Debate Over Plant Closings Misses Point
It may be hard to believe but the biggest political issue in Washington right now is whether employees should be given two months’ notice before losing their jobs.
A proposal requiring employers to give 60 days’ notice of plant closings and layoffs is part of the big trade bill scheduled for a vote in the Senate today after receiving overwhelming approval in the House last week.
But President Reagan threatens to veto the trade bill because he objects to the plant closing amendment and congressional Democrats threaten to override his veto, but are unsure they have the votes to do so.
Why all the controversy? Surely, most people would say, a person is entitled to notice before losing his or her job.
Most people would be right. As economist Robert Z. Lawrence of the Brookings Institution puts it: “Landlords and tenants give each other 30 days’ cancellation notice in the standard lease, and the real estate market hasn’t collapsed.” In other words, the thought behind a plant closing notice is sensible: to allow an individual about to lose a job time to prepare for it--perhaps even to find a new job.
You’d think such notice would already be routine in U.S. industry as it tries to cope with global change.
It isn’t routine. The General Accounting Office says U.S. firms, on average, give their employees two weeks’ notice of going out of business--although large unionized firms do far more. But even GAO’s findings are fought over, as the plant closing quarrel has become an ideological struggle between big business and big labor over who should make decisions about employment and industry.
Fears Further Curbs
The issue is not new. Proposed legislation in the 1970s called for two years’ notice and one year’s severance pay, says labor expert Richard McKenzie of Clemson University. After failing repeatedly to get through Congress, the proposal has been reduced to requiring companies employing more than 100 people to give 60 days’ notice of factory shutdowns or of mass layoffs involving a third of the company’s work force.
But business lobbies oppose even that, fearing that any law would only open the way for further regulation, bringing the U.S. system closer to that of Europe, where companies must apply to the government, argue before labor courts and pay heavy severance in order to lay off workers.
However, as Europe’s complex of regulations made firing expensive it also made hiring risky, and it has discouraged the creation of new jobs and new industries as much as it has preserved the old. One result is hideous unemployment. The Netherlands has 14% unemployment, for example; Italy has 15.7%; France has 10.4%, and West Germany has 8.8%. Europe holds few lessons in accommodating change.
Japan, meanwhile, has its own system for declining industries. The Japanese government, explains Yale economics professor Richard Levin, selects industries to be phased out--as it did with aluminum, petrochemicals and electrically produced steel when energy costs made them uncompetitive internationally.
Companies in those industries were then required to find jobs for their employees at other companies. And the firms hiring the displaced workers were paid subsidies by the government for hiring them.
Curiously neither U.S. labor nor business holds up the Japanese system as an example, probably because the government’s strong role discomforts business and Japan’s labor policies discomfort U.S. unions. Japanese industry uses a lot of contract and part-time labor--only one-third of the work force enjoys lifetime employment--and its company unions allow managements discretion in reassigning employees. The government and industry broke attempts to organize more powerful unions in the early 1950s.
The truth is, foreign models seldom apply. The U.S. system must find its own way to keep industry vital while providing work with dignity for our people. And the emphasis should be on renewing older industry, not merely preserving it; on plant openings more than plant closings.
In that respect, Massachusetts has a program that asks business to give employees and the state 90 days’ notice before going out of business. (The notice is voluntary, although Gov. Michael Dukakis has been saying in his presidential campaign that it is required).
But politics aside, the program works. Under the Mature Industries Law of 1984, state agencies use the 90-day period to help employees get new jobs, and they can also commit to help the business modernize.
As lender of last resort, the state has laid out $5.5 million in loans since 1984, leveraged by an additional $31 million of private money. And that has helped some of Massachusetts’ old apparel and tool-making companies to stay alive--not with handouts but with new machinery and new approaches to their business.
The perfect solution? Nothing is perfect, and change isn’t easy. But at least Massachusetts is showing what government, business and labor can do with less ideological argument and more intelligent effort.
