5 tips on handling the new job economy
Job Shift from Middle Class
by Luke Landes
The middle class fared the worst in terms of job losses throughout the recession. The National Employment Law Project has consolidated findings from its studies and found that while there has been some economic recovery in the employment sector following the recession, the recovery changed the nature of the job market.
Jobs with a mid-tier range of wages, from $13.84 to $21.13 per hour, have only recovered about one quarter of their losses. Lower-wage jobs, those with wages from $7.69 to $13.83 per hour, gained back more jobs than this group lost by a factor of about 33 percent. Higher-wage jobs, in this study those classified with wages from $21.14 to $54.55, have recovered almost all of their losses during the recession.
Politicians talk about job gains and losses in big numbers and in totals, but this masks the reality of the employment situation. Both political opponents have numbers they like to share about the economy in terms of recovery in the employment sector, but not only are the calculations easily manipulated lending to numbers that are designed for marketing rather than fact, but the sound-bite-style approach to discussions precludes people's ability and willingness to look deeper at the situation.
Middle class jobs are being replaced by low-income opportunities, like jobs in food preparation, retail sales, and office clerks. Here are some more observations from the study:
- Lower-wage occupations were 21 percent of recession losses, but 58 percent of recovery growth.
- Mid-wage occupations were 60 percent of recession losses, but only 22 percent of recovery growth.
- Higher-wage occupations were 19 percent of recession job losses, and 20 percent of recovery growth.
The shifting of the labor force is not a new occurrence. The industrial revolution created middle class jobs. Machines replaced some labor, but created an entirely new marketplace for middle class jobs because machines needed skilled operators. Two world wars created new opportunities for workers to fill low-income and middle class jobs. With the digital revolution, computers replaced more low-wage jobs, making an education significantly more important in finding and keeping middle class jobs. Perhaps not to the same extent but still significant, the recent recession has undone the progress of the middle class over the past one hundred and fifty years.
It's hard to say what's in store for the middle class moving forward. Economic forces that permanently shift the economy in this manner are bigger than any one President of the United States. Seventy years of great expansion for all classes in the United States, from the very rich to the very poor, followed the Great Depression, accelerated at times and slowed at times by public policy, but the driving force was technological advancement. Technology seems to be continuing to evolve at an accelerating pace and spread to developing nations, so there is hope, even if you need to take a global perspective in order to see it.
But this doesn't matter much to the mid-level corporate employees losing their jobs, finding only menial service positions for significantly less money. This reality, frustrating as it is, forces us as individuals to re-evaluate long-term approaches (and by long-term I mean multi-generational) to living in the world. It could change the nature of financial independence. A shift away from middle class jobs changes the type of education and skill-building necessary to live a comfortable life without risk of falling into the lower working class or even poverty.
If you want to survive this shift away from middle-income jobs, which might get more pronounced in the future and could well be permanent, here are a few approaches or strategies to consider. The goal, of course, is to move towards financial independence in a world where there is a wider gap between the rich and the poor.
- Be flexible with your industry. Middle-income jobs were available for people who studied in college or became an apprentice in some fields, then pursued the same type of job for a lifetime. It wasn't a rich lifestyle, but this approach allowed for some financial comfort. Industries change much more quickly now than they did in previous centuries. For hundreds of years, the job of tailoring was much the same. Machines and computers changed the face of tailoring, but that's very recent in the history of the industry.
You may find that you need to react to industry changes quickly as the middle class disappears, either to become a leader in the industry or to find another way to generate income.
- Be flexible with location. For most of history, families didn't move much. Even with nomadic tribes, moving a society from one location to another was very slow. Transportation and technology allow today's families to change locations almost instantly. This is going to become more important as the best or the most opportunities for middle class financial independence appear in locations that are not already overdeveloped from an economic perspective.
Would you move to Jakarta, Manila, São Paulo, or New Delhi? A century ago, job opportunities drove American settlers west, and that migration took fortitude. The opportunities for financial independence in the upcoming centuries might be beyond this country's shores.
