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Layoffs and Their Consequences

Written by Louis UchitelleAuthor Alerts:  Random House will alert you to new works by Louis Uchitelle

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On Sale: April 10, 2007
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Synopsis|Excerpt

Synopsis

Layoffs have become a fact of life in today’s economy; initiated in the mid 1970s, they are now widely expected, and even accepted. It doesn’t have to be that way.In The Disposable American, award-winning reporter Louis Uchitelle offers an eye-opening account of layoffs in America–how they started, their questionable necessity, and their devastating psychological impact on individuals at all income levels. Through portraits of both executives and workers at companies such as Stanley Works, United Airlines, and Citigroup, Uchitelle shows how layoffs are in fact counterproductive, rarely promoting efficiency or profitability in the long term. Recognizing that a global competitive economy makes tightening necessary, Uchitelle offers specific recommendations for government policies that would encourage companies to avoid layoffs and help create jobs, benefiting workers, corporations, and the nation as a whole.

Excerpt

The Stanley Works

Several years ago, Donald W. Davis stopped making visits back to New Britain, Connecticut. He felt shame for what had happened to the Stanley Works, the city’s largest employer, which he had led from 1966 to 1988—from its best days to the beginning of the layoffs and plant closings that, after he was gone, finally reduced Stanley’s presence in New Britain to a collection of mostly empty factory buildings and reproachful former workers.

Davis by then no longer lived in New Britain. He had sold his Dutch Colonial home, which he had painted a bright and optimistic yellow, and had moved with his wife to Martha’s Vineyard, where their summer house on seven acres of rolling lawn became their main residence. It was an entirely different setting, but the trip back to New Britain for visits was easy enough—less than four hours by ferry and car—and Davis at first made it often. Like many chief executives of his era, he had been deeply involved in the life of the city that, in his day, had supplied thousands of Stanley’s workers. He had served on the board of education for many years and was its president for a while. The six Davis children attended the public elementary schools.

But in the late 1990s, the visits home stopped. Meeting former Stanley employees on the streets, in restaurants, at the YMCA, where Davis still went to exercise, became too painful. “They just moaned about what was happening to this great company,” Davis told me. He had tried to share their sadness, to distinguish his stewardship from the accelerated pace of layoffs and the disregard for New Britain that had become so striking after he was gone—as if he were a victim too. But he wasn’t really. The people he encountered had lost their jobs against their wishes, while he had retired on schedule, a wealthy man. And he had, after all, initiated the layoffs. No one blamed him, Davis maintained. But the encounters with former Stanley workers became, as Davis put it, “much too personal.” So he stayed away.

When we renewed our acquaintance a few years into his self-exile, I found a restless, often passionate man, unable to put behind him his final years as chief executive. At eighty-one, still stocky and agile, he was grateful for good health so late in life. Age showed only in his hair, which was pure white, and in his eyes, which became tired and bloodshot in the late afternoon, although when I suggested that we take a break in our conversation, which had started in the morning and had continued through lunch at a noisy seafood restaurant, he waved me off, intent on his recollections. He no longer bothered with the suits and sports jackets of his CEO days, but he did have on a white button-down shirt. He was running a leadership seminar twice a week during the fall semester at the Massachusetts Institute of Technology, where he shared a small, cluttered office with two other instructors.

Davis rarely canceled a class; the seminar he led became a last connection to his former business world, a final public platform. Sitting in on a class in the late afternoon, listening to him draw on his experiences from his Stanley days, I imagined that beyond the nineteen young peo- ple seated in the room, he was speaking to all those he knew back home, explaining that he had done as well as any executive could, in a very changed world, to preserve Stanley as it was. And that could not be done.

The Stanley Works illustrates, as well as any Fortune 1000 company, the accelerating deterioration of job security in America over three gen-erations of chief executives, a deterioration that Davis and his counterparts in the first generation resisted for a while, reluctant to let go of the expiring norms. So did their workers. For almost ninety years, from the 1890s until the late 1970s, the thrust of American labor practices had been toward lasting attachments of employers to workers and vice versa. There were lapses and backsliding in those decades. Descriptions of labor practices during the 1921–22 recession, for example, are remarkably similar to labor practices today. But the direction was toward job security, not away from it. Efficiency seemed to require it. So did union power, government policies, community expectations, and social norms. Even the Depression, with its mass unemployment, produced in reaction labor laws that in the post–World War II years strengthened job security. We had decided as a people—managers, politicians, and workers—that job security had value, and in pursuit of that value, we lifted ourselves out of insecurity. And then, starting about 1977, midway through Davis’s twenty-one-year term as chief executive, there was a U-turn.

