It pays to prepare for possibility that you might lose your job

NEW YORK — New York--If you lose your job in this slow-growth economy, what are your chances of finding a new one at the same pay you had before? Not great, according to biannual surveys of "displaced workers" done by the U.S. Department of Labor.

A displaced worker is someone who loses a job for structural reasons -- a plant closing, a corporate downsizing, a reorganization of the workload. As of last January, fewer than half of the 5.6 million workers displaced over the past five years had been able to find a new full-time job. Around 11 percent took part-time work. Another 8 percent became self-employed, perhaps because they had no other choice.


Of those who found full-time work, nearly half had to swallow a pay reduction. Of these, two out of three are now working for at least 20 percent less than they made before. Only 22 percent of the displaced workers are known to have found jobs paying the same or higher than their old one did.

Manufacturing firms continue to wipe out the largest number of jobs. But the service industries are moving up fast, especially finance, insurance and real estate. Middle managers are a special target.


Surveys by the American Management Association show that layoffs will continue among large corporations, as they seek an irreducible core of permanent employees. Firms rarely cut back just once; no sooner is the blood stanched from the first reduction than management comes back for a second and third blitz. Around 25 percent of the 836 companies surveyed by the association last June were planning cuts in the next 12 months.

Even in better times, some heads will roll. The association found that around one-third of today's job cuts are due to structural or strategic change, unrelated to recession.

No systematic studies have been done of how families are coping with layoff risk. But here are some thoughts from financial planners:

* No one today can afford to behave as if his or her paycheck will never stop. To that end, you should carry less debt and build up more savings than you possessed in the 1980s. Consolidate loans at the lowest possible interest rate (best choice: a home-equity line of credit or a credit union).

* Don't move to a giant house with a giant mortgage that would be tough to pay if your income stopped. And think twice before taking a 15-year mortgage, which locks you into higher monthly payments than you'd owe on a 30-year loan. A good alternative: a 30-year mortgage paid off on a 15-year schedule. This gives you flexibility. If you lost your job, you could lower your payments to the minimum needed for the 30-year payback.

* If you learn that your job is in jeopardy, start hoarding cash. Pay only the bare minimum on your debts. Chicago financial planner Mark Bell advises that you quit adding money to a retirement savings plan. It will cost you a 10 percent penalty to get that money out if you need it to pay your bills.

* When a layoff hits, switch investments out of stocks or stock mutual funds and into a money-market fund or bank account. You'll need this cash for basic expenses, so it shouldn't be at risk.

* Pare your budget to the bone and compute the smallest salary you can accept, advises planner Jane King of Wellesley, Mass. It's easier to get a job when you have one already.


(Jane Bryant Quinn is a syndicated columnist. Write her at: Newsweek, 444 Madison Ave., 18th Floor, New York, N.Y., 10022.)

1992, Washington Post Writers Group