The tide is turning on the professional class. In prior economic contractions, it was usually the ... [+]
A steady flow of layoff announcements targeting professionals working in tech, Wall Street, media and other sectors could signal the beginning of a white-collar recession. The downturn in the economy is changing the worker-employer dynamic. Companies, after contending with the Great Resignation and consequent labor shortage, are now gaining the upper hand.
Bob Iger, the former and now once-again CEO of Disney, made one of his first orders of business to bring back workers to the office four days a week starting March 1. Salesforce co-CEO Marc Benioff chastised employees in a Slack message complaining that the company’s newest hires aren’t being productive, according to his standards. Starbucks’ interim CEO Howard Schultz was displeased that employees disregarded his return-to-office request and is now requiring office workers to return for three days a week
The tide is turning on the professional class. In prior economic contractions, it was usually the blue-collar and front-line workers who bore the brunt of job losses. This time, it's different. Highly compensated, white-collar professionals are currently the most impacted by layoffs.
The Change In Power Dynamics
During the pandemic, employers pandered to their workers, as it was exceedingly difficult to recruit, onboard and retain people. Record-high inflation, rising interest rates, China’s restrictive Covid-19 policies and other factors contributed to a more challenging environment. Now, business leaders are focused on reigning in expenses, cutting costs and letting go of employees.
Even the best-run companies face challenges in swiftly changing economic environments. In a letter to employees, Salesforce, the biggest private employer in San Francisco, announced that it was laying off 10% of its approximately 80,000 workers. Benioff also questioned why the subscription-as-a-service tech giant was facing “lower productivity” from its newly hired employees.
He raised rhetorical questions, such as, “Is this a reflection of our office policy? Are we not building tribal knowledge with new employees without an office culture? Are our managers not directly addressing productivity with their teams? Are we not investing enough time into our new employees?”
At Starbucks, Schultz asserted that the global coffee chain should remedy the unintended consequences of remote work. He contends that the company is losing the art of collaboration, doing work in silos prevents actual prioritization and his employees are losing their connection with a shared mission by not being together.
Iger mandated Disney employees to work in-office four days per week, saying "in a creative business like ours, nothing can replace the ability to connect, observe and create with peers that comes from being physically together.”
The Shift In Fortunes Between Blue And White-Collar Workers
According to the Wall Street Journal's reporting of the recent jobs report, hospitality, leisure, manufacturing and retail laid off fewer workers than white-collar workers from September to November compared to a year earlier.
Average downsizings in the financial and insurance sectors from September to November nearly doubled since the same time last year. Real-estate layoffs increased by more than 20% over the same period, and by 14% in the information-technology sector. Job listings on Indeed.com for human resources and talent acquisition roles were down by about 36% last month from a year earlier.
The Wall Street Journal predicts that blue-collar workers stand a better chance than white-collar professionals.
Jason Calacanis, a venture capitalist and the host of the All-In Podcast, tweeted about the white-collar recession, “...The white collar recession is very real [and] it will increase.”
It doesn’t look like the prospects for white-collar workers will improve anytime soon. The World Bank cut its global growth forecasts and foresees a worsening in economic conditions, CNBC reported. According to the World Bank’s latest Global Economic Prospects report, conditions could cause the third-weakest pace of growth in nearly three decades, ranking up with the global recessions caused by the pandemic and the global financial crisis.
The most recent Conference Board survey indicated that most executives don’t foresee more robust economic growth in the near term. More than 50% of CEOs worldwide and 60% of U.S. CEOs anticipate a lackluster 2023. On a positive note, the report shows that the executives feel there will be a pick-up in economic growth by the end of the year or into mid-2024. The chief executives are concerned over labor shortages and talent retention, once again showing how the current downturn strikingly differs from past tough times.
Despite the belt-tightening measures, old habits are hard to kick. Despite Goldman Sachs' announcement to lay off around 3,200 workers, CEO David Solomon and other top executives were questioned over the costs of using private jet trips, according to the Financial Times.
