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Showing posts with label THe REcession/Depression. Show all posts
Showing posts with label THe REcession/Depression. Show all posts

Wednesday, October 14, 2009

For Those Lucky Enough To Still Be Working..Expect Pay Cuts, Higher Medical Insurance Premiums, And More Hard Work

Still on the Job, but Making Only Half as Much

Published: October 13, 2009

MECHANICSVILLE, Va. — The dark blue captain’s hat, with its golden oak-leaf clusters, sits atop a bookcase in Bryan Lawlor’s home, out of reach of the children. The uniform their father wears still displays the four stripes of a commercial airline captain, but the hat stays home. The rules forbid that extra display of authority, now that Mr. Lawlor has been downgraded to first officer.

Casey Templeton for The New York Times

Bryan Lawlor was reduced from airline captain to first officer and his salary lowered by 50 percent as his employer cut costs.

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Cut in Half

Today's Business: Pay Cuts During the Recession
Casey Templeton for The New York Times

“I don’t want to be a 50-year-old pilot earning $40,000 a year," said Bryan Lawlor, First officer, ExpressJet Airlines

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He is now in the co-pilot’s seat in the 50-seat commuter jets he flies, not for any failure in skill. He wears his captain’s stripes, he explains, to make that point. But with air travel down, his employer cut costs by downgrading 130 captains, those with the lowest seniority, to first officers, automatically cutting the wage of each by roughly 50 percent — to $34,000 in Mr. Lawlor’s case.

The demotion, the loss of command, the cut in pay to less than his wife, Tracy, makes as a fourth-grade teacher, have diminished Mr. Lawlor, 34, in his own eyes. He still thinks he will return to being the family’s principal breadwinner, although as the months pass he worries more. “I don’t want to be a 50-year-old pilot earning $40,000 a year,” he said, adding that his wife does not want to be married to a pilot with so little earning power.

In recent decades, layoffs were the standard procedure for shrinking labor costs. Reducing the wages of those who remained on the job was considered demoralizing and risky: the best workers would jump to another employer. But now pay cuts, sometimes the result of downgrades in rank or shortened workweeks, are occurring more frequently than at any time since the Great Depression.

State workers in Georgia are taking home smaller paychecks. So are the tens of thousands of employees in California’s public university system. The steel companyNucor and the technology giant Hewlett-Packard have embraced the practice. So have several airlines and many small businesses.

The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.

“What this means,” said Thomas J. Nardone, an assistant commissioner at the bureau, “is that the amount of money people are paid has taken a big hit; not just those who have lost their jobs, but those who are still employed.”

Bryan and Tracy Lawlor, who is also 34, have hidden their straitened circumstances from their four young children, mainly at his insistence. But as their savings dwindle, Christmas, a key indicator in the Lawlor family, will mean fewer presents this year. The Lawlors have made a practice of piling on toys and new clothes for their children at Christmas, buying relatively less the rest of the year. That will make a cutback noticeable this holiday season, and the parents are concerned that their children will begin to realize why.

“You don’t want to see disappointment on their faces; that makes me feel horrible,” Mr. Lawlor said. “You can be the best pilot in the airline and make the best landings, and in their eyes, I am not going to be as important as I was.”

A Dream Come True

Bryan Lawlor was five years out of Virginia Tech before he turned to aviation, his first love as a boy. His mother still cherishes a photo of her son, age 5, seated in a cockpit. But Mr. Lawlor studied chemistry in college and he used that skill, taking jobs as a chemical technician, to support his growing family. Layoffs marred those early years and in 2003 Mr. Lawlor made the “crossroads” decision to become a commercial pilot, borrowing $24,000 to learn to fly and to acquire the necessary licenses.

His current employer, ExpressJet Airlines, is a spinoff from a feeder operation forContinental Airlines. It brought passengers to Delta hubs as well, mainly in the West, and to help handle that traffic, Mr. Lawlor was promoted to captain from first officer in July 2007. His pay rose to $68,000, with the prospect of reaching $100,000 — roughly triple a first officer’s pay.

That is not so much money by the standards of an earlier era. Even senior captains on legacy airlines rarely earn above $200,000 today, as they often did in the past. Mr. Lawlor says pilots’ pay these days fails to recognize the training and skill involved in transporting passengers even more safely than in the past.

But Mr. Lawlor felt he was headed in the right financial direction until the economy, and the airline business, took a tumble. It is a setback that worries his wife, who wants her husband back on the income path that was interrupted one year ago this month. “I certainly don’t earn enough to make up for what he lost,” she said, adding that to make matters worse, “teachers didn’t get a raise in our school this year.”

