Background Notes for Death of a Yuppie Dream

By John Ehrenreich und Barbara Ehrenreich

The Absorption of the Liberal Professions into Corporation-Like Enterprises

During the last fifty years, rapidly accelerating in the last twenty or so, corporations (or other large institutions, such as “mega” law firms, hospitals, and universities—organized along more-or-less corporate lines and sharing corporation priorities) have come to be the employers of most of those in the “liberal professions.” Increasingly, the work experience of most of those in these professions is coming to look like the work experience in engineering and the business service professions.

Health Care Professions

(a) The central factor in transforming health care was a qualitative change in the actual service provided by health care professionals. In the years following World War II, a vast array of new technologies for diagnosing and treating illness appeared—drugs, MRIs and other radiological devices, pacemakers, operating room monitors, defibrillators, implants, computerized record keeping systems, etc. For the first time, medicine could actually do something for you—but at a price. Only hospitals could afford the new technology, and in many cases, the new procedures were intrinsically hospital-based. And despite the “not-for-profit” status of most hospitals, profits there were! By 2010, health care had become a $2.6 trillion per year industry, a ten-fold increase since 1960 and one driven directly and indirectly by the new technology.1 Drug companies alone earned more than $60 billion in profits in 2010, medical supply and equipment companies almost as much more. Given the profits to be made from health care, not surprisingly, a new breed of proprietary (for profit) health care facilities—hospitals, nursing homes, and medical laboratories—emerged, earning well over a billion dollars in profits in 2010.2 To pay for health care, insurance became essential, and with it, yet another way to profit off heath care. The five biggest health insurance companies alone earned over $12 billion in 2010. Health care, once a sleepy “not-for-profit” sector, had become big business.3

As the hospitals grew, so did doctors’ dependence on them. Solo practice—and certainly solo practice without hospital affiliation—became all but impossible. Doctors were pulled into multi-doctor groups and hospital based practice. Between 1983 and 1997, the proportion of patient-care physicians working as salaried employees rose from 24% to 43%, and by 1997, more than two thirds of young doctors with up to five years in practice were salaried.4 Increasingly even group practices were owned by hospitals, not by the doctors themselves. By 2010, more than half of practicing U.S. physicians were directly employed by hospitals or by integrated delivery systems.5

The hospitals’ growth transformed the very definition of “medical professional.” An army of new college trained professionals—medical technologists, nurses, physical therapists, occupational therapists, lab techs, and the like—took over many activities formerly carried out (in more primitive versions) by doctors. And as medical enterprise grew and as the need to keep revenues above ever increasing costs increased (regardless of ownership—public, not-for-profit, or proprietary), hospital management professionalized. Hospital managers were now trained in schools of business, rather than medical or nursing school.

Health care came to be organized largely along corporate lines, with non-technically (i.e., non-medically) trained managers; a corps of highly trained staff, analogous to engineers, organizing and directing “production” (the physicians and, in varying degrees, the nurses, technologists, and other therapists); and a “working class” stratum of nurses aides, kitchen workers, laundry workers, and the like performing more routinized work. At all levels, pressures to cut costs grew—from the hospitals, from the insurance companies, and increasingly from the government (due to its role in financing Medicaid and Medicare).

The Legal Profession

(b) If changes in the nature of the services offered drove the changes in health care, it was a great expansion in the demand for legal services that transformed the legal profession. The legal services boom was driven by the expansion of government regulation; the rapid growth of the legal-services-hungry financial and governmental sectors; the emergence of new practice areas such as environmental law, intellectual property law, pension and benefits law, and health law; and shifts in legal practices making it easier to use the legal system (e.g., reductions in obstacles to class action litigation). In response, the proportion of American gross national product (GNP) accounted for by lawyers’ services doubled between 1967 and 1997.6

The growing need for legal services was met by a vast expansion in the number of lawyers. Law schools expanded rapidly. First year law classes grew from around 15,000 per year in the mid fifties to 34,000 by the late sixties and 40,000 by 1978. The nation’s supply of lawyers grew from 211,000 in 1960 to 650,000 twenty years later and almost a million today. And the new lawyers were a different breed: increasingly it was women, Jews, and those from racial and ethnic minority groups that entered the field.7

