Liz and Bob McLean are on the wrong side of an economic divide.
Not so long ago, they would roar out on a motorcycle trip to Yellowstone, or ride a helicopter down the Colorado River. In 2007, Bob put half the money down on a new pickup and paid cash for a new motorcycle.
Losing their jobs changed everything for the couple from Prior Lake, Minn. Bob now drives a school bus for $13 an hour, one-third what he earned when he designed tools to test hard drives for Seagate Technology. Liz, who works in IT, has found new jobs, but she makes less than she did in 2008.
“We don’t go out. We don’t travel,” she said. “We’re figuring out if I can even retire.”
Millions of Americans have moved on from the recession with careers and finances mostly intact, but large groups have fallen behind, perhaps for good. The difference is whether they were able to hang on to their jobs.
Those who remained employed through the downturn endured anxious moments, lost value in their homes and may have forgone pay raises. But people who were laid off gave up months or years of earnings, lost homes, raided 401(k)s, went into debt, and now more often than not must take jobs for significantly less pay.
Even as the economy has added jobs and unemployment has fallen below 7 percent, today’s unemployed are more likely than at any time since the Great Depression to stay that way for a prolonged period and far more likely to end up in part-time jobs. At last check, more than 4 million people across the country had been out of work for more than six months, not counting the millions who have given up looking.
“Many of them are still paying the price by having a job that’s not as good, or only a part-time job, or maybe not a job at all,” said Henry Farber, a Princeton economist who studies displaced workers. “The labor market never really recovered from the Great Recession.”
If and when job seekers do find work, a majority make less money. A third suffer a 20 percent pay cut or worse, according to research by the Federal Reserve Bank of Cleveland.
They are ushered into a new life with lesser prospects and no clear path to reclaim what they lost.
President Barack Obama has found himself in the sometimes awkward position of promoting an economic recovery that feels distant for many.
“The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by, let alone get ahead,” Obama said in his State of the Union address last week. “And too many still aren’t working at all.”
Friday, the president met with CEOs of companies who have pledged to develop initiatives for recruiting and hiring the long-term unemployed a better chance in the hiring process.
Obama also signed an order directing federal agencies to end hiring practices that put the long-term unemployed at a disadvantage and has promised hundreds of millions of dollars that will be devoted to hiring and job training initiatives.
In his Tuesday speech, he also emphasized a goal of restoring an extension of unemployment benefits for those who have been out of a job for more than 26 weeks.
“When you run out of unemployment, you’re desperate,” said Liz McLean, 60, who grew up just north of Duluth, Minn. “If someone hasn’t been laid off, they don’t really understand this whole thing.”
About a quarter of American workers say they lost a job during the recession, according to a 2013 survey by researchers at Rutgers University.
The number of workers unemployed long-term — six months or longer — shot up during the downturn from 1.4 million in early 2008 to 6.7 million in early 2010, and remains historically very high at 4.1 million.
More than half of those who were laid off and eventually found a new job are earning less, the analysis at Rutgers showed.
“For the unemployed, especially the long-term unemployed, they get caught in that vicious downward spiral of wage and salary,” said Carl Van Horn, director of the Heldrich Center for Workforce Development at Rutgers.
A worker’s value to a new company will almost always be less than at one where they’ve worked for several years, Van Horn said. They may not have up-to-date skills, and companies have the freedom to bid down wages.
“This is a buyer’s market, and that buyer’s market has been going on for almost five years now,” he said.
Newly unemployed workers usually come out swinging, expecting to equal the wages they lost and shunning lower-paid work. Six months later, he said, that impulse is beaten out of most folks.
“It completely evaporates after they exhaust their unemployment insurance,” he said.
The McLeans got married and moved to the Twin Cities in 1974.
Bob McLean had a two-year degree in mechanical design and landed a job at what is now Seagate Technology, where he worked for 27 years. Once the couple’s three boys were old enough, Liz McLean earned a couple of two-year computer degrees for herself and landed a job she loved, working on the IT help desk at Fabcon, a concrete company in St. Paul, Minn.
Bob McLean, 65, lost his job first, in January 2009. It wasn’t a huge surprise — he was among the oldest in his department, he said. He took a year of severance, went to the state’s dislocated worker program, rewrote his resume, took classes in computer-assisted design programs, and started looking for jobs.
A month later, Liz McLean lost her job. She worked stints on the IT help desk at Pella Corp. and Mystic Lake Casino. Now she works for a company that sells books to colleges. It’s interesting work in a good department, but then, “every job since I got laid off at that other place has been lower in pay,” she said.
Bob McLean worked a three-month contract at another manufacturer, which wasn’t renewed. Now he drives a school bus in Chaska, Minn. The job starts early and ends late. Bob wishes it paid more, but he gets a kick out of the slow-moving kindergartners with their giant backpacks.
“They’re harmless, but it’s hard to control them on a bus,” he said.
There’s a good reason people who lose their jobs take lower-paid positions: That’s what’s available.
The median hourly wage in the United States fell 2.8 percent from 2009 to 2012 after factoring in inflation, according to analysis by the National Employment Law Project. Some 43 percent of all U.S. job growth in the recovery years of 2011 and 2012 was in the generally low-wage categories of food services, retail and temp agencies.
This is not unusual after a recession, according to research by the Federal Reserve Bank of Atlanta, but it’s also a long-term trend.
The economy has for decades been disproportionately shedding middle-skill jobs that command middle-income wages, researchers at Duke University and the University of British Columbia have shown. The most recent decade was the worst of three bad ones in a row for the middle class. Between 2000 and 2011, the economy shed 11 percent of its middle-skill jobs, according to the researchers’ analysis, while low-level employment increased 16 percent.
“We’re just seeing more of what we’ve been seeing over the last 20 years, but it accelerated over the recovery,” said Mike Evangelist, an analyst for the National Employment Law Project. “The real net job growth has been in these lower-wage occupations, in retail and food services, so I think those jobs are indicative of what’s available.”
People lose earning power after a layoff because they can’t find full-time work, a problem that’s been especially pronounced in this recovery, said Farber, the economist at Princeton.
In every recession since 1980, 12 or 13 percent of people who lost full-time jobs ended up in part-time work. The Great Recession was different, with the share of people ending up in part-time jobs rising to 20 percent.
“The earnings losses are huge, but mostly because the people can’t find full-time work,” Farber said.
Meanwhile, many companies are still cutting wages. During and after recessions, employers try to cut costs without hurting employee morale too much, so they freeze wages, a phenomenon economists at the San Francisco Fed call “pent-up wage cuts.”
“The fraction of individuals receiving no change in their wage has been larger in this recession than in past recessions,” Daly said.
These wage freezes cut into people’s standard of living over time, have been especially severe in this recovery, and have held on longer because inflation is so low, she said.