The Disposable American: Layoffs and Their Consequences

The Disposable American: Layoffs and Their Consequences

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by Louis Uchitelle

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"Uchitelle makes clear the ways in which layoffs are counterproductive, rarely promoting efficiency or profitability in the long term. He explains how our acquiescence encourages wasteful mergers, outsourcing, the shifting of production abroad, the loss of union protection, and wage stagnation. He argues against our ongoing public policy - inaugurated by Ronald Reagan… See more details below


"Uchitelle makes clear the ways in which layoffs are counterproductive, rarely promoting efficiency or profitability in the long term. He explains how our acquiescence encourages wasteful mergers, outsourcing, the shifting of production abroad, the loss of union protection, and wage stagnation. He argues against our ongoing public policy - inaugurated by Ronald Reagan and embraced by every president since - of subsidizing retraining for jobs that, in fact, do not exist. He breaks new ground in documenting the failure of these policies and in describing the significant psychological damage that the trauma of a layoff inevitably inflicts, even on those soon reemployed." While recognizing that in today's global economy some layoffs must occur, the author argues that government must step in with policies that encourage companies to restrict layoffs and must generate jobs to supplement the present shortfall. There are specific recommendations for achieving these goals and arguments that workers, business, and the nation will benefit as a result.

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Editorial Reviews

Thomas Geoghegan
Many readers know Mr. Uchitelle as a business journalist with an acute analytic bent. That is in this book, but there is a surprising passion as well. He urges — demands — that Americans speak up: not to give empty speeches about how more of us should go to college, or "skill up," but to stop the layoffs from ravaging us all.
— The New York Times
Publishers Weekly
Devoting a book to the necessity of preserving jobs is perhaps a futile endeavor in this age of deregulation and outsourcing, but veteran New York Times business reporter Uchitelle manages to make the case that corporate responsibility should entail more than good accounting and that six (going on seven) successive administrations have failed miserably in protecting the American people from greedy executives, manipulative pension fund managers, leveraged buyouts and plain old bad business practices. In the process, he says, we've gone from a world where job security, benevolent interventionism and management/worker loyalty were taken for granted to a dysfunctional, narcissistic and callous incarnation of pre-Keynesian capitalism. The resulting "anxious class" now suffers from a host of frightening ills: downward mobility, loss of self-esteem, transgenerational trauma and income volatility, to name a few. Uchitelle animates his arguments through careful reporting on the plight of laid-off Stanley Works toolmakers and United Airlines mechanics. Descriptions of their difficulties are touching and even tragic; they are also, alas, laborious and repetitive. And Uchitelle's solutions are not entirely convincing: neither forcing companies to abide by a "just cause" clause when they fire someone, for instance, nor doubling the minimum wage are likely to increase employment. Yet Uchitelle's basic argument-that no American government has taken significant steps to curb "the unwinding of social value" caused by corporate greed- is all too accurate. (Mar. 31) Copyright 2006 Reed Business Information.
Library Journal
These are not your father's layoffs-seasonal plant shutdowns, and recession-induced furloughs. Layoffs today are permanent and life-shattering for blue-collar workers, professionals and even highly placed managers. Uchitelle (economics correspondent, the New York Times) chronicles the rise and impact of the American corporate culture of layoffs. Until the mid-1970s, American companies dominated the world economy and offered employees at all levels lifetime job security. However, with the rise of foreign competition, rising energy costs, and the retreat of the federal government from Keynesian economics, American corporations turned to massive layoffs as the panacea for their problems. Uchitelle talks to corporate leaders and employees to document the bad management and political failures that make huge layoffs seemingly inevitable. Highly skilled aircraft mechanics, production workers, and middle managers share their stories of emotional exhaustion and economic downgrading in this heart-wrenching book. It would be stronger, however, without his short final chapter on solutions to layoffs, which doesn't do that topic justice. Nonetheless, highly recommended for academic and larger public libraries.-Duncan Stewart, Univ. of Iowa Libs., Iowa City Copyright 2006 Reed Business Information.
Soundview Executive Book Summaries
A History and Analysis of the Chopping Block
Americans have a true love/hate relationship with layoffs. On the surface, we criticize the effect they have on communities and families. On the other hand, we tend to celebrate their effect on the bottom line, giving the executives willing to make the cuts big paychecks, cute nicknames and book deals.

