LAYOFFS
IN TIGHT LABOR MARKET
BY
JULIANNE MALVEAUX
|
With the national unemployment rate
remaining at 3.9 percent for the second month in a row, little
attention is focused on those who have difficulty finding employment.
Instead, the Federal Reserve Board has focused on the
"tight" labor market where supposed worker shortages may
well lead to higher wages and, thus, inflation Indeed, when the
Federal Reserve Board meet this week, they demurred on an interest
rate increase, but issued their standard warning about inflation.
Given recent reports that labor costs rose in the third quarter, the
Fed may feel that inflation worries are founded But isn’t it about
time workers demanded more money for their contributions? After all,
for all this talk of expansion, workers only began to see their wages
rise in late 1998.
What the Fed didn’t say, and what many of the headlines miss, is that thousands of employees are thrust into economic uncertainty because of the pace of layoffs that characterizes our "tight labor market" economy. According to the Bureau of Labor Statistics, there were 936 mass layoff actions this September. Each action involved at least 50 people for a single establishment. Over 106,000 workers were involved. This number was higher than for any month since BLS began collecting this data in April 1995. Most of those involved in mass layoffs came from the manufacturing or service industries. You don’t need BLS data to make the point about layoffs. Perusing the headlines from this week, there have been layoffs at Coca-Cola (part of a plan to reduce the workforce there by 5000 this year), layoffs at Bethlehem Steel, a 40% staff reduction at Discovery.com, a 1700 person layoff because of a merger of the Arkansas-based Entergy Corporation with a Florida utility. MarchFirst, a Chicago-based Internet company, laid off 1000 workers, ten percent of its workforce, this week. Go back a month, and find some of our nation’s blue-chip companies struggling with layoff issues. Xerox announced that they would lay off 8000 workers. The AT&T breakup is likely to generate some layoffs. And thousands of layoffs have been recorded in the faltering dotcom sector, with more than five thousand people losing jobs in October alone. And the beat goes on. There have been slowdowns along with the layoffs. DaimlerChrysler had a weeklong plant closing on October 30. The company needed to slow production down because they sold 14 percent fewer cars than projected during the third quarter. The cost cutting, inventory-reducing slowdown may have been fiscally prudent, but represented a pay cut for 20,000 workers. This represents quite an economic shift in the auto industry. Two years ago, they were involved in labor disputes for forcing overtime. Now, they are forcing workers to take time off. While the volume of layoffs seems high, the 106,000 layoffs recorded in September represent less than one percent of total employment, at 135.4 million workers. Some consider these layoffs a "minor" problem, and point out that most people who are laid off find new jobs within the quarter. They might also note that, thanks to our tight labor market, fewer and fewer workers experience unemployment. But while the unemployment rate is low at 3.9 percent, more than 13 million people, or nearly 9 percent of us, experienced unemployment in 1999. The numbers were higher for African Americans, at 12.6 percent, and Hispanics, at 11.3 percent. Since few workers recover effortlessly from unemployment, and since many move on to jobs that pay less than their previous job, economic hardship is more extensive than the unemployment rate would suggest. With a sluggish stock market, many companies have responded to their stockholder’s demands for higher profits by reorganizing, or merging. They haven’t created new value, but they hope that new organizational structures will increase productivity and profits. Time will tell whether new organizations can increase profits, but generally organizational restructuring causes employment uncertainty, and layoff possibilities. The pace of layoffs measured in September will probably continue, regardless of the tightness of labor markets. The celebrated low unemployment rate, then, does not adequately
reflect the condition of the nation’s workers. Record layoffs, along
with high unemployment rates among African Americans, Hispanics,
youth, and those who live in inner cities, should remain matters of
concern. We have heard warnings about the possibility of inflation,
but where are the warnings about the weakness in our "tight"
labor market? All they hype about worker shortages must make those who
don’t have jobs feel as if their unemployed status is a personal
problem, not a structural one. Yet the record pace of layoffs suggests
that the unemployment rate will begin to rise soon. After all this
economic expansion, can we handle the hardship that comes from higher
unemployment rates? |