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Cascade: No. 77, Spring/Summer 2011

Spotlight on Research: The Distributional Impact of Unemployment

The recession of 2008–09 has had debilitating effects throughout the economy. One lingering effect that continues to receive a great deal of attention is the persistently high rate of unemployment. Since the recent recession has left a large number of American workers without employment, the creation of more jobs would provide welcome relief to some of those who have been struggling to find a job. However, the creation of jobs for jobs’ sake might not be a panacea if the skills required in the new jobs do not match those possessed by the unemployed. Thus, the distribution of job losses among different segments of the labor force and their requisite job skills might figure prominently in addressing the unemployment dilemma. A study by Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin, and Sheila Palma provides some insight by focusing on those workers hardest hit by the recession.1 Following is a summary of their analysis.

Data and Results

Marvin M. Smith, Ph.D., Community Development Research AdvisorMarvin M. Smith, Ph.D., Community Development Research Advisor

Sum et al. used data from several sources to conduct their analysis, including various reports from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau’s Current Population Survey of households. The authors found that the recent recession “sharply increased unemployment, underemployment, hidden unemployment, and other forms of labor underutilization,” among other effects.2 They further reported that the job losses and resulting rising unemployment problems were not shared evenly among workers by gender, age, race–ethnicity, educational attainment, or occupational groups. As with past recessions, certain segments of the workforce, such as young workers, black males, those with less educational attainment, and blue-collar workers, tend to bear a great deal of the job losses. The authors stressed that, as a result of the recent recession, “blue-collar workers (construction crafts, manufacturing operatives and other production workers, laborers and helpers, and transportation operatives/material movers) have been more severely affected than any other group.”3

Recent Recession’s Overall Job Losses. Sum et al. focused their analysis on the period from November–December 2007 (the recession officially started in December 2007) through February 2010. According to them, nonfarm payroll jobs declined by 3.3 million between November–December 2007 and the end of 2008 and by nearly 8.4 million from November– December 2007 to January–February 2010. However, there was an uneven distribution of the job losses across key industrial sectors, with those industries that are primary employers of blue-collar workers experiencing a greater decline than other industries.

Relative Job Loss of Blue-Collar Workers. The authors noted that total employment fell by nearly 18 percent in three industries (construction, manufacturing, and transportation/ warehousing) where the majority of workers are blue-collar. These industries “accounted for 54 percent of all payroll job losses across the entire economy through January–February 2010.” To provide some context, the authors pointed out that “during the Great Depression of 1929–33, total employment in the U.S. had been estimated to have fallen by slightly more than 18 percent.” Sum et al. also indicated that the industrial sectors that were least likely to employ blue-collar workers lost fewer jobs or actually increased employment. More specifically, between the fourth quarters of 2007 and 2009 there was a 2.4 percent growth rate for professional/technical workers.

Sum et al. highlighted how educational attainment figured prominently in the employment picture during the economic downturn. They noted that “between November 2007 and January 2010, employment among males with no high school diploma or GED certificate fell by just under 17 percent versus declines of 10 to 11 percent among males with a high school diploma or one to three years of college and only 1 percent among males with a bachelor’s or higher degree.”

Blue-Collar Unemployment and Underemployment. Given the marked decline in employment among blue-collar workers, the authors explored whether this group experienced above-average increases in their unemployment and underemployment. Once again, there was a stark difference between the blue-collar groups and those in the professional and managerial occupations. By the fourth quarter of 2009, they found double-digit unemployment rates in three of the four blue-collar groups (ranging from nearly 12 percent to slightly less than 21 percent). In contrast, “professional and managerial workers faced unemployment rates only in the four- to five-percentage-point range, which would be considered the equivalent of near full employment for the entire labor force.”

A similar situation occurred with underemployment. The authors reported that “the underemployment rates of blue-collar workers in the fourth quarter of 2009 ranged from a low of 4.6 percent among installation/maintenance/repair workers to 8.4 percent for transportation operators/material movers to a high of over 15 percent for construction and extraction occupations.” The professional and management workers fared much better with underemployment rates only in the 2 to 3 percentage point range.

To dramatize the labor market difficulties of blue-collar workers, the authors combined the unemployment and underemployment rates and found that three of the four blue-collar groups experienced combined unemployment/underemployment problems in the 19–33 percent range, while both professional and managerial workers faced combined rates in the 7 percent range.” Sum et al. further noted that the disparity in the combined rates for these two groups “widened considerably over the course of the recession.”

Impact of Employment Problems on Blue-Collar Workers. Sum et al. indicated that the jobless difficulties of blue-collar workers have serious negative consequences. The increases in the mean duration of unemployment spells over the course of the recession diminish their reemployment prospects and lessen their hopes of obtaining a job at their former earnings. Moreover, those blue-collar workers who are permanently displaced from their jobs face stiff competition from a large surplus of workers seeking employment.

Other Groups Affected by the Recession. In addition to the recession having a negative impact on the overall category of blue-collar workers, certain subgroups that were also adversely affected are worth mentioning. Since blue-collar occupations are composed mostly of males, men experienced greater job loss than women (10.8 percent unemployment rate versus 8.6). Moreover, black males as well as young males (under 30) who lack post-secondary degrees were severely affected. Black males had an employment loss of 10.1 percent, while the decline in blue-collar employment shut young males out of a key segment of jobs.

Concluding Observations

Sum et al. determined that “the recession of 2008–9 has taken a very severe toll on the labor market fortunes of the nation’s blue-collar workers. Rising displacement from their jobs and an increasing incidence of both unemployment and underemployment problems have put them in severe long-term jeopardy.” They noted that “the depression in many blue-collar labor markets will not be resolved by a modest recovery of the U.S. economy over the next few years.” Thus, they called for expanded and revamped training and retraining efforts to assist displaced workers. But they hasten to add that the nation has not had a promising track record on retraining efforts for displaced workers. Nonetheless, the authors suggested that “new innovative training efforts with strong ties to employers, including combined classroom/on-the-job training efforts, will be needed to increase long-term employment and earnings outcomes for the nation’s dislocated blue-collar workers.”

  • 1Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin, and Sheila Palma, “The Great Recession of 2008–2009 and the Blue-Collar Depression,” Challenge, 53:4 (July/August 2010), pp. 6–24.
  • 2This includes those workers who are seeking jobs but remain unemployed, those who desire full-time employment but are working less than 40 hours a week, those who are working at jobs that do not require them to use their primary skills, and those who want to work but who have stopped looking for employment out of frustration due to unsuccessful job hunting.
  • 3The authors noted that earlier papers refer to the severity of job losses among blue-collar workers as “Blue-Collar Depression.”