Workers lose while bosses gain as downturn drags on

By David J. Lynch

The U.S. economy's anemic rebound from the worst recession in six decades is pummeling workers while leaving bosses almost unscathed, and neither President Barack Obama nor Republican challenger Mitt Romney is captivating these disaffected voters five months before the national election.

Between 2007 and 2010, working-class people -- those in nonprofessional occupations who lack college degrees -- saw their median earnings fall 4.6 percent, according to a study of U.S. census data prepared for Bloomberg News by Sentier Research of Annapolis, Md. Over the same period, earnings for college-educated professionals or managers rose 1.9 percent.

Working-class males were hit especially hard, with median annual earnings falling 6.6 percent, more than three times the 1.9 percent loss suffered by all employees, according to the study, an effort to quantify the recession's impact on labor.

"These are the sort of guys Bruce Springsteen would sing about," said Paul Ashworth, the chief U.S. economist at Capital Economics Ltd. "These guys have had a bad time."

The struggles of working-class Americans are having an impact on the presidential election race, shaping discussions on trade with China, immigration policy, and the automobile industry bailout. Republican Mitt Romney is seeking to capitalize on workers' dissatisfaction in his bid for the White House, while President Barack Obama tries to brand his rival as a financier focused more on profits than people.

In 2008, white, working-class voters went for Arizona Senator John McCain over Obama by a margin of 58 percent to 40 percent.

Yet now both presidential candidates' appeals to this group are handicapped by biography and personal style. Harvard-educated Romney, a former private-equity executive who is worth as much as $250 million, has drawn criticism for saying he likes "to fire people." Obama, another Harvard graduate with a taste for arugula, is shadowed by his 2008 comment that "bitter" working-class voters "cling to guns or religion."

"Neither of them is going to resonate very well with the working class," says Sean Trende, the author of "The Lost Majority," an account of both parties' electoral challenges.

According to the Sentier analysis, median earnings for professional males rose to $68,820 in 2010 from $68,558 three years earlier. Over the same period, earnings for working-class males fell to $32,677 from $34,981.

Working-class individuals of all races suffered income reversals between 2007 and 2010. With Obama, the nation's first black president, expected to capture an overwhelming majority of minority voters, much of the political skirmishing will be over the white vote.

For Romney, mobilizing blue-collar victims of the recession is essential to victory in November. In 2008, non-college-educated​ whites -- key players in every successful Republican presidential campaign for four decades -- accounted for 39 percent of the electorate, exit polls showed. And white working- class voters potentially make up more than half the electorate in states such as Ohio, Minnesota, Wisconsin and Michigan.

"This is his base. He needs to turn them out in large numbers," says Henry Olsen, a political analyst at the Republican-leaning American Enterprise Institute in Washington. "He needs large numbers and large margins."

Romney's promises to designate China as a currency manipulator and crack down on illegal immigration are pitched at these voters. Obama, trying to minimize the scale of his working-class losses, counters with reminders of the administration's financial support for General Motors and Chrysler and attacks on Romney's tenure as chief executive officer of private-equity firm Bain Capital for having eliminated jobs at some companies.

Working-class households, lacking a financial cushion, require steady employment, Olsen says. "What Obama is doing is striking at exactly that fear, saying, 'You need a job to survive; this guy doesn't care about you getting one,'" he adds. "That's the message."

Three years after the recession's end, the dueling appeals find the working-class straining to regain lost ground. Globalization has placed millions of American workers in competition with lower-paid laborers in other countries while employers increasingly place a premium on education, even for many factory jobs.

In May, 8.1 percent of workers with a high school degree were unemployed compared with 3.9 percent of college-educated Americans, according to the Bureau of Labor Statistics.

Standing in front of Columbus Castings in Columbus, Ohio, John Snyder, 44, says he wishes he'd attended college after graduating from high school. "I'd probably be better off," he said before a crane-operator shift at the plant, once run by President George W. Bush's great-grandfather.

The former Democrat says he's undecided between Obama and Romney. "I don't agree with either side anymore," he adds. "All they do is bicker and fight."

Even before the end of the housing boom tipped the economy into recession in December 2007, these workers had been under assault by economic forces over which they have little control. Since 1980, job growth has been weakest in the mid-skill occupations that once enabled workers without college degrees to earn a decent income, according to a 2011 Federal Reserve Bank of New York analysis.