- Pay attention to the cost of living, thinking globally. I've remained in New Jersey longer than I intended because I determined I like it here. But I can't get around the fact that it's so expensive. The cost of living is incredibly high, and for someone who can generate income from anywhere, it doesn't make too much sense to live in one of the most expensive locations aside from "liking it here." Telecommuting is just one facet of technology that has the potential to create significant abundance. Earning a New York City salary while living in Arkansas, Costa Rica, or Dushanbe, Tajikistan (the city with the lowest cost of living in 2011) is a sure way to grow wealth. It's risky though; distance makes it easier for your boss to feel no remorse about finding a cheaper replacement.
- Get more education. With the middle class disappearing, you need to set your sights on bigger goals. Education is inflationary. First a high school education was required for middle-income jobs, then a college degree. Higher paying jobs generally require even more education, and for financial independence in a world where jobs for those with just a college degree is disappearing, you cannot let yourself be left behind. Graduate degrees don't always pay off, but in some industries, they do. In other industries, these degrees are required just to get a foot in the door. When some of the top jobs you're interested in seem to go only to members of a certain subset of graduates, say Harvard Law or Business School graduates, consider finding a way to join that club, keeping in mind that you need some way to recover the costs of that education.
- Be an entrepreneur and succeed. The quickest way to get to the point where you don't need to mourn the loss of middle-class jobs is to build your own business. If you have the skills and the opportunity, fulfilling a need is the best way to create financial independence for yourself and your family. It's not easy, though. Millions of small business owners are not financially independent, let alone wealthy. With a fast-moving economy, a volatile employment marketplace, and technology that seems to advance by the minute, there is a world of opportunity out there for someone who discovers how to take advantage of the situation.
Every business idea is worth exploring, and you never know which one has the potential to catch on. Most ideas fail, and most of the failures go unnoticed. Who likes to talk about failure, particularly when there's a new idea to promote? They key is to stay engaged and push through failures until you find what works.
If the current trends that are helping eliminate middle-wage jobs, broadening the gap between the wealthy and the poor continue, and I expect they will regardless of who is elected as the President of the United States, you can forget about living comfortably on pensions, 401(k) payments, and Social Security in retirement. You can forget about comfortable suburban living on a decent but not great corporate salary. You'll need to make some changes to the way you're living and consider a new way of designing your future if you're interested in not having to worry about money from one paycheck to the next and about whether that next paycheck will come.
As I wrote earlier, this has the potential to be a multi-generational shift. Not only do you need to think about the future of your own financial independence in these terms, you should consider doing what is necessary to ensure the financial independence of your children for the rest of their lives as well as the lives of their descendants. That doesn't necessarily mean building wealth to such a level that you can keep it in the family for generations to come, but instilling a philosophy that takes the long-view and moves in the direction of somewhat permanent or at least consistent financial independence. A healthy attitude and approach to building wealth and its prerequisites like education, lateral and creative thinking, and flexibility, can help families be immune to the loss of the middle class over the long term.
Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Flexo on Twitter. View all articles by Luke Landes (Flexo).
- Frugal employers will lose their talent
- 8 questions before you quit your job
- Use your emergency fund when you quit
Share your thoughts about this article with the editor: Click Here
More Tips & Tools to Help You
Live Better...For Less
- How to become a millionaire in 7 easy (hah!) steps
- 5 poor ways to save (and how to do better)
- 10 places to look for $500 in savings
Here are 10 ways to save $500 for when you drive, eat or travel.
- 9 savvy strategies to save for a rainy-day fund
- 5 big bills you can cut fast
- Money-saving secrets of the rich and frugal
- Helping elderly parents organize must-have financial paperwork and information Expert Interview
- How a single mom can create multiple income streams
- Turning your hobby into extra income
- Basic finance management for teens
- Positioning yourself for career advancement
- Reduce your debt with this free debt course by The Dollar Stretcher
- Reduce your debt payoff time
- Find a better credit card rate
- Get better savings & MMA rates