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The full text of The New York Times.
NYTI provides the full text of articles from the final late edition
of the prestigious American The New York Times.
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Accession number & update
050890920102 920101.
Title
Overhauling Services: The Long, Painful Process -- A Special
Report; Employment in Service Industry, Impetus to Boom in 80's,
Falters.
Source
New York Times, 02 January 1992, Late Edition - Final, section A,
page 1, column 1.
Author(s)
Sylvia Nasar.
Text
For decades, banks, fast-food restaurants, hospitals, law firms,
retail chains and governments -- the so-called service sector --
have been the engine that powered the great American job machine.
In the 1980's, when services added a stunning 21 million jobs and
employed almost four out of five workers, Americans debated
whether service jobs were good jobs or bad jobs, but basically
took the steady growth of services for granted.
No more. Except for health care, the services are in the throes
of a pervasive shake-up very much like the one that racked
smokestack manufacturing a decade ago. The concerted drive to
squeeze costs and improve profits has resulted in extensive cost-
cutting, job freezes, layoffs, consolidations and takeovers. The
storm threatens to last much longer than the recession --
prolonged, very likely, by the wave of white-collar layoffs and
the unusual reluctance among service companies to hire.
Indeed, most economists expect the great American job machine,
even after it gets going again, to run at just half speed through
much of the 1990's.
The consequences are likely to be felt by many, if not most,
Americans for a long time, labor experts say. They expect job
growth in the 90's to be the slowest since the 1950's. Pay,
including benefits, is expected to rise more sluggishly.
Unemployment, now 6.8 percent, is expected to hover above 6
percent for years.
And they predict that job security -- the comfortable expectation
of being able to settle down somewhere for life, at least by
middle age -- may be gone for good.
Lost Security at T.V.A.
"If you got a job here it was probably one of the highest paid in
the valley, it was secure and you could stay until you retired, "
said Robert M. Nimetz, a tough-minded 50-year-old former
draftsman at the Tennessee Valley Authority, the Government-owned
(...)
Professionals Join Unemployed Ranks
Placement experts who try to match executives with job openings
have remarked on the breadth of the cutbacks. "Unlike the early
80's, we're seeing accountants, engineers, lawyers, financial
types, people from all across the spectrum, " said Charles
Albrecht, executive vice president at Drake Beam Morin,
describing some of the unemployed people passing through the
nation's largest outplacement firm.
(...)
Though service company sales have recovered a bit since last
spring, hiring has not. And while service payrolls swelled 4.4
percent in the first 12 months of the early 80's recovery, they
have barely budged since April. Many industries are, in fact,
still trimming. Retailers, for example, are now in their 22d
month of job cuts.
What's behind the belt-tightening? The four basic forces,
economists and executives say, are:
OVEREXPANSION: In the 80's, the services added a stunning 19
million new jobs, $800 billion worth of new technology, 16,000
new shopping malls and three billion square feet of new office
space (nearly as much again as existed in 1980). For Wall Street,
retailers, fast-food restaurants and financial services, that
added up to too much capacity, much of it in the wrong places.
"Large banks went into every town they wanted to be in, " said
James J. Preble who recently retired as vice chairman of the
Fleet/Norstar Financial Group. "We wound up with a branch for
every 2,500 customers. The norm is one branch for every 7,500
customers." Fleet/Norstar, which is based in Providence, R.I.,
acquired the failed Bank of New England last year. "We'll wind up
with fewer banks, " Mr. Preble predicted.
RUNAWAY COSTS: Wages and other costs in services, which grew no
faster than manufacturing costs in the 60's and 70's, shot to the
moon in the 80's. But service companies found they could not
absorb these costs through higher productivity, nor could they
recoup the higher costs through higher prices. "Service companies
were unprepared for the arrival of an environment in which costs
could not easily be passed along to consumers, " said a
commentary by economists at J. P. Morgan & Company.
TECHNOLOGY: From computers to specialized shipping containers,
innovation has created opportunities to increase sales without
adding labor. But it is only now, when companies are under the
gun, that they are really exploiting technology. While much of
the hardware did not pay off in the past, managers are now
learning to use it. Michael R. Zucchini, executive vice president
of Fleet/Norstar, says the potential for consolidating back-
office bank operations has barely been tapped.
In retailing, the same headquarters staff can service nearly
twice as many stores as a decade ago, in part thanks to point-of-
sale computer systems that let marketing managers stay on top of
far-flung sales and inventory trends.
Despite their financial squeeze, service company executives hope
to take advantage of better technology to get them out of their
current bind. The latest Commerce Department survey of capital
spending plans shows that service companies, which barely cut
back on spending on computers and the like during the recession,
plan to increase outlays.
