Views on politics and current events

Wednesday, August 09, 2006

The Disposable American : Layoffs And Their Consequences

A book by Louis Uchitelle

The author, an economics reporter for The New York Times, shows a rare insight into the realm of the corporate strategy of layoffs and plant closings and how those actions affect everyone concerned.

When seven-figure salaried executives resort to plant closings and layoffs they seldom look past the immediate future. Like a traveling band of gypsies, these people go from position to position, from company to company implementing the short-term gain policies of layoffs. They have no regard for employees or customers, no regard for the communities where the company is located. Their entire focus is on making stockholders happy. If that means cutting jobs, what difference does that make? So they make the stockholders happy, collect their very generous salaries, stock options and all the frills, while jobs are eliminated.

The problem with this is that stockholders are not the only ones that have a stake in the company. In an extreme case of putting the cart before the horse, the ones that actully created the wealth for the company in the first place are at the bottom of the totem pole. The author tells about the 'myth' that if workers lose their jobs, somehow it is their fault. And if that worker cannot find another job that pays as much or more, they are also at fault. If the worker gets further training for a different job but still does not earn as much, they're not ambitious enough. The onus of layoffs and loss of a job is put directly back on the worker.

Another reviewer of this book has said, "Despite the fact that this book focuses on the subject of employment, the author seems to lack a clear understanding of just what a job is and how wages are determined." I totally disagree.

The author displays a rare insight into the realm of the corporate strategy of layoffs and plant closings and how these actions affect all concerned. As far as how wages are determined, a common opinion is that the skill and demand for that skill determine what rate of pay the worker recieves. This opinion does not take into consideration the value of physical labor. If a worker is willing to do quality physical labor in a less than ideal environment, that should be worth a decent wage in and of itself.

The author writes with rare insight about the corporate strategy of layoffs and plant closings and how those actions affect all concerned. Usually the only response from corporations to these actions are that it was unavoidable. For the benefit of the company, these cuts had to be made. And in some cases, this is a fact. But cuts in the benefits and wages or the loss of jobs for front-line employees, while a small handful of stockholders and company executives continue to make seven-figure salaries and collect their dividends, underscores the reality of the title of this book :'The Disposable American'.

The author also explores the fallacy of job retraining with a simple question...retraining for what? Many people that have lost jobs participated in these retraining programs. But most folks that recieved training for other fields found out either the pay wasn't that good or the jobs weren't there.

While many oppose any kind of funding or relief directly to workers, states and communities engage in bidding wars for new businesses for their community. Tax abatements, roads, sewer,electric and water services, money for construction of structures for the business, all provided at the communities expense, constitute funding for business. These communities pay out the nose for the privilege of a business to locate in the community. This is a fact, and the author discusses this in the book. He also writes about some instances where a company has reaped the benefits of all this community funding, only to close the plant to relocate. All of the commitment the community has made, the livelihood of other businesses, and the livelihood of the workers displaced has no bearing on the decision.

The author tells how layoffs and plant closings have become normal business procedures that are accepted not only by business and government, but by unions. Layoffs are inevitable, so the thinking goes. The author does not agree. As the author writes, "Layoffs are not going to go away, but they do not have to be so numerous as they are now."

The last chapter of the book is titled 'Solutions'. The solutions offered will no doubt be considered radical by some. An incremental raise in the federal minimum wage to $12.00 an hour, to give one example. To raise the minimum wage to a decent level recognizes that labor is not only the main contributor in the creation of goods and services, but is also the largest consumer of goods and services. The more money they have to spend, the more the economy will benefit.

As with any book about economics, labor and business, this book has its share of statistics. The author has done a tremendous amount of research to gather so much information. But the difference is that unlike some books that deal with the subject, this does not contain only facts told in an impersonal way. This book gives the facts and figures with empathy and compassion towards the workers themselves.

A very well written book that voices the disenchantment, disenfranchisement and economic hardship of 'The Disposable American'. To continue the trend of exploitation and unfair practices towards labor harms one of our country's greatest assets and fractures the very backbone of the nation. Mr. Uchitelle has given a voice to these people, and thinks they deserve better. I say good for him.


David said...'re correct, of course, that there are many stakeholders in a company other than the shareholders--particularly the employees. But if a business operates at an uneconomic cost level, then sooner or later it's going to go broke and that won't do anyone any good. Even companies that were 100% employee-owned would have to do layoffs in some circumstances.

I do agree that there are too many executive who are quick to close something down rather than do the hard creative work of figuring out how to make it succeed.

Alan Beggerow said...

The author states in his book that some layoffs are necessary, and that his purpose is not to eliminate layoffs. That is not possible. But that layoffs occur far too often, and that the reults of layoffs are not only bad for labor, but bad for the companies themselves, the economy, and society.

On these points, I agree with the suthor.

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