GREED CUTS JOBS
In the 1980s and 1990s, everyone has become used to seeing the headlines describing a company slashing the number of jobs: AT&T (40,000 jobs cut); IBM (60,000); Boeing (30,000); Sears Roebuck (50,000); General Motors (75,000); and dozens of other companies eliminating thousands of jobs. While many families were torn apart by the layoffs and communities suffered, Wall Street rejoiced, sending the stock of job-cutting companies to new heights. Why?
One of the myths many people have adopted is that these job losses are necessary for companies to either remain profitable or compete in the global economy or both. Amazingly, we even sometimes believe those reasons when our jobs disappear. When you here those myths consider the following:
The profitability myth. Corporate profits in the 1990s were generally soaring, including for those companies announcing layoffs. One estimate by Wall Street insiders holds that a single layoff is worth $60,000 to bottom-line earnings in the future. Got it?
· The we-have-to-be-competitive myth. The huge layoffs in the 1990s were happening at a time when: the growth in what the average production worker was being paid--typically a key statistic used to compare whether one country has higher costs relative to another--in Japan, Germany, Canada and the Netherlands were all higher than in the U.S.; the value of the dollar was dropping (making U.S. goods cheaper and more competitive abroad ); and productivity in the U.S. equaled or exceeded the levels found in other countries (that means we were working harder to turn out the same goods and services but our cost--what we were being paid for our labor--was not going up). So, the "we-need-to-downsize-to-compete-in-the-global-economy" argument simply does not jibe with what has been happening.
The great corporate money raid. The top executives of corporations got millions of dollars in stock options as part of their outrageously high paychecks--stocks that often increased in value after layoffs.
We sometimes are so taken in by the words used to explain bigger trends (and the "global economy" has been the most repeated slogan) that we forget a far more obvious powerful factor: greed. Once again, a few people are enriching themselves at the expense of the many. It's actually so simple to see.
Mobil Oil, on a pace to record profits in 1995, announced a layoff of 4,700 workers (about 9.2 percent of its total workforce). The next day, its stock rose 4.1 percent. Mobil's CEO Lucio Noto's net wealth went up more than $800,000 in just 24 hours because of his stock holdings in the company.
The merger between Chemical Bank and Chase Manhattan--two profitable banks--included laying off 12,000 people. Stocks of the two banks went up double-digits after the combination merger-layoffs was unveiled. Chase CEO Thomas Labrecque made a cool $3.6 million in one day; his counterpart at Chemical, Walter Shipley, wasn't quite as fortunate--his wealth went up by only $3.1 million. Overall, the CEOs of the 22 companies announcing the most job cuts in 1995 saw their stock options rise by a combined total of $37 million.
The other buzzword we hear all the time is outsourcing. It is another piece of the downsizing puzzle. When companies "outsource," work once performed by a company's workers is moved to another company; eventually, this causes job losses at the original company because there is less work. So, for example, if General Motors decides it is too expensive to have its own workers make brakes, it moves the work to another company where wages are much lower. In straight language, this means that it's time to take more out of the paychecks of most workers because the company wants to continue to pay high CEO salaries and satisfy Wall Street.
Outsourcing is also a back-door way to weaken or break unions. Usually, when work is moved from a place where wages are higher to a factory paying lower wages, the jobs are being shifted from a unionized workplace to one where there isn't a union.
By the way, some business analysts have recently begun arguing, in the pages of the leading business journals, that the downsizing and outsourcing rage has gone too far. They've discovered that cutting corporations to the bone to boost profits has negative consequences. Without a stable, healthy in-house workforce, productivity declines because people feel less loyal to the company. So, in fact, corporations can be profitable and maintain workers' jobs--as long as executives are willing to choose jobs over greed.
Ripping away huge numbers of workers from their livelihood is just another reason we should be worried about the globalization of corporations. As companies are less connected to local communities, the executives in charge don't feel any pressure or criticism when they cut jobs because they might live across the country or even in another part of the world.
MYTH: U.S. corporations have eliminated massive numbers of jobs to cut away the "fat", make themselves more competitive and improve overall economic activity which will make everyone's life better eventually..
REALITY: With no community or national loyalty, large corporations throw away thousands of workers in order to satisfy Wall Street and boost profits from operations that have no national borders.
This piece from 1996 sure lets us all see nothing has changed and gotten worse for almost another 20 years!
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kennymotown
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