Wednesday, April 19, 2006

Recommended Reading: The Disposable American by Louis Uchitelle

I’ve just finished reading Louis Uchitelle’s The Disposable American: Layoffs and Their Consequences.

With several decades of reporting experience, Uchitelle (a New York Times reporter) has witnessed a seismic shift in labor markets. Beginning around the World War I period and continuing through the mid-1970s, the modus operandi at major U.S. companies was to promote job security and long tenure. Private pensions and other benefits that tied workers to their employers were implemented initially in the name of efficiency with the idea that long tenured workers would develop the necessary skills over a career to work. Post Depression, there was tremendous normative and political pressure on even non-unionized companies to share profits directly through wages, profit sharing or generous benefits. The hegemony of the US economy in the post World War II period helped propel job stability and unprecedented growth in living standards.

This all changed in the mid to late 1970s – when recessions and inflations shocked this status quo. Once economic forces began a process of permanent layoffs in industries like steel that were impacted by global competition, they quickly became acceptable in the name of competitiveness. Uchitelle singles out GE’s Jack Welch as the first business leader to make layoffs into a normative business good. Welch bought and sold business like RCA, NBC and Thomson to acquire pockets of demand – and shedding workers throughout GE during the process. This process was duplicated and multiplied in a deregulated economy. In short,

Rather than to try and outstrip competitors in innovation, a costly and risky process, we gave up in product after product. We stopped making subway cars in the United States and various types of high-tech machinery [flat screen monitors or computer components]…American’s entrepreneurial energy focused not on production but on the financial maneuvering and the chasing of profits through acquisition.

Welch’s ideology is nearly hegemomic in business and politcal circle. It is generally accepted that layoffs and downsizing are necessary for economic growth and the general welfare of society. Lay-offs are seen as almost a minor consequence with the idea was that laid off workers could be retooled and re-employed with the help of retraining and outplacement assistance.

Uchitelle’s major contribution is to document that the impact of layoffs far exceeds the statistics reported by the Labor Department. Rather the lay off is experienced as a tremendous negative judgement on an individual’s self-worth – one that produces lasting marks on marriages, mental and even physical health. Many of the Americans tracked by Uchitelle’s story (mostly above-average earners in blue collar and white collar jobs) are traumatized enough take jobs that are significantly below their skill level if they believe they’ll reduce their risk of another stinging lay-off.

The psychological costs of layoffs are exacerbated by the prevailing view that the only solution to the problem of inevitable layoffs is personal reinvention. Uchitelle witnesses laid off mechanics who are given the book “Who Moved My Cheese,” which sells the idea that economic success is within every individual’s reach if they have the right education, training and motivation to seek the jobs of the future. The fact is that such mechanics were already highly-trained, mid-career workers and earning high wages. Even the most successful of the workers tracked by Uchitelle (an individual who went and got an MBA and eventually became a manager at Pratt & Whitney) were unable to recapture their prior earnings. This is even more true among those workers who have been forced into early retirement as businesses functions like human resources have been outsourced.

Uchitelle’s skepticism of training comes not so much from the quality of individual training programs themselves but rather what he sees as the false political compromise offered by Clintonomics. By emphasize the benefits of free trade and hailing the growth of the late 1990s and minimizing the impact of layoffs, political support for retraining programs and policies to reduce layoffs was undercut.

While I don’t disagree with Uchitelle, I have more confidence than he that retraining and other employment security programs can be more than just “burial insurance.” I believe model embedded in Trade Adjustment Assistance – 2 years of unemployment benefits & retraining tuition, plus protection of health care benefits while you retrain – but universalized to all dislocated workers could substantially minimize the current damage inflicted by layoffs.

But in the end, I read Uchitelle as not anti-training, but rather pro-outrage. We need to stop shying away from talking of the ills of layoffs – instead of deriding such a practice as bad news carping. A first step is to pressure the government to start counting underemployment properly to include pressured early retirements and contracted workers. Uchitelle asks us to call for political and moral pressure on corporations engaging in the layoffs – to either follow through on investments that could have made a department or facility competitive, rather than take the easy route of outsourcing. He calls for targeted government regulation to preserve good jobs when that can be done. And, finally to give Uchitelle credit, he embraces an increased commitment to funding for education and retraining – but not as a magic bullet, but rather as a necessary corrective for the layoffs that cannot be prevented.

