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Monday, March 06, 2006

Middle-Aged Workers and the New Economy

"Nothing was more grinding, to me, than listening to people my age talk of “re-inventing” themselves to be more competitive, mouthing clichés they barely believed.":

Middle-aged and stranded by the ‘new economy’, by Richard Sennett, Commentary, Financial Times:  ...In the last generation, wealth has stagnated for workers in the middle of the economy even as those at the top have ... become even richer... Stagnating wages are the main cause... For this slice of society, stagnation has become intertwined with insecurity. Work has taken on a new character in recent decades for people in the middle; its risks are especially evident among those whose fortunes are tied to the “new economy” – cutting-edge, global businesses such as financial services, media and high-tech...

The new economy has reformulated workers’ experience... Long service and accumulated experience do not earn the rewards that more traditional companies once provided. Instead, cutting-edge businesses want young employees who can work long hours; the “youth premium” works against older employees with multiple responsibilities. ... jobs are defined as short-lived projects rather than permanent functions...

Instability can be an opportunity – if you have real wealth to invest, or are young and unattached, or an immigrant exploring cracks in the labour force. If you are dutiful but not brilliant at work, if you have children and a mortgage, if you are worried about old-age hardship, then instability does not equal opportunity. ...

For the last 10 years, my research team has been studying how people in the middle cope with these pressures. As befits adults, people with paunches are ambivalent. On one hand, they believe in the new work ethos: business should be dynamic and lean; ...mid-level employees recognise the shareholder pressures on their bosses. On the other hand, they see their own income stagnation as unfair. If the company does not value their commitment, why should they feel loyalty to it? ...

That both men and women worry about failing their families was a key finding – this spectre once haunted manual labourers but has now migrated to the middle-class. Manual labourers had strong unions to turn to; white-collar unions are weak or non-existent in the new economy.

People in the middle ... grasp at the idea that “skills” will somehow defend them against the risks of the modern workplace. ... And middle-aged people grasp at the idea of retraining themselves even though they know employers are likely to prefer freshly-trained workers at home or workers pre-trained abroad. Nothing was more grinding, to me, than listening to people my age talk of “re-inventing” themselves to be more competitive, mouthing clichés they barely believed.

The struggling middle class has become a favourite theme of western politicians. This political rhetoric seems out of touch with the realities on the ground. It celebrates the skills society, which in reality is increasingly located off-shore. Politicians have not taken on board ... the crisis of the work ethic for those in the middle, an ethic that turns on institutional loyalty and reliability in providing for the family – an ethic that requires ... continuity and durability in middle-class life, to countervail against the new economy.

If education and retraining aren't the answers to the challenges of globalization, where does that leave us? What should we do to protect a 50 year old worker whose job was just outsourced? My answer has always been education and retraining, and I still believe you are better equipped to deal with the challenges of gloablization with a well-rounded education, but as many of you have let me know, sometimes with both barrels, the promise of education in the new economy has proven to be hollow.

Krugman had this to say back in October:

What if neither education nor health care reform is enough to end the wage squeeze? That's the possibility that makes free-trade liberals like me very nervous, because at that point protectionism enters the picture. When corporate executives say that they have to cut wages to meet foreign competition, workers have every right to ask why we don't cut the foreign competition instead. I hope we don't have to go there. But denial is not an option. America's working middle class has been eroding for a generation, and it may be about to wash away completely. Something must be done.

I agree, something must be done. But what? I also have a hard time abandoning free trade and like Krugman, I hope we can find another answer.

    Posted by on Monday, March 6, 2006 at 12:56 PM in Economics, Social Security | Permalink  TrackBack (1)  Comments (58)

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    » Ode to the struggling middle class from New Economist

    The LSE and MIT's Richard Sennett has a piece in Tuesday's Financial Times on those Middle-aged and stranded by the 'new economy'. For those familiar with his work, its the usual collection of anecdote and sweeping generalisations. Sennet claims that ... [Read More]

    Tracked on Monday, March 06, 2006 at 03:06 PM


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