Company Loves Misery
Corporate Killers
Wall Street Rewards the Corporate Killers. Workers are Suffering. Why? Is there a solution?
Corporate America is delirious with "downsizing fever." Some 600,000 jobs were eliminated in 1994 alone. Wall Street just loves companies that fire workers and rewards them with soaring stock prices.
We all feel the effects. The economies of entire communities are undermined. And even public workers are threatened: When properties are lost, people move out—and the community and the tax base suffer. Local governments cut jobs and local services decline.
That the rich get richer and the poor get poorer is an old song. But why is it happening so fast, right now?
In the 1990s, the international economy places American companies in competition with aggressive Japanese firms. And with NAFTA, American workers go head to head with Mexican workers for jobs. "Because of NAFTA, 41,201 American manufacturing jobs have been lost since January 1994," reported The New York Times in October 1995.
Intense competition makes companies' production cycles shorter than ever. Missteps by corporate CEOs have deadly consequences in today's competitive market. Showing workers the door is one quick fix for many corporations that feel no responsibility toward their employees.
Years ago, companies could afford to be responsible. But every day, there are fewer examples such as the one set by Malden Mills of Lawrence, Mass. When the mill burned down in December 1995, owner Aaron Feuerstein kept the workers on the payroll for weeks, until the plant was rebuilt.
"Why should I make more money that I can't spend before I die?" Feuerstein said. He can afford to take such an attitude because Malden Mills is a family business. Huge corporations are responsible only to their shareholders who demand ever more return on their investment.
Wall Street has made matters worse. Investors on the stock exchange are convinced that "downsized" corporations yield higher returns. As soon as AT&T announced its downsizing, its stock jumped $2.62 a share. In addition to his $3.4 million annual salary, Robert Allen, CEO of AT&T, made another $5 million in profit from his personal stocks after the January downsizing.
If management refuses to take these draconian measures, the shareholders replace them with someone who will.
Concentration of Wealth. Corporate profits are up to record levels: 64 percent higher in 1995 than in 1989. In 1993, CEOs made an average salary (pay and bonuses) of $3.7 million—more than 190 times greater than the average American worker. This is the widest wage gap in the industrialized world.
The corporations making such large profits are the same ones that used to consider workers an asset—and now see them as a drag on the bottom line. They've traded worker loyalty for what they call "flexibility."
The largest employer in the country, with 560,000 employees, isn't IBM or General Motors. It's a temporary agency, Manpower. Agency temp workers make an average hourly wage of $6.50. Seventy-five percent of agency temps get no health insurance.
American workers and their families have spent the last two decades watching their standard of living decline. They work longer hours and at more than one job for less money, less health care and more debt:
- The average paycheck buys 4.6 percent less than it did 16 years ago.
- Fourteen percent more of health benefit costs come out of workers' pockets than they did ten years ago.
- The average American worker puts in longer hours than workers in Germany, France, Great Britain—and even Japan.
What's the Answer?
Companies could take the initiative in acting responsibly toward their workers. They may do this out of benevolence or out of a realization that employee loyalty and job stability contribute to the bottom line.
Aaron Feuerstein saw his production double after keeping his workers on the payroll while Malden Mills' factories were being rebuilt.
Other companies have opted to do likewise. Haworth furniture makers in Holland, Mich., has an iron-clad no-layoff policy. Southwest Airlines in Dallas, Texas, which is 90 percent unionized, offers its employees generous profit-sharing.
Government Incentives. In the past, government has leveled the playing field between companies and workers. But the conservative Republican leadership in Congress wants to reduce government's role rather than increase it.
If government is allowed to do its job, it can also offer incentives such as the Clinton administration is proposing to encourage responsible corporate behavior.
U.S. Sec. of Labor Robert Reich has suggested such incentives. Several members of Congress, including Sens. Tom Daschell (D-S.D.) and Jeff Bingaman (D-N.M.), are discussing legislation with similar goals.
Taking it to the Polls. Finally, AFSCME is joining with the other unions of the AFL-CIO to elect a Congress this November that is sympathetic to our needs. We must register and vote to overcome the radical right's attempt to divide and conquer.
What could workers win ?
- A Level Playing Field for Workers. Put workers on equal footing with management by strengthening labor laws. Establish fines for companies that engage in unfair labor practices. Ban strike replacement workers. Simplify union election procedures.
- Pensions Workers Can Take with Them. Allow workers—who are now more likely than ever to undergo employment changes several times in their careers—to take their pension benefits with them from job to job.
- A Strong Safety Net for Victims of Layoffs and Furloughs. Require firms to provide more advanced notice of layoffs or shut-downs and severance packages to ease the transition between jobs.
- A Federal Tax System Where Everyone Pays Their Fair Share. Scale back the corporate tax exemptions, deductions and exclusions which allow highly profitable firms to pay little or no taxes.
- Investments in American Workers. Ensure adequate public resources to provide workers with ongoing, high-quality education and training programs. Allow workers and their employers to design the best curriculum to provide the skills needed to compete in the 21st century.