INCREASED COMPETITION: Challenges have come in many guises.
Deregulation of airlines, financial services, telecommunications
and cable television have opened the door to price cutting,
invading of neighbors' markets and wiry new entrants.
"Restructuring is largely due to increased competition, " said
James Brian Quinn, a professor of management at Dartmouth
College.
Waiting to take advantage of these circumstances was a horde of
hungry low-cost, high-quality, customer-friendly powerhouses like
American Airlines, Wal-Mart, State Farm, CNN and Taco Bell. "The
big are definitely getting bigger, " said Randall E. Gebhardt, a
Columbus, Ohio, retail consultant.
Foreign competition has also surged, with strong new global
competitors arising in construction, shipping, travel and half a
dozen other services. While foreign competition in service
industries seems less apparent than in autos and steel and other
manufacturing fields, it is there nonetheless.
Some of the competitive pressure from abroad is indirect. It
comes via cost-conscious American manufacturers, who spend more
on services than they do on labor these days and have to match
foreign rivals on price. Many are pressing their suppliers, from
ad agencies to electric utilities, to lower their prices and keep
a lid on rates.
No End in Sight For Retrenchments
The bind that service companies find themselves in -- and the
radical surgery many are undertaking -- is evident at the
Tennessee Valley Authority, which one executive called "a
bankruptcy waiting to happen." By 1988, after 20 years of rate
increases, large customers, including the city of Memphis, were
threatening to defect.
(...)
Slower Job Growth Through the Decade
Job growth -- even after the economy gets moving again -- could
be the slowest since the 50's, according to the latest long-term
projection of the Bureau of Labor Statistics. Although services
are still expected to create nearly all the new jobs in the 90's,
forecasts call for job growth to be at less than half of the rate
of the 80's. That would not reduce unemployment quickly.
(...)
The Lowest Paid Are Hardest Hit
For now, the pain is being felt most by those who are losing
their jobs or who are working harder because their fellow workers
were dismissed. Hardest hit by restructuring are the young, the
low paid, the least educated: clerks, office workers, cleaning,
security and food workers.
(...)
Graphics title
Photo: "If you got a job here it was probably one of the highest
paid in the valley, it was secure and you could stay until you
retired, " said Robert M. Nimetz, a former draftsman at the
Tennessee Valley Authority, the Government-owned utility that has
now cut its staff. (Rip Noel for The New York Times)
Graphs: "An Expected Shift in Employment Levels by 2005" shows
total employment in all fields from '90 to 2005 and the average
annual rate of change (Source: Bureau of Labor Statistics); "How
Services Trail" shows average annual rates of productivity growth
in manufacturing and services every 10 years from '50 to '90
(Source: A. Gary Shilling & Company) (pg. D4)
Table: "Where Opportunity Will Knock" shows projected employment,
1990 to 2005, for major job categories (Source: Bureau of Labor
Statistics) (pg. D4).
Descriptors
UNITED-STATES-ECONOMY, SERVICE-INDUSTRIES, LAYOFFS (LABOR),
SURVEYS-AND-SERIES
NASAR-SYLVIA
Article type
Special Report.
Publication date
920102.
Occurrences
Accession number & update (1)
Length
18,383 Characters, approximately 11 PC screens.
Label/description Example
AN Accession number 1_: 050890920102.AN.
& update - see Limit options -
TI Title 2_: SERVICE ADJ
INDUSTR$3.TI.
SO Source 3_: PAGE ADJ '1'.SO.
AU Author(s) 4_: SYLVIA-NASAR$.AU.
or 5_: SYLVIA ADJ NASAR.AU.
TX Text 6_: RETAIL ADJ CHAINS.TX.
GR Graphics title 7_: OPPORTUNITY WITH KNOCK.GR.
DE Descriptors 8_: SERVICE ADJ INDUSTRIES.DE.
or 9_: SERVICE-INDUSTRIES$.DE.
AT Article type 10_: SPECIAL ADJ REPORT.AT.
DT Publication date
DATE= Publication date 11_: DATE=19980726
MONTH= Publication month 12_: MONTH=199807
YEAR= Publication year 13_: YEAR=1998
OC Occurrences - Display only -
LE Length - Display only -.
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MONTH Publication month YYYYMM 3_: ..L 1 MONTH EQ 199807
YEAR Publication year YYYY 4_: ..L 1 YEAR WL 1998,1999
UDATE Update date YYYYMMDD 5_: ..L 1 UDATE GT 19990622
UMONTH Update month YYYYMM 6_: ..L 1 UMONTH<199906.
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