View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

March 15.

eOONOMIC
GOMMeNTORY
Federal Reserve Bank of Cleveland

Is This Really a
"White-Collar Recession"?
by Randall W. Eberts and Erica L. Groshen

U.

' mil the National Bureau of Economic
Research (the official arbiter of business
cycles) decrees it, we cannot be certain that
history will record the current economic
downturn as a recession. Nonetheless,
many economic analysts and media representatives have chosen not to wait for the
official pronouncement, proclaiming not
only that the US. economy is in the midst
of a recession, but that this downturn is different from previous ones because it has
hit white-collar workers disproportionately
hard.' While both issues provide interesting material for debate, this article investigates only whether we are indeed experiencing a whiie<ollar downturn.
The emphasis on the plight of whitecollar workers may be traced to the
regional and industrial origins of the current downturn, initial signs of a slump
were centered in the Northeast, and primarily in that region's financial service
and real estate industries. Understandably,
early media coverage focused on layoffs
in these predominately white-collar industries. Now that the slowdown has deepened and spread to other regions and sectors, it is appropriate to examine the
assumption that white-collar workers
have been the primary target of current
employment cutbacks.
The term "white-collar recession" is not
precisely defined. Media accounts of the
current downturn often refer to salaried
employees and convey the image of long
unemployment lines now filled with
white-collar workers where blue-collar

ISSN 0428-1276

workers once stood. Reports of wage
cuts and suspension of bonuses and
profit sharing in the white-collar ranks
have also been noted. Certainly, no single dimension of the employment situation can totally capture the relative
fates of white- and blue-collar workers
during this •downturn. We concentrate
on employment/unemployment data,
however, because they are closely
linked to workers' well-being and are
the most current information available.
We find at least six ways to ask whether
this is truly a white-collar downturn.
For instance, what is the relative share
of white- and blue-collar workers in
the pool of unemployed; what is their
share of the recently unemployed; and
do white-collar workers have a higher
unemployment rate than blue-collar
workers?2 With only one exception,
the answers to these and three additional questions soundly reject the notion
that, in general, white-collar employees
are suffering disproportionately.
• White-Collar vs. Blue-Collar Jobs
Who are white-collar workers? The Department of Labor has defined six broad
categories of occupations: I) managerial and professional specialties, 2) technical, sales, and administrative occupations, 3) service occupations, 4) precision
production, craft, and repair workers,
5) operators, fabricators, and laborers,
and 6) fanning, forestry, and fishing occupations.

There has been some suggestion in
economic circles and the news media
that the current downturn has hit
white-collar workers disproportionately hard. This article examines the
issue from several perspectives and
finds overwhelming evidence to the
contrary. However, as the blue-collar
share of the work force continues to
dwindle, employers faced with declining sales may increasingly view their
white-collar staff as "fair game."

Of these six, all but service occupations can be easily classified as white
collar or blue collar. The first two categories are clearly white-collar occupations, and the last three categories are
obviously blue-collar jobs. But service
occupations (which include workers in
private households and in the protection, health, food, and personal service
industries) do not fit easily into either
group. Like blue-collar jobs, service
jobs are usually paid hourly, may be
somewhat physical in nature, and require only moderate to low levels of
general education. However, like whitecollar employees, service workers generally produce intangible, nonstorable
products. Thus, to answer some of the
questions posed below, we consider the
service occupations separately.

• Six Different Perspectives
Are the currently unemployed workers
mostly white collar? The answer is no.
As of February 1991, former whitecollar employees accounted for 32.7
percent of the 8.16 million unemployed,
compared to 44.3 percent from the three
blue-collar groups and 23.1 percent
from the service occupations (table 1).
Only by rephrasing the question to ask
whether the unemployed consist mostly
of non-blue-collar workers does it appear that white-collar workers are worse
off, since 55.8 percent of the unemployed
come from the non-blue-collar ranks.
Are white-collar workers responsible for
most of the increase in unemployment?
Here again the answer is no. As shown
in figure I, the number of unemployed
workers has risen much faster for the
blue-collar occupations since late 1990,
despite the overall growth in whitecollar employment. In contrast, service
occupation unemployment appears to be
unaffected by the downturn. White-collar
jobs accounted for only 30.3 percent of
the additional 1.58 million workers who
became unemployed between February
1990 and February 1991, while bluecollar jobs were responsible for 65.7 percent of this increase.
Although data limitations prevent a
comparison of the current downturn
with previous ones at the national level,
information on job seekers registered
with Ohio's Bureau of Employment
Services offers a limited historical
perspective. The proportion of whitecollar job seekers in the state rose sieadily between January 1975 and November 1990, reflecting the growth in whitecollar employment; however, there has
been no obvious increase during the current downturn. Meanwhile, the bluecollar share of Ohio's job seekers has
grown noticeably since early 1989, increasing from 50 percent to 60 percent.
Do white-collar workers have a higher
probability of being unemployed than
blue-collar workers? Definitely not. As
of February 1991, unemployment rates
for both of the white-collar occupational
groups were much lower than those for
the blue-collar groups. Of the six cat-

