we are currently in.  The average length of time that white-collar workers have been out of work vs. blue-collar workers has changed.  Many white-collar workers have been out of work for at least a year, thus dropping off the unemployment lists and becoming 'invisible' in the counts of the unemployed.  According to USA TODAY (4/7/03) 20.2% of all those unemployed today have been unemployed longer than 27 weeks and many have become so discouraged they have just given up.

 

As the job seekers come through our groups week after week, we notice predominately the mature skilled white-collar workers. The Minnesota Job Clubs Consortium has approximately 7000 job seekers, of which over 96% or approximately 6800 are the white-collar workers.  If we were to figure an average salary of $75,000 each (a conservative amount), that amounts to a loss of $507,375,000 in salaries.  This equates to a loss of tax revenues of $40,590,000 from our groups alone.  Studies show that only 10% of those seeking jobs attend our networking support groups, although some figures put this number as low as 5%.  For this example we will use the more conservative 10% number.  Using the 10% estimate these numbers jump to $5,073,750,000 in lost wages and $405,900,000 in lost tax revenue.  If we take the 5% estimate that number become $816,800,000 or approximately ¼ of our state's deficit.

 

An interesting article in the Star Tribune paper's Business Section referenced that those who have exhausted their unemployment benefits are no longer counted in the reported jobless head count. If this is correct and if you are no longer receiving benefits and you fall off the tracking of unemployed. Then I would propose that the true number of unemployed is much greater than that reported.  From a recent survey of our groups, we have found that 45% of our members or over 3200 have exhausted their benefits and are no longer being tracked.

 

This does not count the underemployed, or those who have had to take survival jobs at much reduced salaries.  I know of several director level job seekers who have taken jobs at hardware retailer, and one who is running a lawnmower for a golf course; these and many others are now grossing what they used to pay in taxes.  I heard of one individual who has a PHD and two Masters, and the only job he could find was to shovel dirt at a nursery.  When the experienced workers accept entry-level jobs, it affects new graduates and those on public assistance by locking them out of the market.  Thereby keeping them from initial employment or on public assistance.

 

Since August 2001 there have been many overly confident reports from the Department of Economic Security, newspapers, and business & technical journals of how the "tech sector" will rebound quickly.  This has made it difficult, if not impossible, for technical workers to obtain employment outside their normal field of business.  Employers say they don't want to risk hiring "short-term people".  The Information Technology (IT) sector has been hit particularly hard this time with salaries, for those who can find a job, dropping by up to 40%.  Many IT positions have moved offshore to Asia and India, especially in the programming, customer service and helpdesk areas.  Some companies are offering special classes to teach these off shore workers to speak English with an American accent, so people will believe they are talking to Americans when they call a helpdesk.

 

I just read of a case in New Jersey, where the county put out for bid their welfare help desk function and it was awarded to the low bidder.  The low bidder out sourced it to Bombay.  When the citizens of that county found out, the county had to cancel the contract because of the uproar for those citizens.  They then passed a law stating that all county jobs must remain in the county.

 

Is there something similarly to the current NAFTA policies, that helped people whose jobs moved to Mexico, that could be used to help those individuals whose jobs are moving off shore with training.

 

If the job market in Minnesota does not improve, we will find many of these skilled workers looking elsewhere for jobs.  For the month of March, Ontario had placed full-page advertisements in Business Week magazine touting its expertise and low costs, and trying to bring business to Ontario.  We all know how South Dakota is trying to lure business to that state.  If the economic outlook in Minnesota remains bleak, we will start losing our skilled workers.  This may not seem like a problem now, but in five years when the baby boomers start retiring, it has been predicted there likely will be a shortage of skilled workers in Minnesota.  Once disenfranchised workers have moved, it is harder to draw them back to Minnesota than it is to keep them here.

 

It seems that more companies are turning to hiring temporary or contract employees rather than hiring new employees.  This reduces their overhead, but does not do much to relieve the problems faced by job seekers.  We need to "incentivize" these companies to hire "employees" over contractors - especially in situations when the contractors have been there for an extended period.  The IRS is already trying to enforce this.  Many contracting firms don't offer benefits with the excuse that workers are temporary employees.

 

I was at a meeting a couple of week ago and was sitting next to the lead technician of a large ISP in the metro area.  He told me that all of the workers are so fed up with managements decisions not to hire more workers and require them all to work 60 - 70 hour weeks, that when the economy turns around they have all decided to leave the same day with out notice.