Over the next twenty years, the achieved job security disintegrated in the United States. Layoffs were the medium. Each step in the disintegration was a novelty and a shock. But the layoffs continued, and in 1984 the Bureau of Labor Statistics began to count “worker displacement.” By 2004, the bureau had counted at least 30 million full-time workers who had been permanently separated from their jobs and their paychecks against their wishes. Huge as that number was, it did not include the millions more who had been forced into early retirement or had suffered some other form of disguised layoff, masking the magnitude of the problem. A more comprehensive survey would very probably have found that 7 or 8 percent of the nation’s full-time workers had been laid off annually on average—nearly double the recognized layoff rate. And the percentages crept higher as the years passed.

Davis remembers vividly the circumstances that brought on the U-turn. The experience was, in his word, “traumatic.” He awoke in 1979 to find that customers for Stanley’s hand tools were defecting in alarm- ing numbers. The lure was Asian tools. Once-shoddy socket wrenches, screwdrivers, claw hammers, saws, levels, chisels, pliers, and measuring tapes imported from Asia had gradually become indistinguishable in quality from Stanley’s offerings, and at 60 percent of the price—a feat Davis and his counterparts in many other industries had not anticipated.

Scrambling to respond, they cut prices and, hoping to preserve profits, they began to cut labor costs, at first through attrition and then through layoffs. Hundreds of other companies were caught in a similar experience. From then on, job security unwound in America. Layoffs became the measure of our national retreat from the dignity that had been gradually bestowed on American workers over the previous ninety years. What started as a necessary response to the intrusion of foreign manufacturers into the American marketplace got out of hand. By the late 1990s, getting rid of workers had become normal practice, ingrained behavior, just as job security had been twenty-five years earlier.

That did not happen without resistance, particularly in the 1980s and early 1990s. Community groups, for example, tried to purchase and reopen shut factories, the goal being to reemploy the working people who gave the community its existence. The Roman Catholic Church joined in this endeavor, and issued two pastoral letters in the 1980s opposing job destruction. But then the church fell silent, as did the communities, which disintegrated without the steady jobs that had sustained them. Government regulation had protected the jobs of nearly 13 percent of the workforce, those employed in airlines, trucking, public utilities, telephones, banking, and railroads. And then deregulation, starting with President Jimmy Carter, precipitated endless reorganizations in those industries, and endless layoffs to accommodate the reorganizations, until reorganization and layoff finally became the norm. Organized labor also protested, but union membership and power were already in decline, and after 1981, when President Ronald Reagan fired and then replaced the nation’s striking air traffic controllers, strike activity in support of job security—or in support of any other demand, for that matter—declined precipitously. The old assumption that a worker out on strike had his job waiting once the strike ended was gone.

Just as layoffs began to be a source of national anxiety, mainstream economic theory completed an about-face that in effect endorsed layoffs and diminished the pressure on the nation’s presidents and on Con- gress to preserve job security. The dethroned way of thinking had recognized a central role for government in protecting workers in a free market economy. Entrepreneurial, hard-driving managers were essential to keep the economy vibrant and growing. But they ran roughshod over workers unless they were restrained by government rules and regulations, including rules that strengthened labor’s bargaining power. The marketplace would not provide job security without pressure from government. That way of thinking, born in the New Deal in the 1930s and greatly expanded over the next three decades, died in the 1970s.

The new intellectual framework took the opposite view, and in so doing validated what was already beginning to happen. Companies were freeing themselves from the many obligations to their employees that had accumulated over the years, and now mainstream economics blessed that endeavor. In the process, government was depicted as an obstacle to prosperity. Unfettered enterprises, the argument now went, would expand more rapidly and, over the long run, share their rising profits with their workers, doing so voluntarily through job creation and raises. If that did not happen—and it did not happen for tens of millions of people who lost their jobs—well, that was the fault of the job losers themselves. They had failed to acquire the necessary skills and education to qualify for the increasingly sophisticated jobs that were available. They lacked value as workers. And the argument took hold. Sanford M. Jacoby, the economic historian, citing a study typical of this period, noted that “workers with at least some college education were more likely than less educated workers to view fairness as ‘recognition of individual abilities’ instead of ‘equal treatment for all.’ ”

The new economic theory, making each worker responsible for his or her own job security, interacted fatally with the actual layoff experience. Layoffs, we are told, do not happen to people who are valued by their employers. The layoff says that you have failed in your endeavors to improve your skills and to be flexible, innovative, congenial, and hardworking. The damage to self-esteem from this message is enduring. It shows up frequently in people who have been laid off, whether or not they work again, and yet it is ignored in the political debate. Job creation and full employment are held up by Democrats and Republicans, and nearly all the experts who advise them on policy, as sufficient antidote. Putting the laid-off back to work in new jobs solves the problem. There is income again and even prosperity, or the potential for it. But mental health is not easily restored.

