The anguished cries can be heard at pink slip parties from Silicon Valley to Silicon Alley.
What, no more Kate Spade handbags?!
The fall can be hard after making so much so quickly. But for future laid off dot-commers, the choice of whether to accept a low-paying job or hold out for something meatier may be easier.
In a policy brief titled "A Prescription to Relieve Worker Anxiety," a pair of economists suggest that the U.S. government supplement the incomes of downsized workers who are forced to take lower-paying jobs.
A companion to unemployment insurance, wage insurance benefits would kick in the day a person is laid off and would last for two years, according to the proposal. Benefits would be capped at around $10,000 per year.
Wage insurance would ease the pain, real and imagined, that naturally accompanies times of economic turbulence caused by new technology, stock market nosedives, and other sordid factors, like free trade.
Unlike unemployment checks, these benefits would make it more attractive to head back to work, by enabling people to accept lower-paying job offers. Also, because every day spent on the dole is one less day of wage-insurance benefits.
"The idea has been kicking around for 15 or 20 years. It’s been flying under the radar," said UC Santa Cruz economics professor Lori Kletzer, who wrote the proposal with Robert Litan, director of the economics studies program at the Brookings Institution.
Only recently has it gained any clout, and it’s not rocket science to see why. Pink slips are being handed out by the thousands, and the economy is teetering on the verge of a full-blown recession. Politicians are scrambling for a solution.
"The old model where you just paid people unemployment insurance doesn’t cut it anymore," said Allan Mendelowitz, former executive director of the Congressional Trade Deficit Review Commission.
Medelowitz argues for programs that recognize flux in technology, trade and consumer tastes, as well as the need for workers to be constantly upgrading their skills -- something that often requires them to take a lower-rung position while they get up to speed.
It was one of the few policies that the Congressional Trade Deficit Review Commission agreed on when it presented its final report to Congress last November.
"I’ve talked to folks on the Hill and there is interest in the fact that a bipartisan commission that agreed on little could agree on this," Mendelowitz said.
A senator's aide who specializes in trade policy agreed.
"It's definitely in the germinating stage," said the aide, speaking on condition of anonymity. "The idea has some momentum. People are looking for new ideas and this is attractive." He added that the plan had good intellectual and bipartisan support and that it came at a good time.
Even Federal Reserve chairman Alan Greenspan is into the idea, or at least some version of it. Alluding to "wage insurance" in his April 4 remarks on free trade to the Senate Finance Committee, he said, "In the end, economic progress clearly rests on competition. It would be a great tragedy were we to stop the wheels of progress because of an incapacity to assist the victims of progress.
"Our efforts should be directed at job skills enhancement and retraining -- a process in which the private market is already engaged -- and, if necessary, selected income maintenance programs for those over a certain age, where retraining is problematic," Greenspan said.
Of course, political support is all well and good but what most taxpayers want to know is how the heck Uncle Sam plans to pay for all this.
The proposal doesn't talk about where the money will come from, just how much it will cost -- around $4 billion.
Kletzer and others say the federal surplus is one possible source, as is using the money that this program would save in unemployment insurance. Either way, it would come out of American’s paychecks, which they might not mind if they felt the money were going to a working-class Joe who lost his factory job.
But a laid-off dot-com Chandra from creative? That’s a hard sell.
For better or worse, the proposal may be years from becoming reality, making it a case of too little too late for fresh victims of this latest slowdown. Even if it were around today, Silicon Valley recruiter Susan Flesher is skeptical that it would help much in the tech arena.
"For many of these people the base (salary) is not the key component to their compensation. There are significant bonus programs and trying for equity in the stock," Flesher said.
Plus, a stipulation in Kletzer’s proposal requires a person to have held their previous job for two years to be eligible for wage benefits.
"If there has a been a lot of mobility across dot-com firms, a smaller share of those dot-com workers would be eligible," Kletzer said.
At the same time, Flesher concedes, people are starting to "play it a lot more guarded. We had a lot of people get aggressive and greedy. They really broke a lot of rules."
So wage insurance may be just the thing to have in place when the next recession rolls around.