Likewise, from 2007 to 2010, the largest U.S. employers created three times as many jobs overseas as in the U.S., according to the Bureau of Economic Analysis. U.S. multinational corporations added 600,000 jobs at their foreign affiliates during that period compared with 200,000 at home.

Almost half of all Americans describe themselves as members of the working class. In the 2010 General Social Survey, a government-funded questionnaire that began in 1972, 47 percent of respondents said they were in the working class while 42 percent chose middle class. So the economic distress of this segment of American society carries political and financial implications.

Still, economic changes have shrunk the white, blue-collar vote, which in 2008 was 15 percentage points smaller than in 1988, according to Ruy Teixeira, an analyst at the Century Foundation in Washington. In 2008, voters with at least a bachelor's degree were four times as likely to vote as those with a high school degree, according to a May 2010 Census Bureau report.

Working-class financial stress is reflected in the operations of consumer-oriented companies. Wal-Mart Stores Inc. (WMT) last fall brought back a layaway program to help customers defer spending.

Amid high unemployment and flat-lining incomes, consumers' heightened cost-consciousness has lifted shares of discount retailer Family Dollar Stores Inc. (FDO) Since the December 2007 onset of the recession, its shares have posted an annual 26.2 percent gain compared with the Standard & Poor's 500 Index annualized loss of 3.2 percent.

"Our core customer is stressed and continues to be stressed," Howard Levine, chief executive officer of Family Dollar Stores, told investors in a March 28 earnings call.

Standing in the parking lot outside a Family Dollar store in Manassas, Virginia, Vicki Tucker agrees. Asked how the last few years have been for her family, Tucker spits out a one-word answer: "Struggling."

Tucker, a school bus driver, and her husband, who works in construction, scrimp to keep their son in college. She resents what she sees as the president's support for "the illegals" at the expense of working Americans.

"I'm voting for Romney," Tucker says, loading groceries into her white Jeep. "It's not what I like about him. It's what I don't like about Obama."

Between 2005 and 2010, income losses were especially severe for white working-class males in states scarred by the housing bust or erosion in manufacturing. The roster of hardest-hit states looks like an electoral college road map to the White House.

In Michigan, ravaged by the auto industry's near collapse in 2008, the income loss was almost 17 percent, according to the Sentier Research analysis. In seven other states -- Oregon, Florida, California, Ohio, Nevada, Indiana and Arizona -- white male workers lost about 10 percent of their annual earnings.

"Opportunities have really disappeared. It's more a matter of trying to keep what you have," says Clay McNeely, 28, a third-generation electrician in Mims, Florida.

"It seemed that at one point in the 2000s that everywhere you looked there was a construction site and everything was booming," he adds. "Now, it certainly feels like only the most educated and most skilled people can even manage to hang on to these jobs part time."

Exceptions to the downward trend were energy-rich states such as North Dakota, where male working-class earnings rose almost 19 percent, and Louisiana, which saw an 8 percent gain.

The Sentier Research study was prepared for Bloomberg by Gordon Green and John Coder, two former Census Bureau officials. They divided the nation's 107 million 25- to 60-year-old wage and salary workers into two groups: those without a college degree working in nonprofessional occupations, and professionals, including college-educated managers.

Income data came from the bureau's annual American Community Survey of about 3 million households. State-level detail was available only for 2005 and 2010.

Ashworth says the working class has likely regained little lost ground since 2010, even though nonfarm payroll employment has increased for 20 consecutive months.

"I haven't had a pay raise in almost five years," said Tim Kirk, 47, an installer of home audio-video systems in Gainesville, Virginia.

The percentage of high school graduates employed is 54.7 percent, virtually unchanged since the end of 2010 and well below the 61 percent peak in July 2006. Economist Dean Baker of the Center for Economic and Policy Research in Washington blames weak demand for goods and services, arguing that the "people who disproportionately bear the brunt of that are lower-end workers: retail clerks, assembly line workers."

In Gainesville, about five miles from the site of two major Civil War battles, Kirk says his employer laid off almost two- thirds of his audio-video system installers when the housing bubble burst.

As the stock market has struggled to recover, Kirk's 401k savings account has lost about $10,000.

"I don't think I'll ever be able to retire. It's just impossible. The cost of living's too high," he says. "I'm way behind where I should be."

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