 

Another problem facing the seasoned white-collar worker is very subtle.  Yet we all know it is happening, and that is the problem of age discrimination.  Come to any of the networking group meetings and you will find mostly white-collar workers over the age of 40.  Then go in to any company, take a look at the HR department, the so-called "Gate Keepers", and what do you see?  You will find predominantly young, white women fresh out of college.  Early in their own careers, they lack the ethnicity, gender, age, or wisdom diversity that comes with years in the industry.  It is valuable for employers to know what broad skill sets, knowledge and experience mature workers bring. Many of these mature workers bring highly transferable skills. 

 

Additionally, there are typically both minimal requirement and desirable skill associated for any new position.  The human resources department (HR) receives the wish list of desired skills and traits from the hiring manager.  The younger HR staff, lacking the experience to know which skills are the most important for the position, often turns the whole list into a demand list.  While the hiring manger might be perfectly happy if the candidates met 80% of the skills listed.  Such candidates are oftened screened out because even the desirable skills have been converted to mandatory requirements.  When this happens both the candidate and employer loses out on a possible excellent job fit.  Many times we are told we are overqualified simply because we have more experience or are older than the person interviewing us.

 

Also mature workers may not look cool or hip, from the perspective of a younger interviewer.  In fact we may remind them more of their parents than a coworker.

 

There seems to be a misconception that the white-collar workers have the financial resources to better handle layoffs than the blue-collar workers.  Although some white-collar workers receive a severance package when they are dismissed from their position, this is not the case with most white-collar workers.  At my company, when I was downsized, only a quarter of those let go received any severance package.  A couple of the factors in determining the amount and duration of a severance package are the length of time employed and the financial health of the companies.   With people spending less time at an organization and more companies cutting costs, severance packages are becoming fewer and smaller.

 

Another misconception is that white-collar workers have substantial savings and investments available to tide us over. This is not true.  Because we realized the trouble Social Security is in and that it will in most cases not be able to supply our needs during retirement, typically, we've put our savings largely into retirement accounts which will not be available without incurring significant penalties.  Prematurely drawing down retirement accounts will likely have an impact on family self-sufficiency in the future.  Taking the money out of these programs when we should normally be contributing the most to them will reduce the amount available to us during our retirement.  Will this then increase the family's dependency on government funding and Social Security than might otherwise have been anticipated?

 

This increased reliance on government programs will reduce their availability to others.  In conjunction with this we, as white-collar worker, contributed a large portion of the tax revenue received by governments to pay for these programs.  With the reduction in tax revenue received by the state, and our increased reliance on these programs, we will be increasing the financial strain on these programs.

 

The lifestyles associated with higher incomes of professional and technical employees provide tax revenues in many forms, typically, income, sales and property taxes.  Due to the salaries we made and the homes we own, we do not qualify for most state aid programs.  This further puts pressure on us to tap into those investments to see us through these extended job searches.  Loss of employment has already reduced state revenues, and may sadly result in loss of homes through foreclosure. Foreclosures on homes of white-collar workers were up 37% last year. The sooner we can get high-revenue employees back to work, the better for them and their families and the better for our state economy.

 

Two major concerns for the unemployed are handling their debts and health care. Higher income, highly productive employees would benefit greatly from temporary relief in these two critical areas.  What might that relief look like?  Perhaps it would include the ability to pay interest only on mortgages and credit card debit for the duration of their job search?  Could there be a lower-cost alternative to COBRA and state health insurance plans, with a coverage term that better reflects the longer timeframe of today's white-collar job search? Could we look at the option of state providing a form of group insurance while we are drawing unemployment checks?  Could we be considered employees while drawing an unemployment check?  If so then with all the unemployed in the state we would be a large group and should be able to get a low rate.  The temporary insurance we can purchase is a good option, but is limited to 6 months, which was the average job search time before this recession.  Now with job searches extending to 1 ½ to 2 years, could the duration of time we could have temporary insurance could be extended?

 

We have discussed these and many other issues in our different groups and have come up with the five items that are the most pressing with our members.  These are just some of the concerns, and possible creative solutions, that the members of the different job transition groups would like for you, our community leaders, to seriously consider. We have prepared a proposal that cover the five most pressing concerns of our members. Those five are:

1)      Dislocated Worker Fund.

2)      Health Insurance.

3)      Re-employment -Tax Credits.

4)      Some form of Gap Funding.

5)      Debt relief, Mortgage issues.