Looking at Labor--and Business

Labor Day, 1987, is an appropriate time to ponder the biblical phrase about reaping what we sow. And what significant elements of American business may be sowing is a lot of trouble for themselves and the country.

Although the signals are mixed, the economy itself seems to be improving. Unemployment is down to 6%, the lowest level since 1979, and the job market for workers with appropriate skills is growing stronger. The U.S. trade deficit is still a disaster area, but American manufacturers are becoming more competitive.

Unfortunately, there is a troubling downside--a squeeze on the living standards of poor and middle-class Americans, and questionable trends in the workplace.

The buying power of the average worker’s paycheck is well under what it was 10 years ago, and in fact has fallen 1.2% in the last year alone. This reflects the weakened bargaining position of labor unions, whose members were prepared in many cases to swallow pay cuts in order to keep their jobs, and the sense of vulnerability among non-union members as well.

Wage restraint was necessary while U.S. companies tried to bring their labor costs more into line with those of foreign competitors. But in some industries foreign competition has been more an excuse than a reason. In reality, the fact that U.S. wage costs are now closer to those in Japan and Western Europe has more to do with the falling dollar than with the shrinkage of U.S. paychecks.

In any event, the stagnation in living standards comes only in part from wage restraint as such. Another factor has been the changing sense of responsibility in many companies toward the people who work for them.

One example is the trend toward greater use of “temporary” employes--workers who may do the same work as members of the regular work force but are supplied and paid by an agency that is compensated by the company involved. In today’s volatile economy, temporary employes can give a company greater flexibility in adjusting its work force in accordance with changing conditions. In practice, however, many firms simply use temporaries to save money, since they are typically not eligible for pensions, paid vacations and other fringe benefits. Over the long haul, a two-tier work force is socially and politically unacceptable.

Then there is the trend toward the payment of bonuses in lieu of pay raises. The use of bonuses as an incentive for performance makes good sense; up to a point, it is in the interest of competent workers themselves. But, in practice, bonuses can turn into a con game. Since bonuses do not become part of base pay, a 10% annual bonus brings a worker less new money after three or four years than a 3% annual pay raise.

To become more competitive, many companies have closed plants and laid off large numbers of workers. The Business Roundtable examined 224 large companies and found that nearly half give more than three months’ notice of plant closings to affected workers and communities. But advance notice of one or two weeks, with little or no severance pay, has been more typical despite the painful effect on workers who must find new jobs, on communities that must find new sources of employment and tax revenues, and on government, which must provide the safety net for displaced workers.

Adding insult to injury, when high-ranking corporate executives lose their own jobs as a result of mergers or company restructuring, they commonly receive “golden parachutes” of a year’s pay or more.

Finally, hundreds of companies have in effect dipped into employee pension funds to finance or resist takeovers or to pay for other expenditures.

Anybody who understands democracy and knows how to count should understand that there will be, and in fact already is, a reaction to such excesses.

Union leaders may or may not prove justified in their current optimism that bargaining leverage will soon swing back their way. But it is already clear that remedies will be sought in legislation and court action.

The Senate has passed a measure that would require 60 days’ notice of plant closures and substantial layoffs--a modest requirement by European standards but one that is being virulently resisted by business lobbyists. By recent count, plant-closing legislation is also being considered by 20 state legislatures. Meanwhile, wrongful-discharge suits are finding an increasingly friendly reception in the courts.

The business people guilty of anti-social behavior in the frequently false name of efficiency and competition are bringing on the very government interference to which they object. To borrow a phrase from the tumultuous 1960s, what goes around comes around.