The Disappearing White Collar Worker: The Jobs That May Never Come Back

For generations of Americans, corporate work has been a path to steady prosperity. But not anymore.

The jobs lost in a series of months of layoffs in white-collar jobs, caused by over-hiring and rising interest rates, may never return, corporate executives and economists say. Companies are rethinking the value of many white-collar jobs as part of what experts predict will be a permanent shift in labor demand that will disrupt the working lives of millions of Americans whose jobs will be lost, reduced or revamped, in part through the use of artificial intelligence.

“We may be at the peak of the need for knowledge workers,” said Atif Rafik, former chief digital officer at McDonald’s and Volvo. “We just need fewer people doing the same thing.”

Long after robots began taking manufacturing jobs, AI is now reaching the upper echelons—accountants, software programmers, human resources specialists, and lawyers—and is merging with an unrelenting pressure on companies to operate more efficiently.

Meta Platforms (Facebook) CEO Mark Zuckerberg told employees after the latest round of layoffs at Facebook’s parent company that many jobs will not return because new technologies will allow the company to operate more efficiently. IBM Corporation CEO Arvind Krishna recently said that the company can stop some hiring to test what kinds of back office jobs can be done with the help of AI. Executives in many industries say they expect the new technology to expand some of the existing roles, and change what people do on the job. Artificial intelligence could enable workers to contribute better to their companies by doing more meaningful work, said Rafik, author of a new book on management.

An increase of 150 thousand white-collar unemployed in 2022

For the year that ended in March, the number of white-collar workers rose by about 150,000, according to an analysis by Employ America, a nonpartisan research group. This included workers in professional services, management, computer professions, engineering and scientists.

“I can’t think of any job that in itself is similar to artificial intelligence,” said Rodney McMullen, CEO of the Kroger grocery chain, which has approximately 430,000 employees. “I can think of many jobs that are affected by AI.”

This underlying dynamic has been accelerated by the excessive recruitment of recent years. Company executives claim that they have become burdened with bloated management layers that slow down decision-making. Retail chain Gap said in April that the new round of corporate job cuts would also trim what has become an inefficient corporate bureaucracy.

Lyft’s new CEO, David Richer, told investors this month that the ride-hailing company has cut the number of management layers from eight to five. Lyft said in April it would eliminate about 1,000 white-collar jobs in its latest round of layoffs. The flattened organizational structure means Lyft ” can innovate faster,” said Richer.

Jobs go through ebb and flow cycles. In previous downturns, managers pledged to persist in efficiency efforts, only to renew or increase the number of jobs when business conditions improved. Many executives say the forces at work now indicate that this time is different.

In previous periods when higher interest rates sent the US economy into recession, job losses were often led by industries most sensitive to interest rate changes, such as manufacturing and construction. “We don’t seem to be seeing that right now. It could be that the structure of the economy has changed,” said Preston Moy, an economist at Employ America, which studies job losses in white-collar occupations.

“The real question is: the Fed raises interest rates and softens the economy, where is this going to manifest itself?” said. The evidence points to white-collar jobs, he said.

Companies focus on retaining blue collar workers

After 14 months of interest rate hikes by the Federal Reserve, job openings fell to their lowest level in nearly two years in March, the most recent month of Labor Department data. Layoffs in the information sector increased in March by 88% compared to a year earlier and increased by 55% in finance and insurance, the data shows. In the field of production, layoffs increased by 25% compared to the corresponding period.

Companies are currently focused on retaining blue-collar workers — restaurant servers, warehouse workers, drivers and the like — who remain in short supply, according to economists and human resources experts. For C-suite executives under pressure from investors, this situation exposes middle managers and other white-collar workers to layoffs.

Whole Foods Market and Walt Disney have announced layoffs in recent weeks that have hit corporate staff hard as they cover customer service jobs like grocery clerks and two-hour theme park workers. Retail workers, including salespeople and cashiers, were among the most in-demand jobs in the first quarter of the year, according to the job site LinkedIn, along with nurses and drivers.

