http://www.newsweek.com/id/233131/page/1On Sept. 12, 2001, there were no commercial flights in the United States. It was uncertain when airlines would be permitted to start flying again—or how many customers would be on them. Airlines faced not only the tragedy of 9/11 but the fact that economy was entering a recession. So almost immediately, all the U.S. airlines, save one, did what so many U.S. corporations are particularly skilled at doing: they began announcing tens of thousands of layoffs. Today the one airline that didn't cut staff, Southwest, still has never had an involuntary layoff in its almost 40-year history. It's now the largest domestic U.S. airline and has a market capitalization bigger than all its domestic competitors combined. As its former head of human resources once told me: "If people are your most important assets, why would you get rid of them?"
It's an attitude that's all too rare in executive suites these days. As the U.S. economy emerges from recession, Americans continue to suffer through the worst labor market in a generation. The unemployment rate dipped in January, from 10 percent to 9.7 percent, but the economy continued to lose jobs. There are currently 14.8 million unemployed, and when you count "discouraged workers" (who've given up on job seeking) and part-time workers who'd prefer a full-time gig, that's another 9.4 million Americans who are "underemployed." While the pink slips are slowing as the economy rebounds, the lack of jobs remains the most visible—and politically troublesome—reminder that despite what the economic indicators may tell us, for much of the population, the Great Recession hasn't really gone away.
Companies have always cut back on workers during economic downturns, but over the last two decades layoffs have become an increasingly common part of corporate life—in good times as well as bad. Companies now routinely cut workers even when profits are rising. Some troubled industries seem to be in perpetual downsizing mode; the U.S. auto industry, to take just one example, has been shedding employees consistently for decades. (NEWSWEEK is familiar with these pressures: its head count is down significantly in recent years.)
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For many managers, these actions feel unavoidable. But even if downsizing, right-sizing, or restructuring (choose your euphemism) is an accepted weapon in the modern management arsenal, it's often a big mistake. In fact, there is a growing body of academic research suggesting that firms incur big costs when they cut workers. Some of these costs are obvious, such as the direct costs of severance and outplacement, and some are intuitive, such as the toll on morale and productivity as anxiety ("Will I be next?") infects remaining workers.
But some of the drawbacks are surprising. Much of the conventional wisdom about downsizing—like the fact that it automatically drives a company's stock price higher, or increases profitability—turns out to be wrong. There's substantial research into the physical and health effects of downsizing on employees—research that reinforces the seemingly hyperbolic notion that layoffs are literally killing people. There is also empirical evidence showing that labor-market flexibility isn't necessarily so good for countries, either. A recent study of 20 Organization for Economic Cooperation and Development economies over a 20-year period by two Dutch economists found that labor-productivity growth was higher in economies having more highly regulated industrial-relations systems—meaning they had more formal prohibitions against the letting go of workers.
Long article, but well worth the read.
It really makes me wonder why people bristle at the suggestion that
Corporate America is sabotaging American progress. The very thought of it gives even some on here the hives. Think about it: viewed in terms of the last 30 years, is it really all that far out of the realm of possibility? Especially with a decade that saw ZERO net job growth?
So what comes first, the chicken or the egg?
Do the consumers have to start spending again, or do corporations need to stop FIRING? Is one side simply waiting for the other side to make the first move, or is the country going to turn into one big Northeast Ohio before either one happens?
News flash. Unemployed, foreclosed, homeless and destitute people . . . can't and don't buy stuff.
Underemployed people . . . don't buy stuff.
People scared of losing their jobs . . . don't buy stuff.
People uncertain of their job and company status . . . don't buy stuff.
Why are they not buying stuff?
Simple. Thousand-plus layoff notices are happening DAILY, not just weekly. Layoffs only lead to more layoffs, which leads to no one (not even employed and scared people) buying stuff, which leads to more layoffs, etc.
Sooner or later, corporations, you're going to need this little thing we in the reality-based community call "BUSINESS".
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