Psychologists and psychiatrists are just beginning to recognize that layoffs chip away at human capital by eating at self-esteem on a mass scale. It is like acid rain eroding the environment, according to Dr. Theodore J. Jacobs, a professor of psychiatry at Albert Einstein College of Medicine and New York University School of Medicine in New York. He says: “Even if a person is accurate in saying, ‘I did a really good job, and I can see that the company is in a bad way and they have to lay off a lot of people and it is really not about me,’ there is seldom an escape from the inner sense of ‘Why me?’ In other words, one has some sense that one has failed and the outside world has made that judgment. And that self-perception dovetails with existing inadequacies that many people feel about themselves.”

The Great Depression was less damaging. Millions of people lost their jobs then, but the majority blamed flaws in the market system, not in themselves. They demanded that government fix the flaws. That collective response, which helped to produce the New Deal, is missing today. Implicit in self-blame is acquiescence to layoffs, now the American condition.

All this was still well in the future when Don Davis became chief executive of the Stanley Works in 1968. Job insecurity in those days— at the Stanley Works and most other manufacturers—went no further than the temporary furloughing of blue-collar workers when sales weakened. The white-collar staff—clerks, secretaries, salespeople—were not touched. “We thought of them as part of management,” Davis said. But at the factory level, some workers would be told to stay home until production picked up again, which it always did in those truly prosperous years. Seniority dictated who was furloughed first, and in what order they would be recalled, which they always were. “That was a very important thing, that recall; it made people feel they still had this connection with Stanley,” Davis said. Seniority rights continued to accrue during the stay-at-home period, and health insurance remained in effect. These were Stanley’s ways, and the ways of many American companies.

The onslaught of imports starting in the late 1970s changed those ways. As customers defected, sales plummeted and failed to bounce back. Nowhere was that more on display than in the auto industry’s struggle with Japanese imports. But nearly every manufacturer was hit, and the steep recession in 1981 and 1982 compounded the damage. The old world has never returned. Visit the tools department at Home Depot, which is Stanley’s biggest single customer, purchasing 12 percent of its annual output in 2004, and the array of products shows Stanley painfully struggling to stand out. The company’s yellow and black colors still dominate the shelves where measuring tapes are stacked, the clip-to-the-belt models whose steel blades spool out across a room and quickly retract into stubby cassettes at the click of a lever. Many of the claw hammers bear Stanley’s name, and also the scraper blades, the linoleum-cutting knives, and every variety of saw—hacksaws, wood saws, keyhole saws, compass saws, pull saws. But even on these shelves, the colorful tools of other companies are well represented. And the Stanley label no longer dominates the displays of socket wrenches, screwdrivers, adjustable squeeze-handle pliers, levels, wood planes, counter punches, chisels, and bolt cutters. What all the tools have in common, including Stanley’s, is origin: the great majority are made outside the United States, particularly in Asia.

Shifting manufacturing abroad was not in Davis’s thinking in the late 1970s and early 1980s. Struggling to prevent the imports from gaining a foothold, he tried at first to bring down labor costs by shrinking the previously sacrosanct white-collar staff, not through layoffs—that would not happen to America’s white-collar workers for a few more years—but by attrition. He froze hiring and decreed that as white-collar workers resigned or retired, those who remained would have to pick up the work of their departed colleagues in addition to their own. “Wearing two hats,” he called it. The goal was a reduction of six hundred employees over two years, or 15 percent of the white-collar staff—a mild cutback by later standards, but worthy then of a display of anguish. Davis and his second in command, the chief operating officer, engaged in an exhausting tour of Stanley’s plants, concentrated then in the Northeast and Midwest. They divided them up, and at each stop, one or the other explained to the assembled workers how the company’s survival had become the issue. “We had a meeting of all the employees, salaried, white-collar, blue- collar, management, everybody,” Davis said, “and where that was too big a crowd, we’d break it up into two or three groups. Then we’d have the night shift in another group. And he or I spoke to each one of these groups about the revolution that had taken place in competition, and how we had to respond to it if we were going to survive as a major player.”

