For the last year, Diane C. Swonk has been vice president/deputy chief economist at First Chicago Corp., which she joined 10 years ago after receiving a master’s degree in economics at the University of Michigan. She also received an MBA from the University of Chicago while working at the bank.
Swonk, 33, is an expert on the Midwest region and is credited with designing the bank’s Regional Model, which produces an annual forecast for different regions of the country and a monthly report on the Great Lakes economy. She also authors “First Forecasts,” the bank’s monthly economic outlook.
Swonk talked with free-lance writer Barbara B. Buchholz about the country’s economy, its reported volatility and the local job market. An edited text of the interview follows:
Q–The overall job market is described as volatile. Do you agree?
A–Definitely, though it’s a better economy in the Midwest, with lower unemployment rates, than in some other parts of the country. In fact, it’s the best job market the region has seen in 25 years.
The volatile economy is due to several factors, including demographics and some longer-term trends that have caught up with us. One is the Baby Boomer component–those people born between 1945 and 1962 or ’63. They’ve been in positions for some time, and they’re competing for jobs during major restructurings.
Older people also aren’t treated well. They don’t feel as much job security, or they’re working more than one job. Then, there are the Baby Busters (Generation X), who were born in the mid-1960 and 1970s. There aren’t as many in this group. Companies are trying to fill entry-level positions with them but there aren’t enough of them. So, there are good deals for this group.
The effect of this is what I describe as a winners and losers economy, which is a natural outgrowth of the efficient marketplace we’re seeing in the ’90s. Some people fare well while others don’t.
Q–Have we experienced this dynamic before?
A–Yes, but, there’s never before been the kind of angst of older workers that we’re now seeing. Part of the reason is that the U.S. in the ’50s was the only industrialized economy. There wasn’t the same type of competition that there is today from other countries. Thinking that the American dream regarding job security would last forever was unrealistic as other countries became industrialized.
Q–When did the realization begin that job security wouldn’t last?
A–In the early 1970s. There were three things that occurred to provide the wake-up call. After the 1973 oil crisis, there was a recession. Baby Boomers came into the work force en masse, competing against each other for wages. Women also came into the market in droves. In the 1980s, the debt game emerged. To feel better about living standards, many people went into debt. In the 1990s, we have too much debt, and we’re feeling the pressure.
Q–Technological changes also began to affect the market, didn’t they?
A–Yes. We became aware of the computer in the ’70s, began buying it in the ’80s and began using it in the ’90s. The market witnessed a huge pressure for highly educated workers at the same time that many businesses cut jobs because of technology. We began hearing the same arguments for and against technological advances that were used during the Industrial Revolution: an increase in our standard of living but concern that progress wasn’t worth the price that would have to be paid.
Technology exacerbated the schism between the highly educated workers who could use skills to make lots of money and people without skills who were paid less.
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Q–How did this affect people’s mindsets?
A–You had the Baby Boomers who became very concerned and the Baby Busters who sensed that they might not move up. They decided they should get as much as they could now.
The overall perception is that people should feel better, but the reality is that they don’t. Many middle class feel they’ll never move into the upper class and may have a hard time holding on to their middle-class status.
Q–What changes in the labor market should employees expect?
A–We should continue to expect that wage gains will be 2 to 4 percent annually, which is why people believe they should “take the money and run.” We also expect a recession in late 1997. The privileged few with good educations will do OK, and those from top (colleges and business) schools and with good degrees will do very well.
Q–How will this translate in terms of layoffs, benefits, part-time work?
A–Unfortunately, layoffs are a fact of life. We continue to gain employment nationally, but businesses are seeking to run more efficiently.
Benefits will continue to be cut. The corporate sector led the way and now the federal government is doing this with Medicare and Medicaid. More workers are going to feel the stress of trying to provide for their children at the same time they have to worry about their parents and nursing homes. On top of that, many people haven’t saved for retirement.
More companies are interested in part-time workers because by using temps and part-timers, they don’t have to provide retirement benefits. Many workers also want flexibility, particularly working mothers. It’s a difficult equation today. We’re reweaving the economic tapestry.
Q–What should people do to survive?
A–They shouldn’t think of staying in one position for their entire lives the way many of their parents did. They should keep options open. The two-income family in the 1980s may have to become the three-income family as kids never move out or move back. We’ll see more families living together, more families not trading up houses.
People need to network more than ever and work harder. They won’t have as much free time. They need to rethink the concept of retraining themselves. If they don’t know how to use a computer, they should, or even if they do they should update their skill set and take computer classes. They should take classes to stay aware of what’s going on in their industry. They should tell themselves: I may be safe today, but what about tomorrow?
Q–So, flexibility is key for the worker. But what about employers?
A–Employers want to keep their skilled workers, and even if they can’t or don’t want to offer better wages, they are willing to be more flexible in terms of flextime, day care, whatever it takes. It’s one major offset to a harder-working environment. Such flexibility in the workplace may not be everywhere, but it’s coming. More companies have a casual day year-round, which is another byproduct of employers trying to offer a more humane environment, where their people can work more comfortably and spend less on clothing.
Q–What jobs will open up in Illinois and Chicago? Which will leave?
A–There’s great demand for highly skilled manufacturing in the machine tools and auto manufacturing industries. Jobs in the city’s financial exchanges will continue, so will those in the tourist industry. There will also be demand for service-sector jobs that ease the burden on time-strapped employees.
There will be a mixed bag in the health-care area. A squeeze on doctors and hospitals will continue, but demographics point to huge demand for affordable care for the elderly. On the flip side, there will be less demand for bankers because of consolidation. More banks will leave.
Again, to cope, workers need to be flexible. A nurse at a hospital could switch to a job in a nursing home.
Q–You have a 1-year-old daughter. Imagine her older, perhaps in college. What advice would you give her?
A–To follow her heart and do what she loves best. I do what I love, but I also got the best education I could. My father told me long ago to become an educated person. I didn’t know what that meant then, but I do now. Get an education, and it will open doors.
It used to be easier with an education, but without it now you certainly can’t start at a good job. For those not interested in college, I say stay in high school and finish. In this economy, there’s no room unless you’re literate and understand computers.
Q–Any parting advice for angst-ridden Baby Boomers?
A–Save for retirement.Don’t spend as much. Take advantage of what your workplace has to offer–401(k) plans, matching plans and savings incentive plans.
