More and More U.S. Workers Falling Victim to Companies’ ‘Downsizing’ : Layoffs: Industrial production is growing slightly. But big firms like IBM and Sears are still issuing pink slips as part of a massive restructuring.
It is a Christmas tale worthy of Charles Dickens.
About 1,475 hourly employees of Pratt & Whitney Corp. were informed recently that they would lose their jobs on Christmas Eve, victims of declining markets for the company’s jet engines.
While most Americans are celebrating the holidays, Richard Whitaker, Daniel Welply, Mario Barboza and many others from Pratt & Whitney are wondering how they will support their families and meet their mortgage and car payments after the paychecks stop coming early next year.
When Welply’s 12-year-old daughter, Jessica, asked him earlier this week what he wanted for Christmas, he replied simply: “A job.”
For these workers and many others like them around the country, early signs of an economic recovery across the United States offer about as much immediate hope as a late-night visit from Santa Claus.
While industrial production is growing slightly and employment is beginning to creep upward, many big companies are continuing to eliminate workers as part of a massive industrial restructuring still under way in the United States. As a result, Pratt & Whitney’s workers will join the jobless ranks with many newly unemployed workers from General Motors, Sears and IBM.
And unlike the victims of recessions past, the people who are getting their pink slips now have no hope of being rehired at their old jobs when conditions improve. Instead, they will likely be forced to go elsewhere and settle for jobs that pay far less than the $15-an-hour average wage at Pratt & Whitney.
Whitaker, for example, estimates that his next job, when he finds one, will pay him at least $15,000 a year less than the one he just lost at Pratt & Whitney--a setback certain to rule out his plans to buy a home in 1993.
As such, the steady elimination of high-paying jobs by big employers is expected to have long-term consequences for the American economy. As more and more workers are forced to settle for less, it weakens the consumer base and undermines the strength of the recovery.
“What American business is doing is firing its own customers,” observed Eric Greenberg, research director for the American Management Assn., which has closely studied the problem. “When you cut a lot of high-paying jobs, it has an immediate impact on consumer spending.”
The management association, which regularly surveys 800 top American companies, recently found that these firms have permanently eliminated about 360,000 positions in the past three years and that many more jobs will be on the block in the next six months. In fact, the association estimates that such contractions are on the increase, despite the recovery.
Predictably, Pratt & Whitney has been portrayed in the local newspaper and by labor union officials as a modern-day Ebenezer Scrooge for its decision to fire many long-term, highly paid workers during the Christmas season.
But economists and employment experts say Pratt & Whitney’s decision-making is not an example of unusual employer cruelty, a la Charles Dickens, but a thoroughly modern tale that reflects fundamental business and management realities in the 1990s.
Pratt & Whitney, like many large American companies, is going through a period of what is being called “downsizing”--a term that began with cutbacks in the auto industry and has since been borrowed by other declining industries.
It is based on the premise that cost containment is the best defense against uncertain economic straits. The strategy accepts that a stripped-down company may not be able to exploit major accounts, business prospects or growth opportunities the way a broadly positioned one can. But in exchange, the strategy ensures that such a company is less vulnerable to short-term drops in revenue and more flexible in hard times.
The spectacle of Chrysler Corp. and other high-overhead behemoths reeling and near collapse under huge losses in recent years helped push many firms toward this conservative posture.
At Pratt & Whitney, a division of United Technologies Corp., communications director Michael Sullivan predicted that his firm will cut an additional 2,000 to 2,500 more jobs next year as it continues a slow process of scaling back at its Connecticut plants--a process that began several years ago.
“We hope to emerge from this a smaller company,” he said.
Downsizing is not a direct result of the recession. While Pratt & Whitney’s sales have suffered some as a result of the downturn in the airline industry, the company’s efforts to decrease its U.S. production facilities stem from more permanent factors: cuts in government defense spending, rising costs of health benefits for union workers and better business opportunities overseas.
Harvard economist James L. Medoff said the big companies such as Pratt & Whitney that are now eliminating large numbers of jobs are generally responding to structural changes in the economy, not to the usual ups and downs of the business cycle. “Some of the cyclical problems have stopped, but the structural problems persist,” he said.