The attrition worked. The white-collar staff shrank as planned. But it was not enough cost-cutting and Davis turned to his factory workers. For the first time, he went beyond temporary furloughs into outright dismissal. He also began—reluctantly, he insisted in old age—to shift some operations from New Britain to lower-wage cities. As he did so, he figured out a system, by trial and error, for handling layoffs with a minimum of backlash. He even reduced the procedure to a checklist, and on the day I sat listening in his classroom at MIT, he introduced that checklist to his nineteen seminar students, all selected because they seemed to have the potential to become chief executives themselves.

“Let’s say you are a plant manager of four hundred people and you are not going to need most of them because of automation,” Davis explained. “Your boss tells you that the new machinery will arrive in three months and the switchover has to be made without a breakdown in production. Your job as leader of this group is to minimize the outcry and keep production going. What do you do?”

Several students raised their hands. Be honest with the workers about what you are doing, one suggested. “Of course you explain to the workers,” Davis replied, impatiently, “but what about the politicians, the editor of the newspaper, the union officials, the mayor—all the people who can accuse you of messing up the town? You need a game plan for telling them, in just the right order in advance of the public announcement, so that when they hear the news later, they can say, Yes, we knew. It takes the sting out of layoffs.” And he illustrated the point. You wait until just after the newspaper’s deadline to tell the editors, he explained, so they know in advance but can’t break the news to their readers ahead of the public announcement. “Stanley had a whole timeline of people who had to be notified and explained to if we had a significant layoff.”

For all his regrets, Davis by the mid-1980s had clearly become skilled at layoffs. He had bitten into the apple, if you will. “I was forced to get used to layoffs,” he told me. What he had begun, his handpicked successor, Richard H. Ayers, an industrial engineer with a bent for efficiency, accelerated. Ayers closed a huge distribution center in New Britain and reopened it in Charlotte, North Carolina—away from unions. Other operations also moved south, or overseas. Under Ayers, the merchandise Stanley sold in America was increasingly not made in America. Sledgehammers and crowbars now came from a Stanley plant in Mexico, socket wrenches from a company purchased in Taiwan, a trickle of door hinges and latches from China, the result of a new joint venture. Under pressure from Ayers, two hundred workers who made hinges for kitchen stoves accepted a wage cut of $2 an hour as a condition for keeping the operation in New Britain. “I looked at this process as being evolutionary,” he said.

But Stanley’s directors weren’t satisfied. Ayers, they felt, was not moving fast enough. So in 1997 they hired an outsider, John M. Trani, as chief executive, luring Trani away from General Electric with a signing bonus of one million Stanley stock options and a seven-figure annual salary package two to three times greater than either Davis or Ayers had ever earned. And Trani, who had won a name for himself at GE, excelling at the company that invented the modern American layoff, did move faster. Over the next six years, he closed forty-three of Stanley’s eighty-three factories. The total payroll plummeted to 13,500 people from nearly 19,000. Some work was outsourced to contractors; other operations were combined in one factory. New Britain was a big loser in this shuffle. By the fall of 2002, the payroll there had dwindled to 900 employees, a far cry from the 7,000 people who had worked for Stanley in multistory brick factory buildings that dominated the downtown when Davis joined the company in 1948 as a twenty-seven-year-old junior executive, freshly graduated from Harvard Business School, which he had attended on the GI Bill.

Not much besides the headquarters building is left in New Britain. That building, strangely, is new, a modernistic, three-story structure put up by Davis in 1985 in a wooded industrial park as a last, futile gesture of loyalty to the city of Stanley’s birth. In the fall of 2002, if you stepped out of the elevator on the third floor, where Trani and his top executives had their offices, against the opposite wall stood a wooden rolltop desk, beautifully restored, a desk once used by Frederick T. Stanley, who founded the company in 1843 in a workshop at the rear of his home in what was then a rural village. Along another wall, portrait paintings of eight earlier chief executives, each ornately framed, each man a stalwart in the civic life of the growing industrial city, paid tribute to the illustrious past. The eight paintings were lined up opposite the entrance to the chief executive’s office, and as Trani came and went, those long-gone chiefs peered out at him. Elsewhere along the quiet carpeted halls were black-and-white drawings, in Norman Rockwell style, of fathers and sons, circa 1930s, working serenely together at home, fixing things with Stanley tools.

