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Blue or white collar: who will future recessions affect most?

12/6/2022

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Economists are debating whether we're anticipating a recession or if it's already here. Regardless, one thing is certain: it's not going to be like any other recession we've seen before. Unemployment is at a historic low and job vacancies number in the hundreds of thousands. Employers won't be cutting filled jobs but instead putting a freeze on filling empty ones.

Which group of workers will bear the brunt? And what will this mean for employers and business owners? Let's investigate:

Previous trends in unemployment

Historically, blue-collar workers (mostly manual laborers and tradespeople) have suffered the most as a result of recession lay-offs. During the decade-long Great Depression (1929-1939), people were hardest hit working in the economic primary sector (agriculture, forestry, fishing, mining and logging), followed by workers in construction and heavy industry.

Of course, the 1929 Wall Street Crash that precipitated the Depression affected white-collar workers. However, the devastating effects of the economic shock were most visible in trades, fields and professions that require manual labor.

The future of unemployment during recessions

The current recession — and probably many other recessions to come — is expected to be vastly different. As it stands, office workers, especially middle management, are anticipated to be the most adversely affected by a continuous economic downturn. There have been massive dismissals at large corporations (mostly in the tech industry) which could very well spell disaster in other sectors.

Why is this? The simple truth is that office workers tend to earn more than manual laborers. Reducing or altogether cutting their larger salaries is the easiest way to minimize overhead expenses. As some experts have noted, it's somewhat reminiscent of the recession that rocked the United States during the early 1990s. It's predicted that some businesses will turn some of the more redundant jobs into part-time positions to cut down on costs.

Further, while there may not necessarily be a surplus of desk jockeys, managers and executives, there's a massive shortage of blue-collar workers. In plain terms, companies can't afford to let their laborers go when they don't have enough to begin with. The rise of automation also means that many office jobs will soon be rendered obsolete if they haven't already.

What it means for business leaders

But are white-collar lay-offs the wisest financial decision for businesses to make? The COVID-19 pandemic taught us essential workers such as grocery store cashiers and clerks, cleaning staff and tradespeople (such as. electricians and plumbers) are indispensable.

By contrast, the economy largely survived lay-offs in other roles higher up the business hierarchy. These jobs span banking and financial services, real estate and entertainment. Many of these positions were filled not too long before the pandemic struck, so it's largely unclear what difference they've made to the economy and, therefore, what impact their loss will have.

Ultimately, only time will tell if laying off the so-called laptop class will be the best course of action.

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