Table II presents a sample of 10 large U.S. companies that have shed labor, each mentioned repeatedly in accounts of America's layoffs. 11 In total, they jettisoned almost 850,000 workers between 1990 and 1995. All of these companies employ fewer workers today than five years ago; thus the layoffs appear to be permanent. The companies and others like them are the ones criticized as hard-hearted and uncaring. As the table shows:
· After adjusting for inflation, the collective output of all 10 firms was down 9.7 percent. · The companies used 34.4 percent fewer workers, however, so output per worker surged nearly 25 percent, or 5 percent a year. ('The Economy's Good News: The Upside of Downsizing' BG #146, National Center for Policy Analysis)
· "Thus their performance greatly exceeded the economy's average annual productivity gain of roughly 1.5 percent. 12 Since rising productivity plays a vital role in rising living standards, it is incongruous to celebrate productivity gains yet denigrate downsizing. That's not all. With the exceptions of Sears and Boeing, the companies in Table I emerged from downsizing more competitive and thus more likely to survive. Those who want to identify "good" firms and "bad" firms should take note: if firms don't survive, nobody has a job. More often than not, Wall Street approves of hard-nosed decisions to downsize as companies become more profitable and stock prices rise. Indeed, stock price gains among the companies listed in Table I averaged more than 130 percent from 1990 to 1995, compared to 86 percent for the S&P 500 companies overall. (Moreover, at 3.13 percent, the dividend yield for the 10 stocks listed in Table I averaged more than that (2.88 percent) for the S&P 500 companies over the 1990-95 period. Reinvesting all dividends, a $100 investment at year-end 1990, spread equally across each of the 10 firms listed in Table I, would have grown to $269.16 (an average annual rate of 21.9 percent), as compared with only $214.95 (16.5 percent annually) for an S&P 500 investment.)" (ibid)
- "Telephone service is another rich example of how the economy as a whole benefits as some workers lose their jobs [see Table III ]. In 1970 the industry employed 421,000 switchboard operators, and Americans made 9.9 billion long-distance calls. By 1994 Americans were making 83.4 billion long-distance calls. Yet new switching technology allowed telephone companies to downsize to 176,000 operators. (Federal Communications Commission, Statistics of Communications Common Carriers, 1994-95 (Washington, D.C.: U.S. Government Printing Office, 1995). At the same time jobs have been pared from this segment of the telecommunications industry, they have been added to others. Employment in the cellular telecommunications segment, for example, increased from 15,927 at the beginning of 1990 to 68,165 by the end of 1995, for a net gain of 52,238 jobs in six years.)" (ibid)
· In 1970 the industry handled only 64 calls a day for every operator, but by 1994 the volume of calls handled by each operator jumped to 1,300. (ibid)
· "Without the boost in efficiency, today's volume of long-distance traffic would require 3.6 million operators, or 2.9 percent of our labor force, instead of the 0.14 percent it actually takes. ( U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, September and various issues, 1996. Hourly wages of telephone operators also grew at a pace one-third to one-half better than average during the 1990s. From 1990 to 1995, operators' hourly wages increased at an average rate of 4.04 percent annually, compared with only 2.66 percent for all other clerical workers and 2.91 percent for hourly employees as a whole." (ibid)
· "Americans would be worse off in two ways: we would lose the goods and services 3.4 million workers now produce elsewhere in the economy, and we would pay six times as much for our long-distance telephone calls. ( Figures are based on the amount of work time required for a typical manufacturing employee to afford a five-minute daytime residential call from New York to Los Angeles, calculated as the price of the call divided by average hourly manufacturing wages. For 1970 this calculation is ($2.25/$3.35) = 0.67 hours = 40.3 minutes, and for 1994 the figure is ($1.40/$12.06) = 7.0 minutes. Based on AT&T's new One Rate Plan (15 cents anytime, anywhere), the 1996 work time figure is 3-1/2 minutes.) /2 minutes.) " (ibid)