All this Trani made a point of ignoring, as if he had chosen corny, anachronistic adornments so he could snub them, which he certainly did. He is a chubby, tall, tightly scheduled man. He had an hour available in mid-November that year, his administrative assistant had told me, and if that did not work, January or February was the next available slot. I took the hour in November and drove to New Britain. We met alone in a conference room next to his office, sitting across from each other at a round, barren table. He answered my questions fully. Nothing I asked fazed him. He was very pleasant. But he did not permit our conversation to veer into a discussion of alternatives to layoffs. There were no alternatives, he insisted. “People who basically look at reality as it exists, without hoping for it to change, and deal with the hand they are dealt, so to speak, they are the successful ones,” he said.

Reality for Trani at the outset of his stewardship meant sales revenue per factory. As Trani tells the story, the first thing he did when he took over in 1997 was to divide the total annual sales revenue ($2.6 billion that year) by the number of factories. The outcome, $31 million in average sales per factory, was too low, much lower than his main competitors. So he closed factories left and right, particularly the ones with the highest wages—i.e., in the United States—and by 2002 sales per factory were approaching $55 million, even though sales revenue, the numerator in the Trani equation, was still stuck at $2.6 billion. Too many competitors were offering too many hand tools at cutthroat prices. Costcutting, which meant mainly labor cost-cutting, was the only way out. “Layoffs and plant closings,” Trani explained, “are not such a rare event anymore that one generally makes a big deal out of them.”

He was equally casual about New Britain. He kept the headquarters there, he said, only because a better opportunity elsewhere had not yet presented itself. He emphasized the “yet.” Given the opportunity to disparage the hometown, Trani rose to the occasion, as if he wanted to burnish his image as a rootless executive. He had recently been vilified in newspaper editorials and media accounts for attempting to move Stanley’s headquarters of record to a post office drop in Bermuda to avoid $30 million a year in U.S. taxes. The public exposure had forced him to cancel the plan, but he was still defiant. Several competitors had reorganized as Bermuda corporations and had gained a competitive advantage, he told me. They had not been challenged by local politicians as he was, one of the critics being Mayor Lucian Pawlak of New Britain. “I understand that he does not like globalization,” Trani said, “but that’s the way it is. The mayor thinks that Stanley owes New Britain forever. Forever! We have discussions all the time. Nice guy. Great guy. But he has a view that I think is so far from reality that it creates angst when it does not neces- sarily have to be that way.”

Davis and Ayers would never have belittled the mayor, or New Britain, so openly. They see themselves, in hindsight, as incrementalists and Trani as a CEO who does things “by overnight fiat,” as Davis put it. They also see themselves as more humane. They walked the factory floors, greeting workers by name, asking after their families. Trani rarely hobnobbed. Not surprisingly, he also abandoned the periodic dinners for workers celebrating twenty-five, thirty, and forty years with the company, dinners that Davis and Ayers made a point of attending. And yet, in the end, for all their disdain for Trani’s ways and his unseemly speed, they were not in disagreement with the outcome. They accepted as probably healthy for Stanley’s profitability the reduction in the workforce and in the number of factories. Trani, in effect, finished what they had started.

Ayers in particular felt this. He noted, for example, that while Trani moved most of the production of Stanley’s retractable clip-to-the-belt tape rulers from New Britain to a factory in Thailand, it was he, Ayers, who had acquired the Thai factory in the first place. The same was true for steel door hinges and latches. A staple of the Stanley product line, they were once manufactured in a great variety of shapes and sizes only in New Britain—and under Trani only in Xiolan, China, near Shanghai. Ayers started up the Chinese joint venture that Trani embraced with unnerving speed, employing a thousand people in Xiolan. In doing so, Trani closed a decades-old hinge factory in downtown New Britain—the five-story building is still shuttered—and laid off five hundred workers. He also shut a newer, smaller hinge factory in Richmond, Virginia, that Ayers had started up. Ayers, like Trani, had sought to lower labor costs, but more gradually. The nonunion Richmond factory was an interim step.

