The Free Market 29, no. 5 (May 2011)
During the first-ever Federal Reserve press conference, Fed chair Ben Bernanke said the number of jobs in America was still 7 million behind the number of people employed when the recession began. When asked whether the Fed could do anything about long-term unemployment, Bernanke said the central bank has been fighting it with an aggressive monetary policy. But he admitted his crew operating out of the Eccles Building doesn’t have any tools to make the long-term unemployed employable again.
A day later the news came that first-time unemployment claims rose to 429,000—up from the week before and surprising economists, who had guessed the number would be 40,000 less. Wells Fargo economic analyst Tim Quinlan stated that “this is a major disappointment because it’s another move in the wrong direction.”
A generation born at the tail end of the baby boom did what mom and dad told them they should: Get off the farm, don’t be a barber, forget about being a mechanic. Go to college and then go be a doctor or lawyer or such. However, high barriers to entry and lack of mental horsepower kept most out of medical or law school. But a business degree means you will still be able to wear a shirt and tie to work, not get dirty, and push paper for a living. An MBA will make you unstoppable.
What’s known as the FIRE economy (“Finance, Insurance, and Real Estate”) fired up in 1980 and headed for the sky until 2006. Now there are 50-year-olds who may never work again. In an April 25 cover story, Newsweek described these out-of-work boomers as “Dead Suits Walking.”
“Capitalism has always been cruel to its castoffs,” said the magazine, “but those blessed with a college degree and blue-chip résumé have traditionally escaped the worst of it. In recessions past, they’ve kept their jobs or found new ones as easily as they might hail a cab or board the 5:15 to White Plains. But not this time.”
A post on the professional-finance blog Calculated Risk says that if college-educated workers 45 or older lose their jobs, “they are toast.” That sounds harsh, but the point is that even in the financial capital of the world, New York, “men in the 35-to-54 kill zone have lost jobs faster than any other group, including teenage girls, according to new data from the Fiscal Policy Institute,” write Newsweek’s Rick Marin and Tony Dokoupil.
According to the official FIRE-economy website, the sector is composed of: “Commercial Banks, Savings & Loans, Credit Unions, Finance / Credit Companies, Securities & Investment, Venture Capital, Hedge Funds, Private Equity & Investment Firms, Insurance, Real Estate, Mortgage Bankers & Brokers Accountants.”
These industries are the sweet spot of loose monetary policies that have led to a series of booms and busts, bubbles and crashes, in ever-greater frequency, since the money supply was completely unshackled from the slightest gold constraint in 1971. Capital has been funneled into higher-order goods, and thousands went to college believing that lending money, landing a hot sales position, or penciling real-estate deals would last forever.
Now the vacant shopping centers are being foreclosed upon, and those who made a living analyzing the numbers or drawing the plans are at home with the kids while mom keeps the family boat afloat.
“Through the first quarter of 2011,” write Marin and Dokoupil, “nearly 600,000 college-educated white men ages 35 to 64 were unemployed, according to previously unpublished Labor Department stats. That’s more than 5 percent jobless—double the group’s pre-recession rate.”
Newsweek’s “Beached White Males” aren’t interested in taking a job they feel is beneath them, despite most realizing that, after months of being unemployed, they will never obtain their previous level of work again. Besides being in denial, they are tired and depressed. This was portrayed smartly by Ben Affleck in the recent movie The Company Men.
Affleck’s Bobby had made all the right moves and was a big-company sales manager at 37, making $120,000 a year plus bonus, driving a Porsche, living in a big house, with a country-club membership, a boy, a girl, and a size-zero wife, Patriots season tickets, and all the associated debt and obligations that go with it.
Bobby swaggers in and brags to his sales staff about shooting 86 that morning at his country club, but a minute later he is “86ed” by the head of human resources.
Elisabeth Kübler-Ross’s five stages of grief then proceed.
- Denial: Bobby thinks he’ll get a job right away. No reason for belt tightening.
- Anger: Bobby believes the company screwed him after 13 years of loyal service and he was betrayed by higher ups.
- Bargaining: OK, Bobby resigns himself to cutting back and goes to work for his smug brother-in-law (Kevin Costner) in construction.
- Depression: Bobby loses interest in the bedroom and tells his wife he’s sorry he let her down.
- Acceptance: Bobby and wife Maggie (Rosemarie DeWitt) spend more time with each other and the kids, while Bobby starts to actually enjoy his construction job.
Career coach Judith Gerberg explains that these men may be able to get up and down from trouble on the links, but are at a complete loss in a situation like this one.
She tells Newsweek, “If you went to the college of your choice, married the woman of your choice, and bought the house of your choice, you’ve never dealt with rejection. You’ve never had to develop fortitude.”
And it’s not just the FIRE sectors that have thinned the ranks: 90,000 architects and engineers have been let go. Jobs considered professional are going the way of farmers since the financial crash, while, according to Marin and Dokoupil,
The rolls of all unemployed white professional men have more than doubled, to a million (not including sales jobs, which add another 300,000). Wall Street and the broader world of business culled the most, laying off more than 300,000 from their trading desks and cubicle farms.
Also dimming employment prospects for white males older than 50 is states’ rigorous enforcement of age-discrimination laws. Employers steer away from employees likely to pull the age card and sue. There were a record number of Equal Employment Opportunity Commission (EEOC) claims in 2010 and the Age Discrimination in Employment Act (ADEA) prohibits discrimination in employment on the basis of age against anyone (regardless of race) over the age of 40.
Perversely, while the market tries to clear away malinvestments and the jobs that supported them, colleges continue to turn out more business majors than any other discipline. In 2007 and 2008 there were more than 335,000 business degrees granted—100,000 more than a decade before, according to the National Center for Education Statistics.
No wonder statistics show that it’s a struggle for fresh college graduates to find work. “College graduates have fared worse than other labor market participants, similar to what took place in the 2001 recession,” according to a Federal Reserve Bank of San Francisco report.
The Federal Reserve’s zero-interest-rate policy attempts to resuscitate jobs that are considered “professional” but are really just a mirage, much like the redundant shopping centers, housing tracts, and casinos built during the boom. In a bubble, there is a market for hail-fellows-well-met who look good in a suit and have connections from their frat days at State U.
Propping up Wall Street and the FIRE economy only fuels denial. Murray Rothbard wrote in Economic Depressions: Their Cause and Cure that government must never bail out businesses in trouble or prop up wages. “It will cause indefinite and prolonged depression and mass unemployment in the vital capital goods industries.”
The Bernanke Fed must accept that it can’t fix the mess it created in the first place. For a generation of people to find meaningful work, the government must embrace the Misesian prescription of a strict “hands-off” policy—rather than staying on the Keynesian drug.
