Minimal wage pressure ahead for contact centers, but also minimal growth

Published by reposted only Date posted on December 28, 2009

Contact center executives concerned that a recovering economy may force up wages and benefit costs and staff turnover thanks to competition for labor from other employers need not worry about it.

They do have to be concerned that there will be a slower uptick for their services and renewed pressure by senior management to squeeze costs out.

A Dec.26 Associated Press (News – Alert) article reports that most economists say it could take at least until 2015 for the unemployment rate to drop down to a historically more normal 5.5 percent. And with the job market likely to stay weak, some also foresee another decade of wage stagnation.

There are 15.4 million people unemployed and the jobless rate is 10 percent, said the story. People out of work at least six months number a record 5.9 million. At the same time more than 7 million jobs have vanished. Further contributing to high unemployment is the likelihood of more people competing for jobs, baby boomers delaying retirement and interest rates edging higher.

The story said the Federal Reserve reported that the jobless rate could remain as high as 7.6 percent in 2012. And it would take two or three years after that for the job market to return to normal. Some analysts think the jobless rate might have already peaked at 10.2 percent in October. But most economists predict the rate will peak at around 10.5 percent by the middle of next year.

At best, it could take until the middle of the decade for the nation to generate enough jobs to drive down the unemployment rate to a normal 5 or 6 per cent and keep it there. At worst, “that won’t happen until much later – perhaps not until the next decade,” said the article. All this, would come “after a decade that created relatively few jobs: a net total of just 464,000. By contrast, 21.7 million new jobs were generated between 1989 and 1999.

The story cited economist David Levy (News – Alert), chair of the Jerome Levy Forecasting Center, who said the U.S. faces a new era of chronically high unemployment, averaging 8 percent or more over the next decade.

The “New Abnormal,” Levy called it.

The AP story cited other contributing forces — businesses squeezing more work from employees they still have and relying more on part-time and overseas help — have intensified in joblessness high. Record-high federal budget deficits and the threat of inflation could drive up interest rates, which could hobble growth and restrict job creation.

“It will be the mother of all jobless recoveries,” predicted economic historian John Steel Gordon.

The high now and in the future unemployment rate will further suppress wages, whose increases have been minimal even in the past boom. Median household income, adjusted for inflation, fell to $50,303 in 2008, according to the U.S. Census, as reported by the AP.

That’s down 4 percent from a peak of $52,587 in 1999, when incomes were bolstered by stock gains from the dot-com boom.

That bubble burst in 2000, said the story. Since then, workers have seen meager wage gains. Adjusted for inflation, wages grew about 13 per cent in the past 10 years – the slowest pace in five decades, according to calculations made by Scott Hoyt of Moody’s Economy.com.

The downsides are that high joblessness and declining household incomes mean less money to spend on goods and services that departments and firms like contact centers provide say other observers. That in turn will limit job growth and could lead to a renewed emphasis on cost cutting by focusing live agents on serving only the top markets: the ones with disposable income, and self-service on the rest.

Levy said he thinks the New Abnormal also means average pay will dwindle, along with consumer prices. That would make it harder for households to pay down debt, he warned.

The article adds that hard-to-get credit is exerting a drag. Wounds from the banking system’s worst crisis since the Great Depression of the 1930s will take years to fully heal. People and companies, scarred by the crisis, are likely to restrain borrowing, spending and investing.

“There will be a continued hollowing-out of the middle class,” said H.W. Brands, a historian at the University of Texas.

Brendan B. Read is TMCnet’s Senior Contributing Editor. To read more of Brendan’s articles, please visit his columnist page. –Brendan B. Read, Senior Contributing Editor

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