Ayers, a slightly built, courteous, patient man, had moved more slowly, he said, because for him a social norm existed that kept him in check, a norm that disappeared on Trani’s watch. The Thai factory, in the Ayers strategy, would have made steel measuring tapes only for the Asian market, not for American consumers. Selling those tapes in the United States, he felt, would have offended customers, many of them carpenters and construction workers who belonged to unions that campaigned against purchasing merchandise not made in America. Hammers manufactured in China might be acceptable to these workers, but not the retractable steel measuring tapes, a signature Stanley product. “We had a very high user base in the unions,” Ayers said, “and there was still resistance on their part in the mid-1990s to imported products.” By the late nineties, however, the Made in America sentiment had dissipated. Americans had become focused on quality and price, and uninterested in origin. That a product was made abroad ceased to be a negative.

But even if Ayers had enjoyed a freer hand, he still would have held back on layoffs. He simply did not have the stomach, he said, for the upheaval that Trani thrived on. Much later, that was the justification he offered for his early departure from Stanley in 1997 at age fifty-five, still in his prime, only three years older than Trani, his replacement. Soon Ayers, in retirement, was shuttling between a summer home on a New Hampshire lake and a winter one in Florida, devoting considerable energy to Habitat for Humanity, the philanthropy whose volunteers, Jimmy Carter among them, build housing for the poor with their own hands. Of his decision to retire, he insisted that it was not Stanley’s board of directors that threw him out, but his own distaste for the work ahead. “I disliked the difficult decisions you had to make in terms of their impact on people and I knew there was more of that coming,” Ayers said. “I decided that it was time for someone else to do it. I could not.”

Davis to Ayers to Trani—the dismantling of Stanley’s workforce through three generations of chief executives finally got to Diane Sirois. After twenty-five years she still worked for the company, at its last factory in New Britain of any consequence, an elongated, two-story building where Stanley once made all of the retractable measuring tapes that it sold in the United States, millions of them each year. In 1995, Ayers had taken a stab at keeping most of this manufacture in New Britain. He had spent millions on machinery to automate the assembly process. When I visited that year, Diane was a curly-haired thirty-nine-year-old climbing over the new machinery, which resembled a Lilliputian railroad, the tracks only a few inches apart.

Small pallets, the Lilliputian equivalent of railroad flat cars, moved slowly along the tracks, each bearing a partly assembled measuring tape. The pallets halted briefly at automated stations to receive components: a black plastic cap was welded to a reel at one stop, the spooled metal blade was inserted at another, an outer casing was added at a third, the belt clip at still another. There were several of these railroads. Each could be reprogrammed to produce different models: the 30-footer, the 25-footer, the 16-footer. Only a handful of workers was needed to keep the machines running. In 1995, however, men and women seated at work- stations still assembled many of the measuring tapes by hand. But Ayers assured me that more railroads would be installed, as soon as funds were available to invest in the contraptions.

As they arrived, hand assembly would be phased out. Production would remain in America, but not as many jobs. The survivors would be those with enough gumption to train for the automated assembly lines and then staff them, responding like emergency workers when the various red beacon lights installed along the lines flashed on, signaling a breakdown. Diane had decided to be among the survivors. She liked new ventures, and the automated railroad system required greater skill and ingenuity than sitting at a worktable repetitively assembling steel and plastic parts into measuring tapes. While we talked she gestured disdainfully at a group of assemblers seated nearby. They were doomed, she said. But she was not. She had spotted a way to immunize herself against layoff. Under Stanley’s labor agreement with the International Association of Machinists and Aerospace Workers, those employees with the least seniority had to go first in a layoff, even if they performed essential tasks. As they departed, colleagues with more seniority were reassigned to their jobs. Sirois, with eighteen years at Stanley then, was vulnerable. One of those expressionless assemblers she had just belittled could bump her. But the contract had an out. While others balked at the training needed to operate the new machinery, she had jumped at the opportunity, knowing that, under the contract, she could be bumped by a colleague with greater seniority only if that colleague could learn her job in a week. Diane had needed three months of training to master the skills required to fine-tune and troubleshoot the railroad. She did not think anyone could do it in less time. “Job security is why I bid for this job,” she told me then.

