Thursday, July 5, 2012

Why Hairdressers Are Secure: Their Jobs Can't Be Exported

Before, during and after the recession, demand for one sort of worker has been persistently stronger: jobs that involve assisting or caring for other people—from fast-food workers to home-health aides to nail polishers.

Demand is strong for personal-service jobs that can't be automated, like nurse's aides and food-prep workers. WSJ's David Wessel discusses the trend with MIT economist David Autor.

These occupations have one thing in common: They aren't easily automated or outsourced abroad. "You can't send people to China or India for a haircut," says Israel Kakuriev, 37 years old, who has been cutting hair in midtown Manhattan for the past 20 years. Nor is there, yet, a robot that can cut hair or hold the hand of an elderly woman with Alzheimer's or do all the chores that flight attendants do.

The U.S. government releases its latest snapshot of the job market Friday morning amid worrisome signs that economic growth is slowing well short of full employment.

But economists see a couple of longer-term trends. Dividing the workforce into high, medium and lower-skill workers, they note that around the world, demand for the most skilled and educated—from engineers to specialized factory workers—has been relatively strong. But globalization and technology have eroded demand for routine middle-skill, middle-wage jobs: In factories, assembly jobs have been eliminated by automation or moved overseas; in offices, tasks once done by humans are done by computers and voice-response software.

Bryan Thomas for The Wall Street Journal
Israel Kakuriev has been cutting hair for 20 years in midtown Manhattan. While companies have squeezed jobs in the past five years, service jobs like haircutters have fared far better.
At the same time, Massachusetts Institute of Technology economist David Autor notes an increase in personal-service jobs—the ones that can't be done remotely from overseas and can't easily be done by machines. To measure this, Mr. Autor and MIT's Daron Acemoglu sliced the U.S. workforce into 318 occupations, ranked by skill and education. Between 1989 and 2007—just before the recession—they found a 5% increase in routinized production, machine-operator and clerical jobs—but a 36% increase in personal-service jobs and a 40% increase in top-of-the-pyramid jobs, such as managers, professionals and finance wizards. 
 This polarization of the job market has persisted. Between 2007 and 2010, the total number of jobs in the U.S. fell by nearly 6%, but the previous pattern held: The number of middle-skill jobs, those most susceptible to automation or offshoring, fell by 12%. The number of high-end, high-education jobs fell by 1%. But despite the recession, there was a 2% increase in personal-service jobs.

Geraldine Arguello, 45, is a nurse's assistant at Colfax Senior Care Assisted Living in rural Raton, N.M., where she prepares meals, assists with dressing and grooming and organizes bingo games.

"People say anybody can do this, but it takes a lot to earn trust," she says. "You're providing mental stability for residents that are swallowing the fact that they're depending on others at this point to get by." The pay isn't great, though. She makes about $10 an hour, occasionally as much as $15 an hour when she works in an individual's home.

More jobs are better than fewer jobs—particularly for those who would otherwise be unemployed. But Mr. Autor cautions: "These aren't going to be high-paying jobs because the skills are quite generic. Anyone can be productive at them in the next day or two. If you had to choose which jobs you'd want to go away, you'd pick these low-wage jobs, not the middle-skill ones."

Luis Mejia, 42, never finished high school, but once made about $80,000 a year at a construction company, operating a vehicle that loads heavy materials onto trucks. That job evaporated with the real-estate bust. "I had a lot of experience, so I thought it would be easy to find the same work, but nobody was hiring," he said.

[image]After substantial reluctance, Mr. Mejia and his wife, Margarita, turned to cleaning houses. "To be honest, when I started doing this, I didn't like it. I was doing it because I had no choice," he says.
Now their business, Margarita's Cleaning Services, cleans 45 to 50 houses a month and has hired its first employee. Rising around 6 a.m. and taking their 16-year-old to school before work, the couple cleans three or four houses a day, six days a week. They charge $80 for a two-bedroom house and $250 for bigger ones. The couple earns about $50,000 a year now, around 60% of Mr. Mejia's previous salary.

The payrolls of brand-name U.S. corporations trace the same pattern: growing workforces in companies that specialize in personal services of all sorts and a decrease in those that have more routine occupations.

Since 2007, Panera Bread Co., PNRA +0.87% a cafe chain, has increased its U.S. workforce by 22,000 jobs, a 50% increase. Chipotle Mexican Grill Inc., CMG +1.25% a fast-food outfit, has added 12,000, a 63% increase. The four largest publicly traded home-health agencies have added 22,000 workers, up 84%.

In contrast, auto maker Ford Motor Co.'s F -0.31% North American payrolls declined by 19,000, or 20%; manufacturer General Electric Co.'s GE -0.24% U.S. workforce declined by 24,000, or 15%, and health insurer Aetna Inc.'s AET -0.80% by 2,200, or 6%.Before the recession, when unemployment was low and workers relatively scarce, wages for personal-service workers rose while wages for middle-skill jobs sagged. Mr. Autor and colleague David Dorn found a 16% increase in inflation-adjusted average hourly wages between 1980 and 2005 for these service workers and a 30% increase for the professionals, managers and upper-end finance workers. That contrasts with a 6% increase for machine operators and assemblers and a 4% decline for production and craft workers.

But the subsequent recession and sluggish recovery produced a glut of workers for these relatively low-skill, personal-service jobs; wages have been depressed as a consequence, Mr. Autor says. And incomes of barbers and some other personal-care workers were squeezed during the recession and immediately after the recession when many consumers cut back spending on easy-to-skip services such as dining out or delayed getting their hair cut.

Regina Gilbert, 46, a mother of two, once made $48,000 doing clerical work in New York City's Administration for Children's Services, but that job disappeared after the Sept. 11, 2001, terrorist attacks when the city turned to outside contractors to save money. She relied on unemployment benefits as long as she could and then performed odd jobs for years.

Now she's working again—checking boarding passes at New York's John F. Kennedy International Airport and making $7.25 an hour without health benefits. Commuting from Brooklyn takes her two hours a day, and the transportation costs take a significant slice out of her take-home pay.

"It is fulfilling," she says, "but every day I look at the money I make and the agony that I'm going through. I'm standing on my feet all day." 

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