EconSouth (First Quarter 2006)
EconSouth (First Quarter 2006)
The Changing of the Guard in Georgia’s Workforce
As Georgia’s economy seeks to continue increasing its productivity, a few longtime stars in Atlanta might be playing a diminished role. Where will workers turn to find jobs as large, old guard firms cut payrolls?
So far, the 21st century has not been particularly kind to Georgia’s workforce. The number of people working in the state peaked at 3.95 million during 2000, then declined for three straight years. Georgia’s total nonfarm employment nudged upward in 2004 and climbed even more in 2005, to a level—3.99 million—slightly higher than in 2000.
But economic forecasters expect more growth in 2006, fueled in part by the leisure and hospitality industries. Still, Georgia’s economy faces challenges, particularly in the important metropolitan Atlanta area. Metro Atlanta, which includes 28 counties, accounted for 59 percent of the state’s employment and 61 percent of economic activity in late 2005, according to the U.S. Bureau of Labor Statistics (BLS) and the U.S. Bureau of Economic Analysis (BEA).
The problem is that some of Atlanta’s largest employers have shed thousands of jobs in the past year and continue to cut. That list includes Delta Air Lines Inc., BellSouth Corp., and automobile assembly plants operated by Ford Motor Co. and General Motors Corp. (GM).
In addition, four military installations are slated to close, three in metro Atlanta and another in Athens. The U.S. Defense Department’s Base Closure and Realignment Commission estimates that those closings could eliminate a maximum of 11,964 jobs, assuming no economic recovery occurs. However, Georgia expects a net gain of about 4,000 military jobs over the next several years mainly because of expansions at Fort Benning in Columbus.
Big companies make big cuts
Delta Air Lines, for decades one of the state’s biggest employers, has lost $10 billion since Sept. 11, 2001, and is shrinking in the wake of its September 2005 bankruptcy filing. Concentrated in Atlanta, Delta’s Georgia workforce has dwindled from 32,000 in early 2001 to about 20,000 people at the end of 2005, according to various media outlets and the Georgia State University (GSU) Economic Forecasting Center. Delta has also reduced pay by 7 to 10 percent for most front-line employees, more for high-salaried officers.
According to Delta’s third quarter 2005 10-Q filing with the Securities and Exchange Commission (SEC), the company’s restructuring plan may eliminate another 7,000 to 9,000 jobs companywide—not just in Georgia—by the end of 2007 in addition to the 6,000 to 7,000 nonpilot job cuts announced in November 2004. About a third of the carrier’s employees live in metro Atlanta. All told, these salary cuts and layoffs will be roughly equivalent to the Atlanta economy losing 15,000 jobs, the GSU forecasters figure.
Even more job cuts will come in the automotive industry as both of Georgia’s assembly plants close by 2008. Last November, GM announced plans to shut its Doraville minivan plant, probably in 2008. Ford Motor Co., which began building Model As in downtown Atlanta in 1909, also plans to close its plant in Hapeville, just south of Atlanta. The factory, which assembles the Taurus, will shut down perhaps as early as the fall of 2006. Part of sweeping restructuring plans at the beleaguered U.S. automakers, those two closings combined will wipe out some 5,200 jobs.
Those moves continue a long decline in Georgia’s manufacturing jobs. Since 1997, the state has lost nearly one of five, or about 104,700, of its factory jobs, according to the BLS.
Jobs in durable goods manufacturing have held steadier than those in nondurable manufacturing, and the state added manufacturing jobs in the third quarter of 2005 for the first quarterly increase since 1999.
Helping to offset the job losses at the Ford and GM factories, Kia, a division of the South Korean automaker Hyundai, announced in March that it will build an assembly plant in West Point, Ga. The plant is expected to ultimately employ 2,500 people and generate an additional 2,000 jobs at suppliers, according to various published reports.