Can progressives embrace the message suggested by this book? “Government is going to do everything we can to preserve your job—and if we can’t, we’ll offer you enough income support and retraining to get back as close to your old job as you can.” It’s certainly superior message that “layoffs are unavoidable, the economy is producing enough good jobs and all we have to do is just retrain you for them.” To regular working folks in many hard hit towns across the US, I think that seems like BS.

By no means does putting job protection on the progressive agenda mean that we can prevent most layoffs. Globalization is a process that can’t be reversed and autarky – shutting off our market to foreign goods – is neither practicable or advisable. But, it does mean we can’t put the question of worker’s jobs front and center into the debate about which trade deals to approve. And, progressives can more broadly think about what kinds of public investment promote the competitiveness of companies with good jobs at risk of layoffs; policies to promote employee ownership of teetering firms; or government regulation with job protection in mind. I know I have not explored these areas much -- and I think they have been generally neglected by progressives and our think tanks. I have my ideas for the reasons for this - but I think it is a blind spot.

Here are some places to start
Center for Labor & Community Research
Ohio Center for Employee Ownership

Friday, April 07, 2006

Employment for Katrina Victims is Still Elusive

The headlines from today's Labor Department report hail big improvements in the labor market. the overall the employment situation appears to continue to make modest improvements, the reverse trend appears to be occurring among evacuees from Hurricane Katrina.

The Labor Department has been releasing monthly figures on the employment fortunes of Hurricane Katrina evacuees. In recent months, the situation had seemed to be improving. The overall unemployment rate among Katrina evacuees had fallen from 20.5 percent in November to 12.6 percent in February, largely because those families who had returned home were able to find jobs at a reasonable rate (60%), as were about 40% of those who were still evacuated.

The trend turned quite negative in March, however.

  • The overall unemployment rate among Hurricane Katrina evacuees jumped from 12.6 to 16.5%.
  • Among the 45 percent of Hurricane Katrina evacuees who have yet to return home 7 months after the storm, 34.7 percent were unemployed – meaning they were looking for work and unable to find any.

Who are those that have not returned home 7 months after the Hurricane--a near plurality of evacuees according to an official government survey that does not even include those living in shelters? For sure, it includes all of those whose homes have been destroyed and have not been able to return home (even in a trailer, I assume). As we know, this is a predominantly low-income group and in New Orleans, largely people of color. The 34 percent employment rate indicates that a first tentative step towards personal recovery remains elusive for evacuees--even when the overall labor market is tightening. The ongoing tragedy is that job opportunities exist in New Orleans and in other parts of Louisiana--but the federal government's unwillingness to act and local government snafus are stopping people from getting housed.

Thankfully, wherever they are Katrina evacuees can apply for amd receive Disaster Unemployment Assistance (DUA) benefits. As of now, these workers can collect DUA for 39 weeks, an additional 13 weeks of jobless benefits beyond what is normally provided because of action taken by Congress in March. Workers unemployed as a result from Hurricane Katrina, the DUA program ends June 3rd and the program ends June 24th for those families unemployed by Hurricane Rita. If you know anyone still displaced by the Hurricane, please pass along information on the DUA program from the NELP fact sheet by visiting:

Monday, April 03, 2006

Immigrants and Our Future

The current immigration debate has gotten under my skin. It is one thing when the anti-immigrant think tank, Center for Immigration Studies is given time on NPR. But it is another thing when even liberals like Paul Krugman are bemoaning the impact of immigrants on the American economy – citing studies that show that immigrants reduce the wages of Americans with less than a high school degree by 8 percent.

Hundreds of thousands of immigrants marching in streets across the country, as well as numerous human rights advocates and scholars, have given voice to the inalienable human rights of immigrants and the contributions immigrants make to US communities every day. NELP's Immigrant Worker Project asserts that protecting of rights of all who work in the United States regardless of their immigration status upgrades the working conditions of us all. These arguments should be sufficient to turn the tide for immigration reform, but to make matters worse those who say that immigrants will weaken U.S. prosperity have it wrong.

