Downsized and Out

Moisés Naím / Carnegie Endowment for International Peace

In 1997, the board of directors of the Stanley Works, a Connecticut tool company, lured its new chief executive, John M. Trani, away from General Electric with a compensation package that was two or three times those given to any of his predecessors since its founding in 1873. Like many of his peers at other U.S. companies at the time, Trani closed plants, cut costs, downsized and outsourced the company's operations. Six years later, 5,500 Stanley employees had lost their jobs.

This story is one of several that Louis Uchitelle, a New York Times economics reporter, uses to argue that there is something fundamentally wrong with the tolerance that this country has developed for large-scale layoffs. His The Disposable American is a nostalgic, anxious book. Uchitelle writes longingly about a time when corporate layoffs were seen as a stain on a company's reputation and when job security was a reasonable expectation -- a time when the worries of American workers had nothing to do with the vagaries of a globalized economy or the outsourcing of jobs to India or China. The author often relies on an idealized view of the employment practices of the past to sharpen the contrast with the more volatile and insecure present. Still, despite the book's occasional exaggerations ("a layoff is an emotional blow from which very few fully recover"), it is impossible not to be touched by Uchitelle's many real-life tales of sacked workers who, through no fault of their own, were thrown into an economic and psychological maelstrom with weak or nonexistent safety nets to help them and their families.

The problems Uchitelle highlights are important, and some of the solutions he proposes make sense. It is clearly wrong, for example, to give huge tax breaks to the wealthy when working families must struggle with limited health insurance or none at all. Cutting outrageous corporate-welfare programs and using the savings to improve health and education for workers is also an unassailable proposal. Unfortunately, not all of Uchitelle's prescriptions are so easy to defend. Government regulations that would make it costlier for employers to fire workers, for example, are good news for the workers who already have jobs but hurt those who are unemployed and looking for work because higher firing costs reduce companies' propensity to hire.

The Disposable American is too often silent on what could be done to avoid the well-known downsides of the policies it champions. Though Uchitelle knows better than to hold Europe up as a model, many of the policies he favors have a strong European flavor -- even though the usual European cocktail of welfare and labor conditions contributes to chronically high unemployment, sluggish economic growth, unfunded public programs and low productivity. Moreover, Europe's rigid labor markets especially penalize the poor, the unemployed and the unskilled, favoring instead a "labor oligarchy" of securely employed workers already ensconced in jobs. The above-average unemployment rates among Europe's youth and its impoverished immigrants are a factor behind the rising criminality, rioting and social turmoil that disproportionately afflict these groups.

It is also surprising that Uchitelle, who in his day job reports on the U.S. economy, could write a book so neglectful of America's distinct advantages. Although massive layoffs have important economic and social costs, the relative ease with which U.S. companies can trim their payrolls to adapt to changing conditions also has benefits. Millions of jobs regularly disappear from the U.S. economy, but with equal regularity, millions more are created. Indeed, no other industrialized country systematically creates as many jobs as the United States. The problem is that while the job losses resulting from plant closings and downsizing are highly concentrated in time, location and industry, the new jobs appear broadly dispersed throughout the nation, over different sectors and over time.

True, workers who lose jobs often must accept new ones at lower salaries; true, all of that is traumatic and undesirable. But the fact remains that, between 1980 and 2002, the U.S. population grew 23.9 percent -- and the number of jobs increased by 37.4 percent. And the painful private-sector restructuring that has taken place in the United States since the mid-1990s, like the one epitomized by the Stanley Works vignette, has created stronger companies that are the backbone of one of the world's most prosperous, competitive economies -- one that continues to create jobs while all other industrialized economies are growing too slowly or stagnating. Last February, for example, New York Times readers learned that, "in one of the strongest job reports since the start of the recovery in late 2001, the government reported yesterday that the unemployment rate fell to 4.7 percent, its lowest in more than four years. The nation's employers hired workers in nearly every industry." The author of the article? The same Louis Uchitelle who in The Disposable American claims that labor conditions in the United States are a "festering national crisis."

The Uchitelle who wrote this passionate but flawed book would correctly insist that we should be alarmed about the poor quality of the jobs being created, rather than being mollified by their quantity. Unfortunately, his compassionate desire to improve the quality of American jobs makes him too eager to experiment with policies that in the long run are known to hurt those whom he seeks to help. ·

THE DISPOSABLE AMERICAN

Layoffs and Their Consequences
By Louis Uchitelle Knopf. 283 pp. $25.95