In The Disposable American: Layoffs and Their Consequences, Louis Uchitelle argues that the negative effects of staffing cuts are worse and longer lasting than we realize, while the benefits are short-term and overstated. It is not, the author argues, worth the trade-off. The author, a business writer for The New York Times, mixes the personal and the practical to make his point, interspersing anecdotes from those who have lost jobs with observations on the history of the employer/employee relationship in America and analysis of government’s role in regulating that relationship.

He begins with the story of the Stanley Works in New Britain, Conn. The tool manufacturer began laying off workers in an effort to keep their prices competitive. Eventually, they would move much of their production out of the country entirely. As of 2002, Stanley had gone from 7,000 employees in New Britain to only 900. Telling both sides of the story, Uchitelle interviews both the executives responsible for the downsizing and a married couple who have been employed by Stanley for most of their lives and now face the loss of the pensions they’d been working toward.

You Can Count On It
From this launching point, Uchitelle begins his explanation of the history of job security in America. Industrialization and the rise of large corporations brought with them the need for specialized skills. Companies began to realize how expensive and time-consuming training could be, so they started making an effort to retain skilled workers.

The 1970s, however, brought with them a recession and an unemployment rate so high that layoffs became a part of life. Deregulation of airlines, utilities and other industries caused wide-reaching shake ups resulting in staff cuts.

Labor unions were losing their influence, Uchitelle argues, and by firing 11,400 striking air traffic controllers in 1981, President Reagan had "served notice to private employers that they were now free, even encouraged, to bring in replacement workers…"

But Uchitelle isn’t playing partisan politics. He chides President Clinton for separating the Democratic Party from "its New Deal concern for job security and full employment." In fact, the author devotes an entire chapter to the harm he believes was done during Clinton’s eight years in office.

How Layoffs Hurt
But what Uchitelle most wants to communicate to the reader is the human cost of layoffs—the toll that job loss takes on the average American. Toward this end, he includes numerous anecdotes from people personally affected by the policies he addresses. For example, there’s Erin Breen who, two years after losing his job at United Airlines, can’t seem to find the self confidence to return to work and ultimately ends up taking a custodian job at a fraction of his former salary. The author also consults mental health professionals to bolster his argument that cases like Breen’s are common. He also seeks to prove that the effects of a layoff extend beyond the dismissed employee. "It is a trauma to the entire family," Dr. Theodore Jacobs, a New York psychoanalyst is quoted as saying.

This suffering, Uchitelle insists, is for nothing. He quotes experts and cites studies that the most productive companies are those with the least layoffs. Companies too frequently see cutting staff as a quick fix and don’t analyze the true cost of resulting challenges such as fighting wrongful dismissal suits or the lower production rates and higher absenteeism frequently found among those employees who remain.

The author does offer some solutions to the problem of layoffs, but admits that they are not easy. The first and biggest step is to challenge current assumptions about layoffs and begin talking about alternatives. Government regulation and public opinion must be changed if we are to see a return to true job security.

Why We Like This Book
The Disposable American challenges the reader to rethink the commonly accepted wisdom on layoffs. Uchitelle debunks many of the major public misconceptions about workforce reductions and puts a human face on the toll that they take. This is an excellent, yet sobering text about an issue that affects a number of Americans on a daily basis. Copyright © 2006 Soundview Executive Book Summaries

From the Publisher
“Uchitelle effectively wrecks the claim that all this downsizing makes the country more productive, more competitive, more flexible. . . . A strong case that the whole middle class is at risk.”
The New York Times

The Disposable American is an overdue wake-up call that could start making the wisdom of layoffs that much less conventional.”
San Francisco Chronicle

“Incisive. . . . An airtight case against the common wisdom that favors job cuts.”

