Rifling through Google News this morning, I saw numerous headlines reporting layoffs affecting corporations (HP, Timberland, T-Mobile USA, etc.) and local governments. Spring has sprung, and economic recovery beckons … safety and security for all is just around the corner.
As Americans in the 21st century, we (luckily) live in a society/culture that values education. It’s revered, sitting right up there with other pillars of our society, such as American Idol, Facebook and Angry Birds. One might argue that the pursuit of education should be a lifelong mindest and worldview, rather than a set activity for a specific amount of time whose tangible output is a piece of paper … but never mind about that. For now, we’ll just focus our attention upon the piece of paper. Why? Because that piece of paper is a supposed passport to a “better world” … or, at least in this case, a better job.
For most white collar jobs in the United States (which pay more than blue collar/service sector jobs) one shouldn’t bother to apply unless they have a college diploma. Again, never mind that the diploma doesn’t guarantee victory, but it serves rather more like a lottery ticket … now that you have it, you have a chance to win. Without it … sorry, Charlie. Even with it, the outlook can be grim.
So what happened? You went to college, fully expecting to graduate into a cushy gig. Ah, the optimism of youth … that generally only works if you have experience, and most college graduates don’t really have much in this department, aside from possibly an internship or two. In the meantime, in order for you to get that diploma, you had to place yourself in debt up to your hairline. Big debt, big money, paid out in Federally backed dollars. You think borrowing money from Tony Soprano is bad, borrowing from Uncle Sam is a wee bit worse … even if you file bankruptcy, you still owe that money. It’s something you can’t get away from, like a bad tattoo. If you die, the debt is forgiven. Anything north of death, fuhgeddaboutit.
The reason you took on the debt in the first place was to earn the diploma so you could get a good, high-paying job, which you better hope you land because you have to pay off the student loans you took out because you … I think we’ve fallen into a recursion, here. But you get me.
I know, I know, I hear some wailing “Nay, nay, I went to college so that I could learn and nothing more.” Maybe so, but I’m betting you missed all the parties. I’m also betting that your protest is something of a fib. Virtually everyone goes to college in the hopes that by doing so they will better themselves, and the most evident way of doing so is economically. Very few do it only for the love of learning (it’s a shame that most of us don’t have that luxury). If that’s one’s noble goal, using a library card is both infinitely easier and cheaper.
So, let’s say you graduate from college, rucksack of debt firmly on your back … you now have the diploma and you can reasonably vie for a lucrative, high-cachet entry level position. Let’s say you go after a few, and you land one. Judo kudos … but please don’t forget the reality of the situation. The thing to remember is that working for many big companies is often like working for the Mafia, but the cafeteria food is rarely as good. As soon as the company deems that they don’t need you any more, you’re gone. As in, two behind the ear in a parking lot gone (metaphorically speaking, of course). Even if you’ve done a great job and your getting clipped had nothing to do with job performance, you can still get dropped like a hot potato when it’s convenient for the company.
How does doing a great job every day, showing up to the office singing “High-ho, High-ho, It’s Off to Work We Go” put you in this unfortunate position?
Here’s how … thanks to the double-edged sword of technology (inexpensive telcom, information technology, etc.), it’s possible for anyone to open an account through which they can electronically buy and sell shares in publicly listed companies. Thomas Friedman brilliantly addresses this dynamic in “The Lexus and the Olive Tree,” calling the participants the “Electronic Herd” (an apt description). The effects that the Electronic Herd have on the overarching system are considerable. The Electronic Herd places its bets – sorry, invests its money – in companies which it believes will provide a solid return on investment. This investment in a given company is, of course, made only after careful consideration of the company’s balance sheet, leadership and products/services, as opposed to overhearing a solid “stock tip” whispered at the bar during a T.G.I. Fridays happy hour. This never happens because it is so foolish. Nah, never …
Anyway, said investment is made and the Herd wants to see returns. Now, dammit. It’s like a video game. We pushed the button and now we want to see shit blow up. We want to receive faster-than-immediate rewards for our brilliant investment move … Pavlov’s dog on speed. So, there we are, salivating on our shoes, waiting for our cookie. The lever has been pressed … where’s the Oreo? Company leadership knows that it has to give the investors/traders what they consider to be sufficient return on investment (higher dividends, stock price soaring like a falcon with a bottle rocket up its ass, market share increasing, etc.) Everything has to look like it’s coming up roses and will always be so – or the Herd’s investment in the company can flee to other havens with the flick of a fickle finger. As you may have guessed, this perception is very difficult for a company’s leadership to maintain. It’s far, far easier for a market/company to be affected by global events now than in the past. Hyperconnectivity exacerbates this … now that investors/traders can have access to breaking news practically before it happens via a wireless device they can check while in line at the grocery store, under a table while in a meeting, on the john, or what-have-you, companies have to go out of their way to assure shareholders that all is well and will continue to be so. This means that they have to present a robust, pink-cheeked, healthy picture of their current status and for their immediate future … and the immediate future these days has evolved into meaning the next 90 days or financial quarter.
This has an interesting, two-fold effect. On the one hand, it means that as long as companies are in this rabid short-term, knee-jerk reactionary mindset, its employees aren’t safe. So long as the ship is sailing on a smooth sea, all is well … but as soon as icebergs appear and the sea gets too rough, bad things starts to happen. What’s a quick way to help stay afloat? Throw a few of the crewmembers overboard … let the sharks snack on ’em. A very quick way to reduce costs (thus helping ye olde income statement) is to reduce headcount … get rid of a percentage of employees. Yes, this means you and me, despite how hard and smart we’ve worked and all we’ve contributed to the company’s profits and well-being to date. When “The Cull” in a company begins, you can feel it. There’s a funny old saying that goes, “Nothing travels faster than the speed of light – except office gossip.” This often inspires a chuckle and a knowing nod from the reader because it is so very, very apt. And it is never more true than when the gossip is about blood in the water. If the rumor of layoffs are on the air, there is a palpable reek of fear riding the stale office air alongside the smell of burnt popcorn and cheap coffee coming from the break room. After what seems like an eternity passes and the axe finally falls, it feels like it cuts through the organization and hits ground with the same force as the meteor that killed the dinosaurs.