FIGURE 1 UNEMPLOYED WORKERS, 1983-1991
Millions of workers
6

White collar
I

1983

1984

1985

1986

1987

1988

Service occupations
i
r
i

1989

1990

1991

FIGURE 2 UNEMPLOYMENT RATE, 1983-1991
Percent
20
L Service occupations
16
12

Blue collar

8
White collar

4
j_

1983

1984

1985

T986

1987

1988

_L
1989

I

1990

1991

NOTE: All data are seasonally adjusted.
SOURCE: U.S. Department of Labor. Bureau of Labor Statistics.

egories, operators, fabricators, and laborers (who comprise the largest share
of the three blue-collar groups) registered the highest unemployment rate:
11.6 percent. The technical, sales, and
administrative occupations, while exhibiting the higher unemployment rate
of the two white-collar categories (5.0
percent), were still 1 '/i percentage
points below the national average.
Managerial and professional specialties
were half again as low. The service occupations, if classified as white collar,
provide the only exception to this pattern. Unemployment rates for workers
in this category exceeded 10 percent.
Has the probability of unemployment
grown more for white-collar occupations than for blue-collar occupations?
Again, the answer is no. Between February 1990 and February 1991, unemployment rates rose most for blue-collar
workers, both in absolute and relative
terms (table 1 and figure 2). The increases in unemployment rates for the
two largest blue-collar occupational

groups were twice as high as those for
the two white-collar categories. Interestingly, the service occupations have
shown virtually no increase in unemployment rates over the downturn.
Has the net loss of jobs been concentrated in white-collar employment?
Although both white- and blue-collar
occupations experienced job losses over
the past year, blue-collar drop-offs
started much earlier (in late 1989 versus
mid-1990) and have been declining
much more steeply (at a current rate of
3.7 percent, versus 0.5 percent). Even
though total employment fell by 1.17
million workers, or 1.0 percent, between
February 1990 and February 1991 (table
2), three of the six occupational groups
experienced employment growth: managerial and professional specialties; service occupations; and farming, forestry,
and fishing occupations. Therefore, the
answer to this question depends on how
it is posed. If one wanted to argue that we
are indeed in a white-collar recession,
one could highlight the fact that the tech-

TABLE 1

UNEMPLOYMENT DISTRIBUTION AND CHANGE BY BROAD OCCUPATIONAL CATEGORY
Percent
Unemployment
(Feb. 1991)

Occupational category

Managerial and professional specialties
Technical, sales, and administrative occupations
Service occupations
Precision production, craft, and repair workers
Operators, fabricators, and laborers
Farming, forestry, and fishing occupations
Total

9.5
23.2
23.1
13.4
27.2
3.7

100.0
8.16

Total number of workers (millions)

s hare of:

Unemployment change
(Feb. 1990-Feb. 1991)

Unemployment
rales
(Feb. 1990)
(Feb.1991)

11.0
19.3

1.9
4.1

2.4
5.0

4.1

10.5
5.3

10.6

8.1
6.2

11.6

5.3

6.5

20.0
40.7
4.9

100.0
+1.58

7.6
7.9

NOTE: All figures are seasonally adjusted. Figures for the service occupations are not reported by the Bureau of Labor Statistics (BLS) because they do not meet BLS publication standards. The service occupation numbers reported here are calculated from totals and subtotals provided by the BLS and thus should be interpreted with caution.

TABLE 2

EMPLOYMENT DISTRIBUTION AND CHANGE BY BROAD OCCUPATIONAL CATEGORY
Percent

Employment
(Feb. 1991)

Occupational category

Managerial and professional specialties
Technical, sales, and administrative occupations
Service occupations
Precision production, craft, and repair workers
Operators, fabricators, and laborers
Farming, forestry, and fishing occupations
Total

26.6
30.9
13.5
11.4
14.5
3.0

' 100.0
116.92

Total number of workers (millions)

Share of:
Employment change
(Feb. 1990-Feb. 1991)

-43.4
81.8
-33.8
33.6
77.8
-15.9
100.0

Change in
employment
(Feb. 1990Feb. 1991)

1.7

-2.5
2.5

-2.8
-5.1
5.5.
-1.0

Mean annual
growth rate
(Feb. 1983Feb. 1990)

3.9
2.8
1.8

2.0
2.0

. -1.4
2.6

-1.17

NOTE: All figures are seasonally adjusted.
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics.

nical, sales, and administrative occupations accounted for almost 81.8 percent
of the jobs lost in the past year. On the
other hand, if one wanted to make the
case that this is a blue-collar recession,
then the fact that 95.5 percent of the
net job loss occurred in the three bluecollar groups could be noted. The
fairest assessment of this question is
that the evidence is mixed within the
white-collar sector.