“Uchitelle writes about the moral failings of our modern corporate structure with deep and persuasive insight. That alone makes the book a must-read.” —Detroit Free Press

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Product Details

Knopf Publishing Group
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The Disposable American

By Louis Uchitelle

Random House

Louis Uchitelle
All right reserved.

ISBN: 1400041171

Chapter One

The Stanley Works

Several years ago, Donald W. Davis stopped making visits back to New Britain, Connecticut. He felt shame for what had happened to the Stanley Works, the city's largest employer, which he had led from 1966 to 1988--from its best days to the beginning of the layoffs and plant closings that, after he was gone, finally reduced Stanley's presence in New Britain to a collection of mostly empty factory buildings and reproachful former workers.

Davis by then no longer lived in New Britain. He had sold his Dutch Colonial home, which he had painted a bright and optimistic yellow, and had moved with his wife to Martha's Vineyard, where their summer house on seven acres of rolling lawn became their main residence. It was an entirely different setting, but the trip back to New Britain for visits was easy enough--less than four hours by ferry and car--and Davis at first made it often. Like many chief executives of his era, he had been deeply involved in the life of the city that, in his day, had supplied thousands of Stanley's workers. He had served on the board of education for many years and was its president for a while. The six Davis children attended the public elementary schools.

But in the late 1990s, the visits home stopped. Meeting former Stanley employees on the streets, in restaurants, at theYMCA, where Davis still went to exercise, became too painful. "They just moaned about what was happening to this great company," Davis told me. He had tried to share their sadness, to distinguish his stewardship from the accelerated pace of layoffs and the disregard for New Britain that had become so striking after he was gone--as if he were a victim too. But he wasn't really. The people he encountered had lost their jobs against their wishes, while he had retired on schedule, a wealthy man. And he had, after all, initiated the layoffs. No one blamed him, Davis maintained. But the encounters with former Stanley workers became, as Davis put it, "much too personal." So he stayed away.

When we renewed our acquaintance a few years into his self-exile, I found a restless, often passionate man, unable to put behind him his final years as chief executive. At eighty-one, still stocky and agile, he was grateful for good health so late in life. Age showed only in his hair, which was pure white, and in his eyes, which became tired and bloodshot in the late afternoon, although when I suggested that we take a break in our conversation, which had started in the morning and had continued through lunch at a noisy seafood restaurant, he waved me off, intent on his recollections. He no longer bothered with the suits and sports jackets of his CEO days, but he did have on a white button-down shirt. He was running a leadership seminar twice a week during the fall semester at the Massachusetts Institute of Technology, where he shared a small, cluttered office with two other instructors.

Davis rarely canceled a class; the seminar he led became a last connection to his former business world, a final public platform. Sitting in on a class in the late afternoon, listening to him draw on his experiences from his Stanley days, I imagined that beyond the nineteen young peo- ple seated in the room, he was speaking to all those he knew back home, explaining that he had done as well as any executive could, in a very changed world, to preserve Stanley as it was. And that could not be done.

The Stanley Works illustrates, as well as any Fortune 1000 company, the accelerating deterioration of job security in America over three gen-erations of chief executives, a deterioration that Davis and his counterparts in the first generation resisted for a while, reluctant to let go of the expiring norms. So did their workers. For almost ninety years, from the 1890s until the late 1970s, the thrust of American labor practices had been toward lasting attachments of employers to workers and vice versa. There were lapses and backsliding in those decades. Descriptions of labor practices during the 1921-22 recession, for example, are remarkably similar to labor practices today. But the direction was toward job security, not away from it. Efficiency seemed to require it. So did union power, government policies, community expectations, and social norms. Even the Depression, with its mass unemployment, produced in reaction labor laws that in the post-World War II years strengthened job security. We had decided as a people--managers, politicians, and workers--that job security had value, and in pursuit of that value, we lifted ourselves out of insecurity. And then, starting about 1977, midway through Davis's twenty-one-year term as chief executive, there was a U-turn.