The field’s expansion and the rapid growth in the number of lawyers led to increased competition for legal business, which in turn led to mergers and consolidation of law firms. The number of lawyers working in corporate-like settings soared. Around 1960, there were fewer than forty law firms employing as many as fifty or more lawyers; today, there are many hundreds, twenty-one of which employ more than one thousand lawyers each.8 Currently 42% of all practicing lawyers work in one of the biggest 250 firms or in other institutional settings (corporations, government, and the not-for-profit sector). By 1992, solo practitioners, though still making up 35% of all lawyers, accounted for only about one-tenth of all lawyer revenues.9

Once, to be a lawyer was to be a member of an elite guild. Lawyers served as “counselors” to their clients. “Ethical” codes and rules limited advertising. But with the rapid increase in the supply of lawyers, the balance of power shifted. Now competition for legal work increased and clients could make demands. To make matters worse, the growing demand for legal and legal-like service drew in outside competition, from tax preparation services, self-help law books, and (later) Internet based services for writing wills, incorporating businesses, and carrying out other “legal” matters. Lawyers had to pay increased attention to the “business” of lawyering.

Working in a “mega firm” bore little resemblance to the old experience of solo practice or the small partnership. Although the partnership form of business does mean that staff lawyers often remain “owners,” management of the large law firm is now concentrated in the hands of a small subset of senior partners (often specializing in management). In many ways, a job in such a firm is like working in any other large corporation. The company can make demands on junior associates for extraordinarily long hours; promotion to partner is based on bringing in business rather than good work done; and even a partnership is no guarantee of job security.10

The drive for greater efficiency at law firms took many forms. There was an increased division of labor, with “specialty” departments taking on more and more of the work. Computers were enlisted to mechanize services previously performed by individual lawyers (e.g., document preparation, legal research, and communication). Outsourcing a variety of services spread (see below).

All these adaptations have succeeded in making large law firms and in-house corporate law operations more efficient, but at a growing cost to those entering the profession. Slowing growth and greater efficiency has led to far fewer jobs available per year than new graduates. Only 30-35% of recent law school graduates are actually finding permanent, full-time jobs requiring a law degree within nine months of graduating from law school, and incomes for lawyers, once growing rapidly, have since 2005 barely kept up with inflation. The status of solo practitioners is even worse, with average incomes currently hovering around $50,000/year—not enough to pay off law school debts and maintain a decent living standard.11

Journalism and Publishing

(c) Changes in the larger society, such as the rise of the Internet, are often blamed for the plight of journalists, writers, and editors. But the transformation of journalism and publishing long preceded the Internet. Most professionals in these areas already worked for corporations, but they are now experiencing the impact of a wave of corporate consolidation—in the context of the rise of the Internet, cable television networks, and social media.

Newspapers had always been businesses, of course, and faced competition for readers and advertisers. Radio (from the 1930s on), television (from the 1950s on), and cable television networks (from the 1990s on) added new competitive pressures. Beginning in the 1920s, a process of consolidation took place. In 1909 there were 689 cities in the United States that had two or more competing daily newspapers; by 1963 that number had shrunk to 55, and now there are fewer than ten. As early as the 1960s and early 1970s, many papers (e.g., the New York Times and the Washington Post) went public to raise capital. Under the pressure of growing costs and declining revenue, mergers continued, often financed by a large debt load, which made the papers especially vulnerable to economic downturns.12