Did the growth rate of jobs slow most
in the white-collar occupations? The
third and fourth columns of table 2 show
that net employment changes over the
past year for four of the six occupational
groups were below their averages over
the previous seven years. Since February 1990, however, employment in managerial and professional specialties continued to grow, albeit more slowly than
before. Employment growth in technical, sales, and administrative occupa-

tions suffered the most striking turnaround, switching from growing faster
than average to shrinking faster than
average. More-detailed data show that
the losses were concentrated in sales
and in administrative support positions.
Employment of technical workers, who
comprise only 10 percent of the group,
actually rose 1.3 percent in 1990 (although at half the rate attained over the
last seven years). By comparison, the two
major blue-collar groups grew more
slowly than the other four occupational
categories, losing more jobs than average
in 1990.
• Are There Grounds for
Expecting a White-Collar Downturn?
Although this analysis makes it clear
that we are not in a white-collar downturn, the general impression that this contraction and future ones may be harder on
white-collar workers is not without some
basis. The first reason for expecting reces-

sions to affect white-collar workers
more is simply the dramatic increase in
white-collar jobs over the last few decades. Since 1983, the number of
workers in white-collar occupations increased 245 percent, while the number
of blue-collar workers rose only 8.5
percent Nevertheless, enough bluecollar jobs remain so that, with their
higher unemployment rates, blue-collar
occupations still make up the largest
group of unemployed workers.
The second line of reasoning is that employers may be forced to concentrate on
white-collar employees in their costcutting efforts, since these workers account for an increasing share of personnel costs. While this may be true, our
findings suggest that blue-collar workers
are still more likely to be laid off when
companies face declining sales. This
result may reflect the nature of whitecollar jobs and their compensation.

Unlike their blue-collar counterparts,
whose employment is tied closely to
current production levels, white-collar
workers may be needed even more during downturns in order to rebuild the
customer base or to correct technical
problems. Methods of compensation
also matter, because layoffs may be
averted if employers can reduce hours
or cut pay. Because white-collar workers may have a more flexible wage
structure (due to the bonus or profit
sharing component of their pay),
changes in their compensation may
help to preserve their jobs during
downturns.
Another reason why this downturn
could have affected white-collar workers disproportionately is troubles in
those industries that employ a large percentage of technicians, managers, and
professionals. During the last few years,
the financial, computer, and defense industries have been particularly hard hit.
However, as the downturn has progressed, it has encompassed the two sectors usually affected most severely by
recessions: construction and durable
goods. These are industries in which
blue-collar jobs are highly concentrated.
Finally, others have stated that whitecollar workers have been losing jobs as
part of a long-overdue housecleaning,
initiated to some extent by the spate of

Federal Reserve Bank of Cleveland
Research Department
P.O. Box 6387
Cleveland, OH 44101

Address Correction Requested:
Please send corrected mailing label to
the above address.

Material may be reprinted provided that
the source is credited. Please send copies
of reprinted materials to the editor.

mergers and acquisitions in the late
1980s. An unusually high number of
these workers are no longer needed
because of shrinking numbers of bluecollar workers to supervise, technological changes, or internal reorganization.
Because of inertia, the thinking goes,
needed streamlining takes place only
during downturns. Whether or not this
is true, it does not seem to be any more
true of white-collar workers than of
blue-collar workers.
• Conclusion
Perhaps what has made the possibility
of a white-collar recession so newsworthy is the long-standing notion that
white-collar workers are generally safe
from recessions. The evidence presented
here supports this adage for the current
downturn. However, as the percentage
of blue-collar workers continues to
shrink, businesses will be increasingly
forced to take a hard look at their whitecollar staff when seeking to trim costs,
thus putting white-collar wages, hours,
and jobs in greater jeopardy in future
downturns.
• Footnotes
1. See, for example, Michael J. Mandel,
"This Time, the Downturn is Dressed in
Pinstripes," Business Week. October 1, 1990,
pp. 130-31.

2. An alternative approach would be to compare the impact of this downturn to the impact of previous recessions on white- and
blue-collar workers. In this article, we ask
the more straightforward, objective question
—Is the current downturn a white-collar
slowdown? — rather than the more complex
question — Is the presumed recession more
white collar than previous ones?
3. The Bureau of Labor Statistics redefined
a number of occupational categories in 1982,
making it difficult to compare blue- and
white-collar workers before and after the
revision date.
4. See Douglas Kruse, "Profit-Sharing in the
1980s: Disguised Wages or a Fundamentally
Different Form of Compensation?" in Randall
W. Eberts and Erica L. Groshen, eds.. Structural Changes in US. Labor Markets in the
1980s: Causes and Consequences. Armonk,
New York: M.E. Sharpe, Inc. (forthcoming).
Fora cuirent example of the reduction in
bonuses, see Michael Siconolfi, "Paycheck
Blues: Street's Bonuses Slashed by 40%,"
The Wall Street Journal. March 6. 1991.

Randall W. Eberts is an assistant vice president and economist and Erica L. Groshen is
an economist at the Federal Reserve Bank of
Cleveland. The authors would like to thank
Kristin Priscakfor excellent research assistance.
The views stated herein are those of the
authors and not necessarily those of the
Federal Resen'e Bank of Cleveland or of the
Board of Governors of the Federal Reserve
System.

BULKRA1
U.S. Postage 1
Cleveland, (
Permit No.':