Over the next twenty years, the achieved job security disintegrated in the United States. Layoffs were the medium. Each step in the disintegration was a novelty and a shock. But the layoffs continued, and in 1984 the Bureau of Labor Statistics began to count "worker displacement." By 2004, the bureau had counted at least 30 million full-time workers who had been permanently separated from their jobs and their paychecks against their wishes. Huge as that number was, it did not include the millions more who had been forced into early retirement or had suffered some other form of disguised layoff, masking the magnitude of the problem. A more comprehensive survey would very probably have found that 7 or 8 percent of the nation's full-time workers had been laid off annually on average--nearly double the recognized layoff rate. And the percentages crept higher as the years passed.

Davis remembers vividly the circumstances that brought on the U-turn. The experience was, in his word, "traumatic." He awoke in 1979 to find that customers for Stanley's hand tools were defecting in alarm- ing numbers. The lure was Asian tools. Once-shoddy socket wrenches, screwdrivers, claw hammers, saws, levels, chisels, pliers, and measuring tapes imported from Asia had gradually become indistinguishable in quality from Stanley's offerings, and at 60 percent of the price--a feat Davis and his counterparts in many other industries had not anticipated.

Scrambling to respond, they cut prices and, hoping to preserve profits, they began to cut labor costs, at first through attrition and then through layoffs. Hundreds of other companies were caught in a similar experience. From then on, job security unwound in America. Layoffs became the measure of our national retreat from the dignity that had been gradually bestowed on American workers over the previous ninety years. What started as a necessary response to the intrusion of foreign manufacturers into the American marketplace got out of hand. By the late 1990s, getting rid of workers had become normal practice, ingrained behavior, just as job security had been twenty-five years earlier.

That did not happen without resistance, particularly in the 1980s and early 1990s. Community groups, for example, tried to purchase and reopen shut factories, the goal being to reemploy the working people who gave the community its existence. The Roman Catholic Church joined in this endeavor, and issued two pastoral letters in the 1980s opposing job destruction. But then the church fell silent, as did the communities, which disintegrated without the steady jobs that had sustained them. Government regulation had protected the jobs of nearly 13 percent of the workforce, those employed in airlines, trucking, public utilities, telephones, banking, and railroads. And then deregulation, starting with President Jimmy Carter, precipitated endless reorganizations in those industries, and endless layoffs to accommodate the reorganizations, until reorganization and layoff finally became the norm. Organized labor also protested, but union membership and power were already in decline, and after 1981, when President Ronald Reagan fired and then replaced the nation's striking air traffic controllers, strike activity in support of job security--or in support of any other demand, for that matter--declined precipitously. The old assumption that a worker out on strike had his job waiting once the strike ended was gone.

Just as layoffs began to be a source of national anxiety, mainstream economic theory completed an about-face that in effect endorsed layoffs and diminished the pressure on the nation's presidents and on Con- gress to preserve job security. The dethroned way of thinking had recognized a central role for government in protecting workers in a free market economy. Entrepreneurial, hard-driving managers were essential to keep the economy vibrant and growing. But they ran roughshod over workers unless they were restrained by government rules and regulations, including rules that strengthened labor's bargaining power. The marketplace would not provide job security without pressure from government. That way of thinking, born in the New Deal in the 1930s and greatly expanded over the next three decades, died in the 1970s.

