The Betrayal of the American Dream (14 page)

By year’s end, about eight hundred employees would be gone. The cuts were staggered over months to give PwC’s new IT contractor, Tata Consultancy Services of India, time to learn the jobs of the people PwC was firing. It was one of the largest mass dismissals ever in Tampa, but what was especially ominous were the kinds of positions eliminated.

PwC’s huge Tampa operation was the “epicenter for nearly all the IT staff that supported the U.S. market,” in the words of one former employee. Among their responsibilities was to build, manage, and maintain operating systems and the hardware supporting them for PwC partners and staff in the United States. To do so meant not only riding herd on temperamental computer networks but dealing with thousands of individual servers throughout the country. The men and women who held these sophisticated jobs were often college-educated, and were well versed in multiple software applications, database management, and the intricacies of managing a far-flung internal network that served thousands of PwC personnel. In other words, they had all the skills that supposedly count in the new American economy.

The jobs paid well, but they could be extremely stressful, especially when it came to keeping a galaxy of networks and servers all functioning in tandem. Anyone who has lost their Internet connection knows the frustration of trying to get back online. The problem is magnified at a commercial venture such as PwC, where millions of dollars can be at stake if connectivity is disrupted for an extended period. It was not uncommon for members of some of PwC’s teams to work sixty to eighty hours a week to keep all the systems running. In one sector called platform services, one specialist worked every weekend for months without a break, according to Mark Ferneau, a former member of this team.

The Tampa office was part of PwC US, the American arm of the $29 billion global accounting and consulting behemoth based in the United Kingdom. The company, which is privately held with ownership in the hands of about eight thousand partners, discloses few financial details, but the Ames Research Group estimated the average gross earnings of partners at $872,640 in 2008—meaning, of course, that many earned in the millions. Although as a private company it wasn’t answerable to Wall Street or stockholders, PwC had started to act like a publicly held company even before the mass layoffs.

Despite its reputation in Tampa as employee-friendly, in the years leading up to the layoffs the company had been engaging in belt-tightening moves that were out of character. Retiring employees weren’t replaced. Other longtime employees were let go on a piecemeal basis for reasons that made no sense to their colleagues other than to cut costs. As one former IT employee later told the
St. Petersburg Times:
“It used to be a great place to work. They took care of their workers.” But by the time of the layoffs in 2010, he said, it had become “a company of bean counters, and all they care about is saving a few pennies.”

One of the divisions hit especially hard was the help desk headed by Irene Odell, who had worked at PwC for eleven years. A one-hundred-person operation, the desk was manned around the clock to field calls and requests from partners and other staff across the United States. The PwC help desk wasn’t like the help desks that consumers contact when they want to question a bill or order a product. It was an integral part of the company’s executive structure and business, always on call to resolve technical computing problems, connectivity issues, password glitches—any problem that had to be dealt with immediately.

A first-generation Greek American, Odell had graduated from the University of South Florida with a degree in business administration in 1990. But she quickly found out that “it was not a good time to be a brand-new graduate with a business degree,” she said. When she couldn’t find anything but minimum-wage jobs, she realized that “this isn’t what I want for the rest of my life.” So she went back to school to become a nurse. There she became fascinated with computers and the rapidly emerging Internet. She started a website and became active with newsgroups through Usenet, tried her hand at building websites, and became proficient in using the new personal computer software that was constantly arriving. By the time she earned her nursing degree in 1995, there was such a demand for people with computer experience that she went into IT, first at a small company in the Tampa area, and then in 2000 at PricewaterhouseCoopers.

After losing her job, Odell wondered what she would do next. She had the qualifications and résumé to land another job in IT, though IT jobs were scarce in the Tampa Bay area. But the more she thought about it the more she felt that there was no future for IT in the United States. As she wondered whether to change careers, a meeting at PwC helped Odell make up her mind.

Like others who were on their way out the door, she attended counseling sessions arranged by the company to help them with their “transition.” At one meeting she attended with about sixty others, the employees were asked what they were thinking about doing next.

“Every single person was choosing a different field,” she said. “Not one person said, ‘I’m going to be looking for the kind of job I was doing.’”

One said she was going to nursing school. Another decided to open a cake decorating business.

“If I’d had any doubts about making a complete career change, that settled it for me,” she said. “Because PwC had really smart people, and if all these really smart people are saying they want training for some other field, then collectively as a group we must be right.”

She decided to return to nursing, the field where she’d earned her second degree before she went to work in IT. She had to go back to school to refresh her training, and she also had to obtain her nursing license. While in school, she took a nursing job at an acute-care facility, but cutbacks there created staff shortages and made working conditions extremely stressful.

Odell isn’t sure that she will stay in nursing, but wherever she winds up, she knows she’ll be earning much less than she earned at PricewaterhouseCoopers. Still, she feels fortunate. Her husband, a pharmacist, has a good job, so they’ll be okay.

Others are not as fortunate. Alex Sanabria also worked in PwC’s IT unit when he was fired in 2010. After he lost his job, Sanabria couldn’t find work in Tampa. The recession there was still raging, and there was a glut of unemployed technology workers. First, he and his wife drew down their savings to try to keep their home, which they had bought at the top of the real estate market five years earlier. But they finally had to walk away and declare bankruptcy. For Sanabria, bankruptcy was “the most gut-wrenching, awful thing I’ve ever had to do.” Eventually he and his wife moved to Colorado to live with her parents while he looked for work there. He finally found a job on the help desk of a consumer products company. He was working again, but at a much lower salary than at PwC.