Still, as her husband’s ordeal drags on, Mr. Lawlor in some ways has risen in his wife’s eyes. “I have more respect for him,” she said. “I can see he is angry and upset, but he does not show it very often, and never to the kids.”

That is less and less true, Mr. Lawlor said, amending his wife’s appraisal. One year into his downgrade, “never” has turned to “rarely” and, in recent weeks, “not so rarely.” He blew up last week at his 3-year-old son, Shayne, for refusing to take a nap, and sent the child whimpering to his room. Then, after arranging with another pilot to delay a flight so he could “dead-head” home in the early afternoon instead of having to wait for the next flight, he blew up at his wife for failing to appreciate the effort he had made and the stress involved.

“My mind is always on 20 different things,” Mr. Lawlor said. “What do I need to get done? How much will it cost? Is it necessary? Can I do it cheaper if I do it myself? Can I make the earlier commute home? Rush, rush, rush, and then suddenly someone makes the wrong comment and I become uncorked.”

A Different Kind of Provider

As a captain for ExpressJet in calmer times, Mr. Lawlor commuted across the country to Los Angeles, his home base, for each three- or four-day trip. Now, as a first officer, his base is Newark, a far shorter commute from the Lawlor home in this Richmond suburb. So he is home more. He spends that time caring for the two youngest children, Shayne and Jackson, 16 months, while his wife takes the two oldest, Zachary, 7, and Kelley, 10, with her to the elementary school where she teaches and they are enrolled as students.

“A lot of my friends say their husbands would not stay home with the kids on their days off, even to save money,” Mrs. Lawlor said, “but Bryan feels that if he is going to be home more that is what he should do, and he is doing it.”

Mrs. Lawlor praises her husband’s adeptness in the routines of child care. But money also drives him. Each day that Jackson and Shayne are not delivered to the home of the baby sitter is $50 that can be spent elsewhere. That wasn’t a priority while Mr. Lawlor was captain. In the 14 months that he held that rank, his $68,000 in pay and Tracy’s $40,000 as a fourth-grade teacher were enough, as Mr. Lawlor put it, for the family — for the first time — to spend freely and still save money.

He purchased a white gold 10th anniversary band for his wife and a bright yellow Harley-Davidson motorcycle for himself, imagining that he would take it for spins on his days off, the wind blowing in his hair as he raced along the sparsely populated roads in Richmond’s semi-rural suburbs. “It was a present to myself when I upgraded to captain,” he said.

The $10,000 Harley sat for months in the garage before it finally sold, with only 175 miles on the odometer. Mr. Lawlor had never ridden it much. His wife objected that he would exclude the family unless, as she pointedly put it, he could “find some way to strap the kids on the motorcycle.” Now the desire to ride the eye-catching hog is gone. If he ever makes another vanity purchase, Mr. Lawlor says, it will be something the family can use.

His mother, Patricia Lawlor, anguishes over this scaling back of his exuberance and the psychological effect of the pay cut.

“Let me put it this way,” she said of her only son, the oldest of her three children. “When we went out to dinner and he was a captain, with a captain’s pay, he for the first time picked up the check. He would say, ‘I’ll get it, Dad,’ instead of letting his father pick it up. It gave him a great deal of pride to do that. ‘Let me buy, Dad, for once.’ And now he does not say that anymore.”

While Mr. Lawlor was still a captain, his parents decided to move into smaller quarters, and the son and daughter-in-law bought their five-bedroom house, getting a break on the price but increasing their mortgage payment to $2,000 a month from the $1,200 they had paid for their smaller home nearby.

They closed on the house in August 2008, on the eve of the downgrade, and soon there were regrets. “We would not have bought the house on a first officer’s salary,” Tracy Lawlor said. She had considered giving up teaching to be a stay-at-home mom. “We felt we had some breathing room for the first time in our 11 years of marriage,” she said, “and that went out the window with the downgrade.”

She was sitting at her kitchen table, and her husband, across from her, winced, but did not disagree. Even if his captain’s rank and pay are restored she will continue to teach, she said. His pay could be cut again. They are convinced of that and, in preparation, they made certain there would be no more children. Their fourth, Jackson, was just 4 months old when the downgrade came, and soon after, Mr. Lawlor underwent a vasectomy.

“We could not take the risk of having another child,” he said.