Like Ford and GM, BellSouth is trimming its workforce amid an intensely competitive and changing business environment. Metro Atlanta’s and Georgia’s second-largest employer for many years, BellSouth announced in December that it will eliminate 1,500 management positions by this April. Before those cuts, BellSouth employed approximately 19,500 people in Georgia, down from 28,000 in 2002, according to the Atlanta Business Chronicle’s Book of Lists. And BellSouth’s headquarters staff in Atlanta is expected to shrink further. In March, the company announced plans to be acquired by AT&T in a deal valued at $67 billion.
As the telecommunications industry has become increasingly competitive, BellSouth, like many of its rivals, has cut costs across its operations. Since the beginning of 2001, the company has reduced its workforce companywide by more than 17,000 employees, or 22 percent, according to the company’s SEC filings. It does not sound like the telecommunications business will get easier any time soon: “Maintaining current operating margin levels going forward will be challenging,” the company said in a September 2005 SEC filing, “as competition intensifies and we are forced to achieve continued increases in productivity.”
Not all jobs are created equal
Many of the jobs being eliminated are held by relatively older, long-tenured workers, noted economist John Robertson, vice president and head of the Federal Reserve Bank of Atlanta’s regional economic research team. So it will likely be difficult for many of the displaced workers to find similarly lucrative jobs in the short term.
For example, production workers in automobile manufacturing plants nationwide in 2001 earned an average wage of $27.85 an hour, while their counterparts in light truck and utility vehicle plants made $29.93 an hour, according to the BEA. Those figures are substantially higher than Georgia’s average hourly manufacturing wage—$14.58 in December 2005, according to the BLS.
The Delta Air Lines jobs also pay well. GSU’s Economic Forecasting Center uses what it calls a very conservative estimate of $95,000 a year on average for the positions being cut. Meanwhile, BellSouth’s SEC filings before its agreement to be acquired by AT&T indicated that the company expects to save about $175 million a year by eliminating 1,500 management jobs. That suggests average salary and benefits of about $116,667 per position. All those job cuts will not be in Georgia, but 42 percent of BellSouth’s managers are in Atlanta.
“The loss of those jobs is significant,” said Robertson, referring to the reductions at the various employers. “The $64,000 question is, what’s going to replace them?”
At least for now, the bulk of the state’s new jobs appear unlikely to offer comparable pay to those going away. The hospitality and leisure sector has been creating jobs at a healthy clip, but those are primarily lower-paying positions. Education and health services has produced the fastest percentage job growth—3.7 percent a year, according to the BLS—of any industry category in Georgia over the past five years. But those jobs also tend to offer lower compensation than the managerial and manufacturing jobs that are disappearing.
Answers for the future?
The information technology sector could emerge as a source of high-paying jobs as it continues to recover from the postboom downturn that hit Georgia hard, Robertson said. That is good news because Atlanta Fed researchers have found that in Georgia, information technology (IT) specialists such as software developers and network administrators tend to earn higher salaries than non-IT workers, even when working outside the technology industry. On average, their skills continued to be in higher demand than those of people in nontechnological fields, the Fed study concluded. In other words, those skills are more transferable to new jobs, Robertson said.
Even amid the challenges, Georgia’s employment base has grown, albeit barely, in each quarter since the middle of 2003. By the end of 2005, the state finally recouped all the jobs lost during the 2001 recession, spurred by growth in health services, education, and leisure and hospitality.
To remain competitive in an increasingly global economy, Georgia must focus on how it will add value to the overall economy, Robertson pointed out. One way that is happening is that many information technology workers who were drawn to the state during the technology boom have stayed. Despite the subsequent IT bust, their skills are in demand in industries that do not produce IT goods and services. The state also must attract growing industries that require a skilled workforce, such as the Kia auto plant, he added.
To be sure, Georgia faces challenges as some of its longtime employers shrink or are acquired. Yet the state’s economy has continued to expand, adding about 100,000 jobs in 2005. “Without a doubt Georgia faces many new challenges in the years ahead,” Robertson said. “But the real challenge will be turning these challenges into opportunities.”
This article was written by Charles Davidson, a staff writer for EconSouth.