Visiting the tape factory seven years later, I walked through a building that was a ghost of its former self. The second floor was almost deserted and soon to be closed off entirely. In the mid-1990s it had bustled with workers assembling tape measures by hand. So much was gone that Stanley no longer invited Boy Scouts and civic groups to tour the plant. The tours would be an embarrassment, Terry Christensen, the plant manager, explained. Downstairs, not a nickel had been spent on more automation. The hand assembly had nearly disappeared, but the Lilliputian railroad system had not been expanded to replace the assemblers. That system had turned out to be more breakdown-prone and less efficient than Ayers anticipated. But rather than invest in better technology—better automation—John Trani eliminated jobs in New Britain and shifted to hand assembly in Thailand, which now was the focus of expansion.*


From the Hardcover edition.
Louis Uchitelle|Author Q&A

About Louis Uchitelle

Louis Uchitelle - The Disposable American

Photo © Fred R. Conrad

Louis Uchitelle worked as a reporter, a foreign correspondent, and the editor of the business news department at the Associated Press before joining The New York Times in 1980. He has been writing about business, labor, and economics for the Times since 1987. He was the lead reporter for the Times series “The Downsizing of America,” which won a George Polk Award in 1996. He has taught at Columbia University and was a visiting scholar at the Russell Sage Foundation in New York in 2002–2003. He lives with his wife, Joan, in Scarsdale, New York.

Louis Uchitelle is represented by the Knopf Speakers Bureau (http://www.knopfspeakersbureau.com).

Author Q&A

Q: What drew you to corporate layoffs as a theme?
A: As an economics writer for The New York Times, I often use companies and their workers to illustrate what is happening to the economy itself. What I kept running into were layoffs, first among blue-collar workers and then in white-collar ranks as well. What started as a legitimate response to encroaching foreign competition became overly used and very damaging.

Q: How did that happen?
A: There was an evolution. We came into the mid-1970s having built up for nearly a century this very strong job security ethic. Unions played a role. So did the New Deal legislation that came out of the Depression. But employers also contributed. The biggest, most important corporations saw job security as a good thing. They wanted their employees to feel attached to the companies that employed them, and to build up over a
career the skills and experience needed to run these complex organizations. Then in the mid-1970s, we began to dismantle this job security. There was resistance, sometimes stiff resistance. But by 1997 the resistance had been overcome and we had acquiesced as a nation to the easy and frequent use of layoffs.

Q: Did corporate executives switch on a dime, or were many reluctant at first to lay off workers?
A: Many were reluctant. I have known, for example, three generations of chief executives at the Stanley Works, the tool manufacturer in New Britain, CT. The first two were reluctant to engage in layoffs. Strikes and temporary furloughs were very much part of their corporate repertoire, but not layoffs, not the permanent disposal of their workers. Nevertheless, starting in the late 1970s, each went a little further into layoffs, and ultimately the third CEO embraced them. Over time, the social constraint had dissolved.

Q: As this process unfolded, did those who were laid off speak openly to you about what had happened to them?
A: Not at first. Although the layoffs were widely reported, many of the victims felt shame for having lost their jobs, as if they had failed and their neighbors and friends had not. They tried to hide their layoffs, even from family. That was in the 1980s. People don’t hide anymore. They stopped doing so in the 1990s. Their experience became too commonplace.

But the psychological damage is still very much there. With very few exceptions, people see their layoffs as statements by their employers that they are valueless as employees. It is a torturing thought. Self-esteem is damaged. Lives are warped or set back. You see that in the men and women who appear in The Disposable American, blue collar and white collar alike.

Q: Describe the psychological damage that laid-off workers experience.
A: The layoff damages our mental health in two ways. As the sociologist Richard Sennett points out, people create for themselves a life narrative. Career is essential to that narrative. “Not to make a career out of one’s work,” Sennett writes, is “to leave oneself prey to the sense of aimlessness which constitutes the deepest experience of inadequacy.”

The other form of damage is more direct. Dr. Theodore Jacobs, a prominent psychoanalyst, puts it this way: “Even if a person is accurate in saying, ‘I did a really good job,’ and I can see that the company is in a bad way and they have to lay off a lot of people and it is really not about me,’ there is seldom an escape from the inner sense of ‘why me.’ In other words, one has some sense that he or she has failed and the outside world has made that judgment.”

Q: You argue that as a society we reinforce this psychological damage. Explain?
A: As a society, we hold the victims responsible. Many companies rate their employees and when layoffs come, the lowest rated get the boot. Even when that does not happen—when the layoffs are impersonal, as they so often are—we insist that Americans are in control of their lives and have it within themselves to land on their feet. If you are laid off, then what you must do is retrain or go back to school to qualify for the good jobs that are out there. If you fail in this endeavor you have only yourself to blame. I am describing a message that, in various forms, comes incessantly from our politicians, our policymakers, our social
scientists, and even some union leaders.