In many cases, the mass lopping is very much fueled by fear. The company’s leadership sees that they’re not going to make their quarterly numbers, so they start trying to figure out how to lighten the load. I’ve seen brilliant, productive and motivated people – ranging from senior vice presidents to software developers – kicked to the curb during a vicious fit of pruning. It’s as if rather than approaching a Bonsai tree with delicate and elegant scissors, company leadership has gone to the shed and returned with a Husqvarna chainsaw suitable for downing redwoods. They jerk that mighty engine to life and have at the limbs with the spinning blade in a fear-stoked frenzy, throwing a potpourri of bedlam into the air.
Please don’t misunderstand … I’m not sayng that all companies are like this, but a vast, painfully uncomfortable number of them are. I’d simply like you to be aware of what’s out there before you throw in your lot with an organization that will toss you away like a bottlecap when they’ve decided they’re done with you. I do, in fact, believe that some people should be let go, but I think it should be based primarily upon performance and not driven by fearful impulses which often lead to irrational decisions that may be regretted later.
So earnings need to be propped up? Throw a percentage of the employees onto the street. Leadership and management should consult the handy-dandy (s)hit list they keep ever-updated, reflecting those who aren’t “team players” or quite “meeting expectations.” Figure out how much headcount has to be cut in each area, then sharpen the long knives.
Never mind the impact to the individuals being laid off. Never mind the intangible impact to the company via the reduction in the morale of the remaining employees (who now fear that they’re next). Never mind the fact that much of the work being done by those laid off still remains … it still has to be done by someone. Again, the morale of the “survivors” is further negatively affected by the fact that they’re often asked to “pick up the slack” and do the work of those who were laid off – this, on top of their regular job … you know, the one they’re afraid of losing? Never mind that this gumming up of the work flow may in fact cost the company considerably in terms of delivering on strategic initiatives that have beepromised to the street, to investors and to consumers. Never mind the impact to local economies due the reduction in buying power of those who were laid off. Never mind any of that. Screw it, as it were.
Another way that this could be handled is through the easy and fun game of offshore outsourcing. What this means is that while many American workers are in fact being relieved of the burden of their jobs (you’re welcome, weary, steadfast workers!), said jobs are not being forced upon the remaining workers, thus increasing the downward spiral of morale and decreasing their productivity. No, what is happening instead is that the jobs formerly occupied by American workers are not being eliminated … instead, they’re being moved across the planet. (“Your position is being moved to a more cost-effective location in Timbuktu. Want to move there and be paid in local currency? No? Here’s a box … pack up your stuff and be out by noon, OK?”) In this way, the work is still being done, but it is being done by workers abroad who work for a fraction of what those pesky, pain-in-the-ass American employees work for. You don’t have to listen to employees bitching about this and that, nor do you have to pay them a “competitive salary” or deal with their annoying benefits. None of that when the jobs are moved to such exotic locales as India, Lithuania, etc. It really cuts down on costs, you betcha … that’ll keep the shareholders happy, by George.
As Clyde Prestowitz points out in his book The Betrayal of American Prosperity, many CEOs of publicly-traded companies are now more beholden to shareholder interests than to national interests. Additionally, companies have additional incentives to offshore outsource jobs beside cost-saving initiatives. Prestowitz writes,
“There are many reasons for this long-running trend. The one usually mentioned in popular commentary – inexpensive labor- is the least important … The second major reason is the tax holidays, capital grants free infrastructure, labor wage agreements, and regulatory exemptions that many countries use to entice investment by targeted global companies and that the United states does not match. The third reason is political pressure from countries like China who make it clear that if a global company wants to do business there that it best demonstrate that it is a friend of China. The fourth reason is Corporate tax rates. US rates are the highest in the world except for Japan’s.* The fifth reason is onerous and complex US regulatory procedures. A sixth reason is the difficult labor union-management situation in some US industries. Pure cheap labor is usually (not always) the last reason.”
So, above and beyond the cost saving of shipping your job abroad that will favorably massage the bottom line and assuage the shareholders, companies have multiple other incentives to shunt jobs to foreign shores. While the government could iron out a lot of these looming issues and provide corporations with the appropriate incentives to keep jobs here, waiting for such action to take place and to distill into tangibles would be futile.
It is fine and good to seek education … but we must be aware of the associated costs and the challenges to be faced once we cross the threshhold into the next phase. Further, it’s fine and good to seek employment with a large, publicly traded company … but again, we must remain aware of the dynamics of that particular arena which may turn around and bite us.
This is The Terrain, this is the world today. We have to “hedge our bets” in such a world … and individual, personal action is required. We have collectively become idle and atrophied, looking to political and corporate entities to provide for our sustenance and welfare, when we should have been looking to ourselves.
* Editor’s Note: One comment is merited here. While some data support Prestowitz’s view, many analyses argue otherwise. For instance, according to Forbes, ‘… while U.S. corporations (and many supporting politicians) argue that American tax rates are too high, the average U.S. corporate income tax is just one percentage point below the median effective rate of their peers in the Organization For Economic Cooperation and Development, OECD.’ That notwithstanding, US corporations have numerous incentives to send jobs to climes where the cost of labor is substantially less expensive.