Silver, and Dark, Linings

The West Coast assignment, while representing a promotion, meant long, often overnight commutes, with Mr. Lawlor sleeping fitfully in the jump seat of a FedEx cargo jet or in a sleeping bag rolled out in the cargo area. His first day home, he often spent dozing on the living room couch. His wife hated the time taken from the family, and her husband’s exhaustion.

“He was totally worn out the first day back, and tired the whole time he was home,” she said.

One year later, even after such a big pay cut, Mrs. Lawlor sees her husband’s shorter commute to his new base at Newark as a blessing she is reluctant to give up. Her husband says that moving back up to captain, with a captain’s pay, might mean commuting again to California. “If that is what it takes, I’ll do it,” he said, and this time his wife winced.

“I would probably not be happy,” she said. But she “wouldn’t trade him for another husband,” as she put it, and while she had never wanted her husband to be a pilot, at this point she would be alarmed if he left aviation in an attempt to please her.

“He likes what he does,” she said, “whereas before he did not like what he did. That has made him easier to be around, whereas before he became a pilot, he wasn’t happy at all.”

Mr. Lawlor is vice chairman for contract enforcement for the ExpressJet unit of the Air Line Pilots Association. He had volunteered some months ago for the unpaid role, and now his fellow pilots seek his help in resolving scheduling disputes, pay issues, meal reimbursements. The calls and e-mail messages come in on his cellphone. When he is home, minding his sons, he lets the children migrate to the living room to watch a cartoon on the family’s big-screen TV while he sits nearby, at the kitchen table, absorbed in mediating appeals.

That is not the same as commanding an airliner — walking through the airport wearing the captain’s hat — but it brings him part way back. “My point would be that being in the captain’s seat made me feel in command, and capable and powerful,” Mr. Lawlor said, “and that has been taken away, and through the union, I can still experience some of that, in the admiration of my peers for being able to step up and help them. Maybe psychologically that fills a void; maybe that is why I don’t feel as bad as I would otherwise.”

So the Lawlors soldier on, with plenty of family help. Their sisters have pitched in with baby-sitting, gratis. His parents bought their kitchen table, the dining room table, a playpen, a living room sofa and the deck furniture. His father’s two unmarried sisters, both retired teachers, insist on helping their only nephew — the one family member perpetuating the Lawlor name not only in this generation but, through his three sons, the next generation.

The aunts offer a subsidy. They insist, for example, that Bryan Lawlor eat healthy meals when he is on the road, even if that means spending more than his airline-allotted per diem. They’ll pay, and Mr. Lawlor says he does now eat properly. The aunts also paid $200 to rent “moon bounce” equipment for a Lawlor child’s birthday party last month. The birthday boy had asked for the party entertainment, and the Lawlors obliged, with the aunts’ help, not wanting the father’s loss of income to translate into constraints on the children’s lives.

Still, their savings, built up in the good years, have dwindled to $10,000, from $28,000 last fall, and Mr. Lawlor said the next rung down, to four figures, is in his mind a crisis level. “I am beginning to feel like, what if something happens to me, where does that leave Tracy?” he said.

He called in sick recently, suffering basically from fatigue. “I think the reason I felt fatigued is the stress,” he said. “It is always there.”

Tuesday, July 14, 2009

Ten Reasons Why The Economy Is In Worse Shape Than You Think

The Economy Is Even Worse Than You Think
The average length of unemployment is higher than it's been since government began tracking the data in 1948.

By MORTIMER ZUCKERMAN

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:


David Klein
- June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

- More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.

- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.

- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

- The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.

- The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.

- The goods producing sector is losing the most jobs -- 223,000 in the last report alone.

- The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.

Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.

Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.

How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? For a start, too much of the money went to transfer payments such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending that creates new jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.

About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.

It may have made him unpopular in parts of the Obama administration, but Vice President Joe Biden was right when he said a week ago that the administration misread how bad the economy was and how effective the stimulus would be. It was supposed to be about jobs but it wasn't. The Recovery Act was a single piece of legislation but it included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases the funds with typical inefficiency.

Another $150 billion, which was allocated to state coffers to continue programs like Medicaid, did not add new jobs; hundreds of billions were set aside for tax cuts and for new benefits for the poor and the unemployed, and they did not add new jobs. Now state budgets are drowning in red ink as jobless claims and Medicaid bills climb.

Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.

Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees. After the 1990-91 recessions, consumers went out and bought houses, cars and other expensive goods. This time, the combination of a weak job picture and a severe credit crunch means that people won't be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending.

This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.

No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It's a shame Washington didn't get it right the first time.

Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.