From my perspective, immigrants are crucial to the future of the U.S. economy. President Bush has skewed the debate by stating that immigration reform is needed to “match willing workers with willing employer on a job Americans won't do.” It has caused some progressives to claim that more Americans would do entry level jobs if the wage were higher or if employers were forced to hire people with criminal records and others on the margins if immigrants were not available.

I think we need to look at a reframing the question. “Immigrants are needed so the U.S. will continue to have a vibrant workforce to continue robust growth and support an aging society.” What do I mean? The demographic changes in the U.S. are staggering. In 2000, just 12 percent of the U.S. population was 65 and over. Because of the impact of the baby boom generation, by 2010 this figure rises to 19 percent and by 2030, it doubles to 25 percent. Everyone knows what this means – declining payroll tax revenue for social security and Medicaid and strains on our healthcare system.

According to the population reference board, fertility for white non-Hispanics in the U.S. is just 1.86—meaning that this segment of the population is currently failing to replace itself and won’t provide a workforce equivalent to its current generation.. In this context, immigration is the key counterweight. An aging generation will require health care workers, building service workers, retail workers and many other types of places where an aging generation can spend its accumulated wealth. Legal immigrants with a clear pathway to citizenship will be eager to fill these jobs.

Brought above the table, the wages of immigrant workers will be properly taxed and invested in the infrastructure of the nation. If labor laws and employment protections are very clearly extended to immigrants and are agressively enforced, employers won't be able to take advantage of immigrants to lower working standards and wages. (Which makes it important not to create two-tier guest worker programs). With opportunities to become citizens, immigrants will be able to climb a ladder from entry level and use the talents they have to become entrepreneurs or professionals and enhance economic growth. With opportunities for education, a second generation of immigrants will further add to the human capital of the economy. In a climate of growth, native born Americans (especially those with access to education) will benefit from opportunities to provide value-added goods and services to a working population eager to spend their wages.

In essence, immigration can help turn an economic challenge into an economic opportunity. It is wrong to view economy as a fixed pie, with immigrants only taking from native-born workers. The economy is a vibrant and changing system needing inputs – and immigrants will provide the people power the nation desperately needs.

What is the alternative? Other industrialized nation’s (Japan and Germany) have already been experiencing declining fertility – Japan’s fertility rate is below 1.3. Declining fertility hampers economic growth. Until recently, Japan’s real GDP was growing at less than 1% and Germany was pleased to be growing at a 1% rate. What do people with money do when the economy is not growing? They save it instead of spend it – because they are worried about their pensions not being there fully for them. With less economic activity, young people struggle to find good jobs and parents have to invest more of their wealth in caring for their families. Once you imagine a scenario in the U.S. with cuts to Social Security and Medicare caused by decreasing payroll tax revenue and coming on top of already reduced private pensions, it is not hard to foresee such a down cycle in the U.S. mid century.

Germany has addressed some of its workforce needs through immigration – largely through guest worker programs. However, because such programs have not provided pathways to citizenship, immigrants have not been integrated well into society. In economic terms, the human capital has not developed and Germany has not gotten the new generation of innovators and consumers it needs. In social terms, the results have been social stratification.

Given our history, the argument for comprehensive immigration reform and opportunities for citizenship for undocumented immigrants already her should not be hard to make. Despite dire predictions by the nativists of the time, Irish, Jews, Italians and numerous other immigrants provided a large surge to the working class of the early 20th century and eventually the middle class mid-century. Living in New York City, it is easy to see that Asians, Caribbeans, Latinos and numerous other groups are striking forward on that same path despite major obstacles. If we could all see the plain truth, we’d be closer to enjoying shared prosperity.

Several reports have documented the economic benefits provided by immigrants

Principles for an Immigration Policy to Strengthen and Expand the American Middle Class: A Primer for Policymakers and Advocates, Drum Major Institute outlines how labor protections and immigration reform work together to expand the middle class.
Undocumented Immigrants in Georgia:Tax Contribution and Fiscal Concerns, Georgia Budget and Policy Institute, articulates a methodology for demonstrating the value in other states
Undocumented workers are taxpayers too, Oregon Center for Public Policy
Immigrants in the economy, resources compiled by the National Immigration Forum
The Changing Face of Massachusetts, MassINC and the Center for Labor Market Studies
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