The Layoff Binge
By George Szamuely
In the great American capitalist way, companies are competing with one another as to who can fire the most workers most expeditiously. According to the Bureau of Labor Statistics, there were about 327,000 layoffs in December. This figure only includes cases in which 50 or more employees were dismissed at once. The total number of people laid off last year was more than 1.8 million. In recent days, we learned that Verizon is eliminating 10,000 jobs; and DaimlerChrysler is getting rid of 20 percent of its workforce. Amazon.com is laying off 15 percent of its employees; BarnesandNoble.com 16 percent; Cnet Networks 10 percent. Xerox, JC Penney, Textron, Lucent Technologies, Toshiba America Inc. and AOL Time Warner are all cheerfully firing workers en masse. General Electric's CEO Jack Welch, legendary for ruthless cost-cutting at the expense of his employees, is promising to shed 75,000 workers.
Needless to say, all this is being accompanied by corporate-owned media twaddle about our glorious lean, mean capitalism, and the thrills of economic insecurity. "Neutron Jack is roaring back," gushes Business Week. "GE is planning massive job cuts on a scale not seen since the early days of Welch's tenure." Gosh! "[We] are not seeing a great deal of old-fashioned job insecurity where people are not sure if they will even have a job," New Economy propagandist Robert Reich announces airily. "There's no reason to suppose that we'll see a sharp increase in unemployment." Newsweek writes fatuously about how "matter-of-factly–even happily–many elite workers are taking their 'reduction in force' notices… Despite all the dour headlines, today's job market remains remarkably strong. Unemployment still hovers near a 30-year low, and recruiters say most laid-off workers are finding new jobs quickly."
That is splendid news. It is the mark of a vibrant economy that former dotcom executives are taking jobs as waiters, and plant workers as telemarketers. Half the workers filing for unemployment insurance pay in December had been employed in the manufacturing industries. Many of these jobs have now been shipped overseas. According to the Bureau of Labor Statistics, manufacturing is expected to account for less than 12 percent of all jobs in 2008. It had accounted for 16 percent of jobs as recently as 1988. Contrary to myth, most of the new jobs are not in high-tech. The computer industry employs relatively few people. The jobs are in retail, marketing, sales, healthcare, social services and administration.
While the media rhapsodizes about our "cruel-to-be-kind" corporate managers, no one ever bothers to ask whether, instead of firing workers, CEOs could take a cut in pay. CEO take-home pay has been soaring for years with little, if any, relationship to company performance. According to Executive Paywatch, in the United States "the average CEO of a major corporation made $12.4 million in 1999, 475 times more than an average blue-collar worker." German CEOs, on the other hand, "make 13 times what the average manufacturing employee makes. In Japan, the CEO-to-worker pay ratio is just 11-to-1."
While Jack Welch hacks away furiously at the fat at GE, one area that will remain undisturbed is his pay packet. In 1999 Welch was paid $45.7 million. In addition, he received stock option grants worth $46.9 million. He also has stock-option exercises to the tune of $48.5 million and unexercised stock options worth $436 million.
The mass firings so beloved by the corporations have nothing to do with recessions, falling demand or market downturns. They are all about boosting profit margins and thereby increasing shareholder value. Wall Street interprets mass layoffs as a sign that corporate managers are serious about "trimming the fat." They therefore buy into company stock and raise its value. An announcement of a huge layoff invariably leads to a surge in the company's share prices. Moreover, since company executives are now paid in stock options instead of cash, they have every incentive to do whatever is necessary to boost the value of their own holdings. Cutting the workforce is the easiest way there is to boost profits.
The threat of layoffs has the additional happy consequence of securing a docile labor force. General Motors demonstrated last year how little mass firings had to do with company performance. After recording one of its most profitable years ever, company managers showed their gratitude to their employees by laying off 15,000 workers. General Electric also enjoyed record earnings in 2000. But according to Business Week, that is not good enough for Welch. GE wants superprofits–an earnings growth of 20 percent next year.
The largest private employer in the United States today is Manpower Inc., the temp agency providing labor services to companies. Reducing all of their workers to the status of temps is probably the ideal toward which the corporations would like to head. Temps are the perfect employees. They can be hired and fired on the cheap. No need to have headhunters, personnel departments, job interviews; and you save on healthcare costs, pension plans and severance pay. Temps, moreover, fall outside the jurisdiction of the Occupational Safety and Health Act, which only applies to company employees. They have no right to collective bargaining, since even if a union does exist at the workplace only company employees can belong to it.
Some years ago Delta Airlines fired its baggage handlers and then rehired them as independent contractors. The workers took a 35 percent cut in pay and lost most of their benefits. The shareholders did very nicely, though. It is a transfer of wealth from the poor to the rich. Marx would be amazed at our indifference.
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Carl
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