Beyond Tech and Finance: Rising Wages Make Blue-Collar Jobs More Attractive

Behind the Vibecession: Why Even a Healthy Economy Feels Wrong

by Faruk Imamovic
Beyond Tech and Finance: Rising Wages Make Blue-Collar Jobs More Attractive
© Getty Images/Darren Staples

In the past year, the job market narrative has split into two seemingly contradictory tales. On one side, professionals lament a job search landscape that is exceedingly brutal, marked by few callbacks despite numerous applications. This sentiment is echoed loudly among those seeking employment, with many declaring it the toughest market they've encountered. Yet, paradoxically, this bleak personal testimony sharply contrasts with the broader economic indicators suggesting robust health. Unemployment hovers near its lowest in five decades, the economy consistently adds jobs, and wages are rising faster than inflation. How can these divergent stories coexist?

A Tale of Two Job Markets

The mystery begins to unravel with insights from Vanguard's recent study on hiring trends, revealed through data derived from 401(k) plan contributions and enrollments. This data presents a national hiring rate differentiated by income level, exposing a bifurcated job market. There's a so-called blue-collar boom, where hiring rates for those earning less than $55,000 annually remain strong and above pre-pandemic levels. However, the scenario dims significantly for those in higher income brackets. For individuals earning above $96,000, the hiring rate has plummeted to a dismal 0.5%, a stark decrease from previous years and a figure that hasn't been this low since 2014.

Why such a stark disparity? Several theories could explain this downturn. Firstly, turnover in corporate positions has slowed, meaning fewer vacancies need filling. Industries like technology and finance, which predominantly employ higher-earning professionals, are currently facing significant struggles. Furthermore, there's a prevailing sentiment among CEOs to cut what they view as excess in corporate structures, a trimming down of what Mark Zuckerberg critiqued as "managers managing managers."

Another distressing possibility is that companies might be preemptively tightening their belts, anticipating tougher economic times. Fiona Greig, Vanguard’s global head of investor research and policy, suggests that in efforts to reduce costs, companies might find it more economical to cut higher-wage positions first. This strategic reduction has intensified the hiring woes for higher earners, painting a grim picture for those seeking new opportunities in their fields.

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The Trapped-in-Place Economy

While the slowdown in white-collar hiring might seem inconsequential in a strong economy, it fails to consider those who are dissatisfied with their current positions. This sentiment fosters what some have termed the "Big Stay," a period where people feel stuck in their roles due to the lack of better opportunities. Emily Stewart, a colleague in the industry, offers a more fitting term: the "trapped in place" economy. This phenomenon particularly affects professionals who, not long ago, enjoyed the flexibility to leave unsatisfying jobs easily during the Great Resignation.

This enduring phase has led to what some call a "vibecession," a peculiar state where the economic conditions feel recessive despite positive macroeconomic indicators. This sentiment is primarily shaped by white-collar professionals who, influenced by personal experiences and a lack of job mobility, project a bleaker economic outlook.

Guy Berger, the director of economic research at the Burning Glass Institute, further complicates the narrative by noting that while the overall job market remains strong, there's a noticeable shift in the dynamics for those with higher degrees. Advanced degree holders, typically enjoying low unemployment rates and high salaries, are now facing increasing challenges. This shift could grow more pronounced as AI and automation begin to encroach on tasks traditionally reserved for highly skilled professionals.

Emerging Trends in the Job Market

Despite the ongoing challenges in white-collar sectors, there are evolving trends that merit attention for both job seekers and economic analysts. One significant trend is the shifting demand within various industries. Traditional sectors such as finance and technology are undergoing a transformation, possibly driven by technological advancements and changing business models. These sectors, which once spearheaded job growth for high-income professionals, are now among the hardest hit by hiring freezes or slowdowns.

Resilience in Blue-Collar Sectors

Conversely, blue-collar sectors are witnessing an unexpected resurgence. Industries like manufacturing, logistics, and construction are not only maintaining but sometimes even increasing their workforce. This boom is largely attributed to a renewed focus on domestic production and infrastructure development, fueled by recent government policies and a global reevaluation of supply chain strategies. The robustness in these sectors suggests a shift in the job market landscape, where hands-on skills and trades regain importance, challenging the long-held supremacy of white-collar professions.

The resilience of blue-collar jobs is also reflected in wage improvements. Historically, these roles have lagged behind in terms of financial compensation. However, recent data suggests a narrowing gap, with wage increases in these sectors sometimes outpacing those in tech and finance. This shift not only highlights the changing dynamics of job security and growth but also raises questions about the long-term value of traditional professional pathways.

The Impact of Remote Work Dynamics

Another critical factor reshaping the job market is the ongoing adaptation to remote work. Initially a necessity during the pandemic, remote work has become a permanent feature for many companies, particularly in white-collar industries. This shift has a double-edged impact. On one hand, it offers employees flexibility and a better work-life balance. On the other, it has led to significant changes in organizational structures and worker expectations, contributing to the "trapped in place" sentiment among those who feel their career progression is stalling.

Remote work has also influenced hiring trends. Companies are now able to source talent from a broader geographic area, which could be contributing to the slow hiring rates in traditional business hubs. Furthermore, the ability to work from anywhere has changed the landscape for high earners, who are now competing in a global marketplace, possibly exacerbating the job scarcity in local markets.