Despite the competition, many newspapers flourished. But by the late 1990s, as corporations—responding in part to Wall Street investors—tried to squeeze higher profit margins out of the newspapers, journalism jobs began to disappear. “Editors at papers across the country became increasingly frus­trated that editorial decisions were being made not in order to keep the papers afloat, but to propel profit levels ever higher.”13 As the millennium changed, a new, even more potent challenge arrived: the Internet. Craig’s List, eBay, and other Internet services took much of the classified ad business away from the papers. Then came the recession, and revenues fell even further (40% between 2003 and 2009 alone). Many papers tried to compensate for declining newspaper revenues by diversifying into non-journalistic areas. The Washington Post, for example, owns a for-profit university (Kaplan), radio stations, a cable station, and the online magazine Slate. The New York Times owns the International Herald Tribune, the Boston Globe, fifteen other daily newspapers, more than fifty web sites, and is a minority stakeholder in the Boston Red Sox.14 But for many papers it was too late. Even profitable papers, such as the Philadelphia Inquirer and the Minneapolis Star Tribune, faced with a massive burden of debt, were forced into bankruptcy.15

The book publishing industry, too, has been transformed by mergers. Historically, publishing was characterized by many small publishers. Competition for market share focused more on taste (e.g., who your authors were) than on reducing costs and finding other efficiencies. Beginning in the sixties, a series of mergers increased the size of the major players. Knopf, Pantheon, and Doubleday, among others, were gobbled up by Random House, which itself was then bought by RCA and later sold to the German publishing company Bertelsmann. Simon and Schuster (and for a while, Prentice Hall and MacMillan) were bought by Gulf and Western and later sold to CBC; Rupert Murdoch’s News Corp. swallowed up Harper Collins. At the same time, the other end of book publishing—book selling—was also being transformed by consolidations. The big chains (Barnes and Noble, B. Dalton, and Borders) drove many small bookstores out of business, and more recently, Internet retailers such as Amazon have gobbled up an increasing share of the market (a share only increased by the recent arrival of e-books). By 2004, eighty per cent of the retail book market was in the hands of eight big chains plus Amazon.

Along with consolidation came a change in management. The old author-editor-publishers such as Alfred Knopf and Bennett Cerf were no more. The new corporate managers—whether from Bertelsmann or Viacom or News Corp.—wanted a higher rate of return. Pressures on profits from the enlarged retailers increased the need to cut costs and increase efficiency. Cutbacks in advances to authors and outsourcing of editing, proofing, graphic design, and—for textbooks—even parts of content creation, have increased the pressures on writers and editors alike.16

With minor variations, the same story could be told of much of the media—magazine publishing, academic publishing, television and radio, and the like. Corporations that had in earlier days remained somewhat aloof from the more rapacious behavior characteristic of other sectors of the economy merged and grew.17 Staff writers, editors, photographers, announcers, and the like faced massive layoffs (more than 25% of newsroom staff alone since 2001), increased work loads, salary cuts, and the loss of their sense of publishing as being a “different” kind of industry, concerned with its product as much as with revenues. From the perspective of freelance writers and artists, it has meant a constriction of opportunities. While the Internet itself provides a growing set of outlets for writers, it has yet to develop a financial model that provides compensation.

Outsourcing

Yet another source of corporate pressure on the liberal professions (as on engineering and management) was outsourcing. Manufacturing jobs had been outsourced for several decades. But the recession of 2001 made further increases in productivity essential, and coincidentally, it was at just that time that new technologies permitting low cost, good quality, and high speed transmission of voice and data appeared. While good statistics on the total number of professional jobs are hard to find, some projections suggest that by 2010, more than two thirds of a million professional jobs, previously done in the US, would be done abroad. For health care workers, it was reading x-rays, MRIs, colonoscopies, and echocardiograms; analyzing pathology specimens; monitoring ICU patients; operating nurse call centers; performing orthopedic procedures such as preparing digital prosthetic templates; and keeping and manipulating medical records. For lawyers it was legal transcription, document review, review of litigation emails, legal research, contract-related services, and legal publishing services. For those in the publishing industry it was editing, proofing, graphic design, and—for textbooks—even parts of content creation. For engineers and computer professionals, it was product design, development of phone apps and mobile phone chips, systems programming, and network design. Even business professionals and managers were hit by outsourcing of activities such as processing mortgage applications and preparing corporate financial analyses and industry reports.18

Sources

1 The Congressional Budget Office estimates that about half of the increase was directly attributable to technology. Indirectly, the improvements in health care drove two other factors increasing health expenditures: the increase in demand for services and increased longevity. http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31-TechHealth.pdf

2 http://money.cnn.com/magazines/fortune/fortune500/2010/industries/222/index.html

3 The integration of the health care sector with the corporate world was evident as early as 1970. See Barbara and John Ehrenreich and Health-PAC, The American Health Empire: Power, Profits, and Politics (Random House, 1971).