“Companies are coming to the realization that they’ve been hiring too much in the middle,” said Nick Bunker, an economist at job site Indeed. “They are shrinking.”

The number of people actually employed and the number of hours worked in white-collar sectors such as professional services, medical and veterinary positions decreased at the end of April compared to January, according to data from Homebase, which provides software services to small businesses for hourly scheduling of employees.

sudden fall

Colton Pace, CEO of Ownwell, an Austin, Texas-based property tax analytics firm, said he has been staffing more open positions with temporary contractors to give the startup flexibility in an uncertain economy. He also predicts technology will soon perform more tasks at the company. “I want to be a little more careful in the way we recruit,” Pace said. “Plus, it makes more sense because we’re not sure. Some of these roles will be automated.”

A year ago, roughly 15% of the company consisted of contractors or seasonal workers. These employees now make up a quarter of Owenwell’s workforce of approximately 85 people. Pace said he can envision how artificial intelligence and other tools will eventually take over a larger share of customer support, operations and sales work.

There is no clear definition of a white-collar worker in the government data. The term generally refers to people who work in offices and have a higher education, such as a bachelor’s degree or a degree from some college. In recent decades, hiring in management and professional jobs has rapidly outpaced other categories. The number of employees in the fields of management and expertise has increased by almost 150% in the last 40 years, and by almost 36% since the end of the 2007-09 recession, according to the Ministry of Labor. By comparison, service occupations such as bookkeepers, child care workers and casino workers have risen 72% since 1983, the earliest data available, and 3.5% since June 2009.

Over the years, higher demand for skilled workers and higher wages for highly educated workers have deepened the economic gap with blue-collar workers. However, following the peak of the coronavirus pandemic, wages rose fastest among low-income earners, reducing the college wage premium and reversing about a quarter of the increase in wage inequality since 1980, according to a study by economists including David Autor of the Massachusetts Institute of Technology.

Payroll data from more than 300,000 small and medium-sized businesses showed that wages for new hires fell overall in April from a year ago, but fell fastest in white-collar occupations such as finance and insurance, according to Gusto, a maker of payroll software, benefits and human resource management. It rose most rapidly in services and blue-collar industries such as tourism, construction and recreation, Gusto found.

Digital intelligence

As companies strive to cut costs, some employers have said that middle managers will have to give up their teams and go back to being “regular” workers. Others, including McDonald’s, have asked workers to accept reduced compensation if they want to stay with the company. Artificial intelligence is also expected to completely eliminate some jobs. IBM’s Krishna has said in recent weeks that he can expect about 30 percent of IBM’s roughly 26,000 non-direct service roles to be replaced by automation or artificial intelligence over a five-year period. An IBM spokesman said the company is still hiring for thousands of jobs. “There is no sweeping ‘pause’ in recruitment,” he said. “IBM is seriously considering and reviewing its recruitment.”

The Ministry of Labor estimates that of the 20 professions that will create the most jobs by 2031, about two-thirds will be blue-collar jobs that pay around $32,000 a year, including home health care and personal care workers, restaurant cooks, fast food workers, waiters and truck drivers.

The occupations with the best growth prospects that require a college degree include software developers, operations managers, and registered nurses. These jobs pay around $100,000 a year and are expected to be more protected than other white-collar jobs from AI conversion.

Some employers already understand exactly how much white-collar workers they will need in the future. McLean, Wash.-based business and government consulting firm Guidehouse, which employs about 16,500 people, expected to triple its headcount in the coming years to reach its goal of tripling its revenue to $10 billion, CEO Scott McIntyre said. But not anymore, he said. .

McIntyre expects that with artificial intelligence and increased automation, Guidehouse may need to hire 40,000 people instead of 50,000 to reach its growth target. “The smarter you are with enabling technology and technology that creates productivity, the smarter you can be about hiring,” he said.