Almost as bad as the economic blow was the emotional impact. PwC was Sanabria’s first real job after college, and he says that he put his “heart and soul” into it, sometimes working sixty-five to seventy hours a week. He said he always got high marks and was moving up, taking on more responsibilities and earning raises and bonuses. Led to believe by his performance evaluations that the company valued his work, he had the feeling that “good things are coming around the corner.”

What came around was a security escort out of the building. Like many people who lose their job, he began to doubt himself after he was fired. “You start wondering—and I don’t think this way now—but you start thinking,
Maybe I wasn’t a good employee. Maybe they had a reason to let me go.
I know that’s the wrong way to think. I know I went in there and did the best job I could have possibly done every day I was there, but you start getting so demoralized.”

Irene Odell says that she and many of her former coworkers will move on, but she does worry about what is happening to the middle class. With their expenses going up and their earnings going down, they have less and less income, and the gap between most Americans and those at the top keeps on growing. She wonders:

“When we get down the road and we end up where we’re headed—which is an elite class and a low class—is the low class going to tolerate that for a long period of time? Isn’t that what inspired the revolution?”

NEXT TO GO

One of the most overlooked—and most frightening—forecasts about the future of the middle class was released in December 2008. This was a study by researchers at the Labor Department that identified service jobs that might go offshore. Despite its scholarly tone, its conclusions are alarming.

It found that as many as 160 service occupations—one-quarter of the total service workforce, or 30 million jobs—could go offshore. Jobs in those 160 categories were growing at a faster rate than service jobs overall and, ominously for future middle-class incomes, they were among the higher-paying service jobs. The Bureau of Labor Statistics calculated the annual wage for these jobs at $61,473—significantly higher than the $41,610 in annual wages for all service occupations.

The list of vulnerable jobs and their average annual earnings is breathtaking: aerospace engineers ($92,700); aircraft mechanics ($49,670); anthropologists ($55,490); architectural drafters ($45,280); biochemists ($85,290); chemical engineers ($84,240); chemists ($68,520); epidemiologists ($63,600); fashion designers ($71,170); financial analysts ($81,700); graphic designers ($45,340); insurance underwriters ($60,120); market research analysts ($66,980); mathematicians ($90,930); microbiologists ($66,430); multimedia artists ($61,010); nuclear technicians ($65,850); pharmacists ($98,960); and tax preparers ($34,890).

The most revelatory aspect of the BLS report was how surprised by its conclusions its authors seemed to be. The agency that specializes in economic matters affecting working Americans has spent little time looking at what may be an Armageddon for service workers. But that’s in keeping with the perennial optimism that economists generally peddle about the direction of the American economy when the subject involves free trade. Why give much ink, these optimists reason, to a problem that doesn’t fit the prevailing theory that offshoring is good?

One of the few economists who did sound an alarm on offshoring, Alan S. Blinder of Princeton, was roundly criticized by his fellow economists when he predicted in 2007 that the offshoring of service jobs from rich countries to poor countries “may pose major problems for tens of millions of American workers over the coming decades.”

While it’s clear that free trade, as practiced by the United States, is driving down the income of millions of working Americans, the economically elite are sticking to their message that America is on the right track.

Harvard economist N. Gregory Mankiw, a former chairman of the Council of Economic Advisers under President George W. Bush, says that the migration of jobs from offshoring makes economic sense and is “the latest manifestation of the gains from trade that economists have talked about at least since the days of Adam Smith.... More things are tradable than were tradable in the past, and that’s a good thing.” For decades, Americans have been given misleading assurances like that. Many so-called experts have also made rosy predictions about the U.S. trade deficit. In a
Washington Post
article in 1992, Stephen Cooney, a senior policy director for international investment and finance for the National Association of Manufacturers, predicted that because of changes under way in the American economy, “with luck our trade deficit could disappear by 1995.” No such luck. In 1992, when Cooney made his prediction, the deficit was $39 billion. Rather than disappearing by 1995, the deficit nearly tripled to $96 billion, and it has continued to escalate; by 2011 the trade deficit had reached $560 billion.

Gary Clyde Hufbauer, a former deputy assistant secretary at the Treasury Department, predicted in a research paper that was widely picked up by the media that NAFTA would “generate a $7 to $9 billion [trade] surplus that would ensure the net creation of 170,000 jobs in the U.S. economy the first year.” Instead, NAFTA caused an immediate trade deficit with Mexico. By 2012, the cumulative total was $700 billion. More importantly, NAFTA wiped out hundreds of thousands of good-paying manufacturing jobs in the United States.

Hufbauer is still in the job-predicting business at a Washington think tank. One of his latest: “When American multinationals go overseas, on balance, they create more jobs here in the United States than they would have if they’d not gone overseas.”

Right.

THE EDUCATION TRAP

If free trade isn’t working out for millions of middle-class Americans, the elite have the answer. American workers need more education. If they upgrade their skills, they can compete in the global economy.

One of the promoters of this theory is Thomas Friedman, the
New York Times
columnist and author of the blockbuster bestseller
The World Is Flat
. Friedman maintains that our trade policies “must be accompanied by a focused domestic strategy aimed at upgrading the education of every American, so that he or she will be able to compete for the new jobs in a flat world.” This is one of the most shopworn theories about what has caused our trade deficit and why we have lost so many jobs to offshoring and outsourcing. And it’s wrong. The real cause is a failure of the trade policy in the first place.

In fact, what education has done is create a false sense of security. The theory that all you need is a sheepskin and jobs will seek you out is not rooted in reality. To begin with, not everyone benefits from a college education. Truth to tell, tens of millions of Americans don’t benefit from higher education, but that doesn’t mean their potential contributions to society are any less worthwhile. To suggest that their contributions are insignificant is arrogant and also ignores the basic rules of the labor market. Flooding a jobs sector with new applicants can have only one result: lower wages for everyone, which is exactly what is happening.