Q: What is wrong with this message?
A: There isn’t a skills shortage. The number of jobs requiring education and skill fall short of the number of qualified people seeking them. I ran across this shortfall frequently in my reporting for The Disposable American. The men and women portrayed in the book often ended up in jobs beneath their skills and at wages well below their lost pay. This happened despite the best efforts of many of them to retrain and get more education. We have developed a whole industry of job coaches and career coaches who are selling the idea that if you can polish yourself properly and present yourself properly, keep your anger under control and get the right training, you’ll land a good job. They are selling a ruse.

Q: Aren’t some layoffs nevertheless necessary? Doesn’t globalization force us into labor cost-cutting?
A: Yes, it does. Some labor cost-cutting is unavoidable in the present global setting. But we should not be blaming the victims, and we should recognize that American employers have taken the process too far. The United Airlines maintenance center in Indianapolis is an example—a chapter is devoted to this story. The center’s cutting edge technology meant that the mechanics could overhaul narrow-bodied airliners in fewer days than competitors. The facility worked so efficiently in the late 1990s that at least one foreign airline considered sub-contracting maintenance to Indianapolis. Global competition would have worked in our favor. But when United and its mechanics got into a struggle, United chose to lay off the mechanics and close the maintenance center, depriving the United States of an industrial jewel. Maintenance was outsourced to low-wage contractors in the south. Twenty years ago, before layoffs became an easy and acceptable practice, that could not have happened. United and its mechanics would have been forced to negotiate an agreement—and they would have. Our acquiescence to layoffs has lifted this healthy constraint.

Q: In your book, you describe the various ways in which layoffs are disguised. Why is this done?
A: During the 1980s and early 1990s, layoffs were often quite cruel. Workers were openly cut from their jobs by corporate executives who saw in this public display of aggressive management a means of supporting their stock prices and their reputations on Wall Street.

But as layoffs spread from blue collar to white collar and up the income ladder, there was a backlash. It came in the mid-1990s and many of the nation’s employers responded by modifying their behavior. The layoffs continued to be as numerous as ever, but they were often hidden. They came as buyouts and premature retirements and outsourcing in which the employee whose task was outsourced resigned rather than switch over to the new contractor at a lower wage with fewer or no benefits.

Q: How many people have been laid off in the United States?
A: I estimate at least 30 million full-time workers since the early 1980s, just on the basis of the worker displacement surveys conducted biennially by the Bureau of Labor Statistics. The 30 million works out to roughly 4 percent of the nation’s full-time workers, on average, in any given year. The bureau’s survey does not catch most of the disguised layoffs, however. Add those in and the percentage rises to 7 or 8. That’s a lot.

Q: You also examine the effect of a layoff on workers who remain at the company. Tell us about that.
A: The survivors often feel vulnerable and less attached to their companies. They call in sick more often, for example, and are less productive. I tell a story about a group of software developers at Xerox who became so unhinged by layoffs elsewhere in the company that instead of concentrating on their software work, they spent more time in meetings trying to demonstrate to their bosses, and to themselves, that they were valuable.

More to the point, the most successful companies do not engage in layoffs, or do so only rarely. They see them as counter-productive. Southwest Airlines is an outstanding example of this abstinence, but there are others.

Q: What can we do to end the layoffs or reduce them?
A: I do not have a universal solution. My book is essentially an attempt to make people aware that we have acquiesced to layoffs and how that happened. The barriers came down, one after another, from 1977 to 1997. We cannot undo what has happened, but we can erect new barriers and slow the process. The first step should be a requirement that companies file annual reports detailing how each employee who left the company did so: resignation, early retirement, outright layoff, normal retirement, buyout. These reports would be
published and the public response might begin to generate resistance. Or the companies themselves might limit their layoffs, not wanting to be spotlighted for shedding more workers in a given year than their industry’s average.


From the Hardcover edition.

Praise

Praise

“Uchitelle effectively wrecks the claim that all this downsizing makes the country more productive, more competitive, more flexible. . . . A strong case that the whole middle class is at risk.”
The New York Times

The Disposable American is an overdue wake-up call that could start making the wisdom of layoffs that much less conventional.”
San Francisco Chronicle

“Incisive. . . . An airtight case against the common wisdom that favors job cuts.”
BusinessWeek

“Uchitelle writes about the moral failings of our modern corporate structure with deep and persuasive insight. That alone makes the book a must-read.” —Detroit Free Press

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