The new intellectual framework took the opposite view, and in so doing validated what was already beginning to happen. Companies were freeing themselves from the many obligations to their employees that had accumulated over the years, and now mainstream economics blessed that endeavor. In the process, government was depicted as an obstacle to prosperity. Unfettered enterprises, the argument now went, would expand more rapidly and, over the long run, share their rising profits with their workers, doing so voluntarily through job creation and raises. If that did not happen--and it did not happen for tens of millions of people who lost their jobs--well, that was the fault of the job losers themselves. They had failed to acquire the necessary skills and education to qualify for the increasingly sophisticated jobs that were available. They lacked value as workers. And the argument took hold. Sanford M. Jacoby, the economic historian, citing a study typical of this period, noted that "workers with at least some college education were more likely than less educated workers to view fairness as 'recognition of individual abilities' instead of 'equal treatment for all.' "

The new economic theory, making each worker responsible for his or her own job security, interacted fatally with the actual layoff experience. Layoffs, we are told, do not happen to people who are valued by their employers. The layoff says that you have failed in your endeavors to improve your skills and to be flexible, innovative, congenial, and hardworking. The damage to self-esteem from this message is enduring. It shows up frequently in people who have been laid off, whether or not they work again, and yet it is ignored in the political debate. Job creation and full employment are held up by Democrats and Republicans, and nearly all the experts who advise them on policy, as sufficient antidote. Putting the laid-off back to work in new jobs solves the problem. There is income again and even prosperity, or the potential for it. But mental health is not easily restored.

Psychologists and psychiatrists are just beginning to recognize that layoffs chip away at human capital by eating at self-esteem on a mass scale. It is like acid rain eroding the environment, according to Dr. Theodore J. Jacobs, a professor of psychiatry at Albert Einstein College of Medicine and New York University School of Medicine in New York. He says: "Even if a person is accurate in saying, 'I did a really good job, and I can see that the company is in a bad way and they have to lay off a lot of people and it is really not about me,' there is seldom an escape from the inner sense of 'Why me?' In other words, one has some sense that one has failed and the outside world has made that judgment. And that self-perception dovetails with existing inadequacies that many people feel about themselves."

The Great Depression was less damaging. Millions of people lost their jobs then, but the majority blamed flaws in the market system, not in themselves. They demanded that government fix the flaws. That collective response, which helped to produce the New Deal, is missing today. Implicit in self-blame is acquiescence to layoffs, now the American condition.

All this was still well in the future when Don Davis became chief executive of the Stanley Works in 1968. Job insecurity in those days-- at the Stanley Works and most other manufacturers--went no further than the temporary furloughing of blue-collar workers when sales weakened. The white-collar staff--clerks, secretaries, salespeople--were not touched. "We thought of them as part of management," Davis said. But at the factory level, some workers would be told to stay home until production picked up again, which it always did in those truly prosperous years. Seniority dictated who was furloughed first, and in what order they would be recalled, which they always were. "That was a very important thing, that recall; it made people feel they still had this connection with Stanley," Davis said. Seniority rights continued to accrue during the stay-at-home period, and health insurance remained in effect. These were Stanley's ways, and the ways of many American companies.

The onslaught of imports starting in the late 1970s changed those ways. As customers defected, sales plummeted and failed to bounce back. Nowhere was that more on display than in the auto industry's struggle with Japanese imports. But nearly every manufacturer was hit, and the steep recession in 1981 and 1982 compounded the damage. The old world has never returned. Visit the tools department at Home Depot, which is Stanley's biggest single customer, purchasing 12 percent of its annual output in 2004, and the array of products shows Stanley painfully struggling to stand out. The company's yellow and black colors still dominate the shelves where measuring tapes are stacked, the clip-to-the-belt models whose steel blades spool out across a room and quickly retract into stubby cassettes at the click of a lever. Many of the claw hammers bear Stanley's name, and also the scraper blades, the linoleum-cutting knives, and every variety of saw--hacksaws, wood saws, keyhole saws, compass saws, pull saws. But even on these shelves, the colorful tools of other companies are well represented. And the Stanley label no longer dominates the displays of socket wrenches, screwdrivers, adjustable squeeze-handle pliers, levels, wood planes, counter punches, chisels, and bolt cutters.


Excerpted from The Disposable American by Louis Uchitelle Excerpted by permission.
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