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Thursday, April 05, 2007
Alan Reynolds :: Townhall.com Columnist
Layoffs in Perspective
by Alan Reynolds
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Lou Uchitelle of The New York Times has made a career of writing passionately about the plight of laid-off workers. This is not a challenging journalistic mission. Even at the peak of economic booms, it is never difficult to find laid-off workers who face difficulties and are delighted to tell reporters what they think about the boss.

Uchitelle recently penned "The End of the Line as Detroit Workers Know It." For any reporter determined to find bad news in the labor market, Michigan was definitely the place to be. The February unemployment rate was 4.5 percent for the nation but 6.6 percent for Michigan, which had lost 55,300 jobs in a year. For the nation, payroll employment was 2 million higher than a year before. No other state lost jobs.

"The End of the Line" noted that 42,300 people left Michigan last year, which sounds like a sensible thing to do since every other state was adding jobs. To Uchitelle, however, nothing and nobody should ever move. Change is just too scary. "The exodus," in his wild imagination, "is reminiscent of the Dust Bowl migration from the prairie states in the 1930s."

Michigan's Dust Bowl experience cannot be blamed entirely on the auto industry, which is now mainly located in states like Tennessee, Kentucky, California, Texas and Missouri. Before the recent layoffs, Michigan accounted for only 22 percent of all jobs in motor vehicles and parts. Employment in motor vehicles and parts was 1,023,000 this February, down 54,100 from 1,077,100 in February 2006. That is, Michigan lost more jobs than were lost in the nationwide auto and parts industry.

Uchitelle is determined to convert Michigan's unique job woes into what he has called a "festering national crisis." To do that, he simply had to do what New York Times economic journalists do best -- make up numbers.

"Across America," wrote Uchitelle, "more than 30 million people have been forced out of jobs since the early 1980s, the Bureau of Labor Statistics reports, and regaining lost incomes has not been easy. Nearly 50 million new jobs have been created over that same period, according to the bureau, so there are always new opportunities, but more often than not at lower pay."

Comparing nearly 50 million new jobs with "more than 30 million" lost implies a net job gain of less than 20 million since 1984 (the first year these data about displaced workers were collected). In reality, employment rose from 105 million in 1984 to 144.4 million in 2006 -- a net gain of 39.4 million.

If new jobs actually involved lower wages and benefits "more often then not," then real compensation per hour would have fallen dramatically since 1984. On the contrary, the BLS index for real hourly compensation rose from 91.1 in 1984 to 111.5 in 2000, or 1.4 percent per year. Real wages and benefits rose by 1.6 percent a year since 2000, to 120.8 in 2006.

Uchitelle claims that "among those who have lost work, only a third held new jobs two years later that paid as well as those that were lost, according to the bureau's surveys of displaced workers. Another third of those displaced were in jobs that paid, on average, 15 to 20 percent less than their previous employment -- while the final third had dropped out of the labor force entirely."

The ominous remark about dropping out of the labor force is ironic because he began by explaining how GM, Ford and Chrysler are offering six-figure checks to departing workers, many of whom are in their 60s. "Many who left or are leaving were eligible for retirement," he wrote, "having already worked the necessary 30 years." When people retire, they drop out of the labor force entirely. Continued...

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Fat At the Top
Tonight's TV news (and you can find it now on google) reported that Ford paid its top six executives $62 million during the same year (2006) it posted a $12.6 billion loss. Ford CEO Alan Mulally, hired in September, had by the end of the year been paid $28.2 million in salary and perks (such as a $7.5 million signing bonus)---that's for four months' work.

I am curious: do townhall conservatives see anything wrong with a CEO getting that kind of compensation from a company that is meanwhile forced to close plants and lay off tens of thousands of workers? We hear the argument that CEO's are worth that money because they guide the company so well---but they get it even they fail. I remember a Disney CEO getting the boot after about a year during which he was paid something like $40 million.

This sounds like a system in which the cards are stacked against labor and shareholders alike. Why does the country put up with this system, in which American CEOs are paid hugely more than CEOs in any other industrialized country---google "comparative CEO pay" for a shock.

Not Only Michigan II
Its odd, after writing my first comment on this article earlier today I came home to find that my next door neighbor had just been laid off by his furniture company. The irony is that his job had involved traveling to Asia to assure that their plants were running properly. Most of those plants were in China. The US Deptartment of Commerce has just recently increased the tarif on their imports from 7% to 58% in an effort to preserve American Manufacturing jobs. The result was a $4,000,000 tarif bill retroactive to August of 06.

I also noted that the North Carolina Departemnt of Commerce says that new manufacturing plants require about 10% of the employees that were needed in the 80's for the same amount of product. As I noted above there are big structural changes occuring in the economy. Tom Peters noted this about ten years ago and predicts that the service sector is next.

BTW the bright folks who want to raise the minimum wage are just making it happen faster.
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