4 P.R. Kletke et al, 1994, 1996, cited in John B McKinlay and Lisa D. Marceau (2002), “The End of the Golden Age of Doctoring.” International Journal of Health Services 32 (2), 379-416.

5 http://www.nytimes.com/2010/03/26/health /policy/26docs.html; http://www.nejm.org/doi/full/10.1056/NEJMp1101959

6 Marc Galanter, Old and in the way: The coming demographic transformation off the legal profession and its implications for the provision of legal services, Fairchild lecture, University of Wisconsin Law School, October 29, 1999, retrievable at http://www.marcgalanter.net/Documents/oldandintheway.pdf; Abe Krash, “The Changing Legal Profession.” Washington Lawyer, January 2012. Retrievable online at http://www.dcbar.org/for_lawyers/resources/publications/washington_lawyer/january_2008/changes.cfm

7 Galanter, op cit; U.S. Bureau of the Census, Statistical Abstract of the United States, 1973, 2001, 2009.

8 America’s Largest 250 Law Firms. Internet Legal Research Group. http://www.ilrg.com/nlj250/attorneys/desc/1

9 Analysis of the Legal Profession and Law Firms, Harvard Law School. http://www.law.harvard.edu/programs/plp/pages/statistics.php

10 See Krash, op. cit.

11 Paul Campos, Served: How law schools completely misrepresent their job numbers. http://www.tnr.com/article/87251/law-school-employment-harvard-yale-georgetown; David Segal, “Is Law School a Losing game?” New York Times. http://nytimes.com/2011/01/09/business/09law.html?pagewanted=all

12 The poster child for failure due to leveraged over-expansion is the Tribune Company, which by 2008 owned twelve newspapers, twenty-three television stations, a national cable channel, and assorted other media holdings, but which was also $13 billion in debt. Faced with declining circulation and ad revenues, it was unable to pay its debts and declared bankruptcy.

13 Federal Communications Commission (n.d.). The Media Landscape. http://transition.fcc.gov/osp/inc-report/INoC-1-Newspapers.pdf

14 Suzanne M. Kirchoff, The U.S. Newspaper Industry in Transition. Congressional Research Service, September 9, 2010, online at http://www.fas.org/sgp/crs/misc/R40700.pdf

15 See David Carr, “The Fissures are Growing for Papers,” New York Times, July 8, 2012.

16 Boris Kachka. “The End.” New York Magazine, September 14, 2008 (retrieved at http://nymag.com/news/media/50279/); Williams Cole, “Is Publishing Doomed?” Brooklyn Rail, November 2010, retrieved online at http://www.brooklynrail.org/2010/11/express/is-publishing-doomed-john-b-thompson-with-williams-cole

17 Eli Noam, Media ownership and concentration in America, New York: Oxford (2009).

18 Ron Hira (The Institute of Electrical and Electronics Engineers). Global Outsourcing of Engineering Jobs: Recent Trends and Possible Implications. Testimony to the Committee on Small Business, United States House of Representatives (June 2003). http://www.cspo.org/products/lectures/061803.pdf;Linda Levine (Congressional Research Service), Offshoring (a.k.a. Offshore Outsourcing) and Job Insecurity Among U.S. Workers. May 2, 2005 (http://fpc.state.gov/documents/organization/46688.pdf); David Wessel, Big U.S. Firms Shift Hiring Abroad. Wall Street Journal, April 19, 2011, retrieved online at http://online.wsj.com/article/SB10001424052748704821704576270783611823972.html; Pete Engardio, Aaron Bernstein, and Manjeet Kripalani, “The New Global Job Shift.” Business Week, February 2003, retrieved online at http://www.businessweek.com/stories/2003-02-02/the-new-global-job-shift; Kletke, op cit.