Analysts agree that downsizing is an effective tool for cutting costs and improving short-run chances of survival. But it has many critics who see it as shortsighted and destructive--a poor alternative to making creative adjustments to tap into other markets and possibilities.
The American Management Assn. said that less than half the companies engaged in downsizing are making a profit as a result, while the long-term impact on employee morale and productivity has been devastating. “You get to a point where you wonder whether the cure is worse than the disease,” Greenberg said.
Pratt & Whitney’s newly unemployed workers are painfully aware of the difference between their current situation and the short-term layoffs that manufacturing workers often endure during a recession. In 1983, when Pratt & Whitney laid off a large number of its manufacturing workers, most were recalled within a year. But no one expects to be rehired this time.
Welply, 37, said he was stunned when both he and his wife, Laurie, were fired by the company that has employed them each for more than a dozen years. After being laid off and recalled a decade ago, they assumed their seniority would protect them from losing their jobs again.
“It’s like a plane crashing into the same house twice,” he said. “I didn’t think it could happen again.”
Being fired during the holiday season made the adjustment harder. Christmas shopping had to be curtailed, decorations held to a minimum and, of course, there is the additional emotional impact.
“There are people out there who have very high mortgages,” observed one worker. “They are going to lose their homes, they are going to lose their cars. The stress on them at Christmas is tremendous.”
Sullivan said the company chose to announce the job cuts on Dec. 1 in order to prevent the targeted workers from accumulating debts during the holidays, and also to comply with the provisions of a new federal law requiring 60 days’ notice of such layoffs.
But the timing of the announcement was not as upsetting to the workers as was their widely shared feeling that the company’s action could have been avoided--that some more innovative answer could have been found.
“We all know that with these skills and equipment, if we all worked together, other products could be developed,” said John Harrity, organizer for District 91 of the Machinists Union, which represents the Pratt & Whitney workers. “The company could actually grow instead of reducing.”
The union has proposed several alternatives to the layoffs, such as the formation of a joint labor-management conversion committee to develop new products. But the company has rejected these proposals as unworkable.
Pratt & Whitney officials have announced that the cutbacks were necessary because of cuts in defense work and many canceled or delayed orders from the airlines. Company officials also acknowledge that some production work is being shifted to foreign facilities or to non-union subcontractors with lower employment costs.
Welply said Pratt & Whitney now imports airplane engine parts that were previously made at the company’s East Hartford plant. These parts now are coming from Belgium, Japan, Germany, Sweden, Singapore and elsewhere.
Sullivan explained that Pratt & Whitney has been forced to manufacture some parts in foreign countries in order to win contracts there. Russia is one country where Pratt & Whitney officials are currently negotiating such an agreement.
“Countries that buy American products want to share in that; it’s a fact of international business,” Sullivan said.
But the explanations have not tempered the bitterness of longtime workers who talk of the waste of their skills and years of loyalty.
Indeed, anger among these workers grew so palpable inside the plants recently that company officials ordered them to leave at the end of their shifts last Friday instead of working through Wednesday as originally planned. One man employed in the East Hartford plant confided that he was afraid one of his disgruntled co-workers would come to work with a gun and start shooting.
Sullivan said the company genuinely regrets what is happening.
“These people have devoted a good portion of their lives to Pratt & Whitney,” he acknowledged. “It’s hard and sad and depressing, and we just have to get through it.”
The company has tried to ease the hardship by offering workers up to 10 weeks of severance pay and continued health benefits, personal and employment counseling, the help of an outplacement agency and up to $2,000 each for job retraining.
While many workers are taking advantage of these opportunities, those burdened with families, mortgages and car payments say they cannot afford the time or the cost of retraining. One worker who inquired at a local trade school was told the tuition was $13,000 for a three-month course.
Most of the workers fear that they will be forced either to leave Connecticut to find a new job or to accept a lower-paying position with a local machine shop, perhaps one on Pratt & Whitney’s growing list of subcontractors. Like California, Connecticut is not yet experiencing the economic recovery that is occurring in other parts of the United States.
Barboza, 43, who hired on with Pratt & Whitney 3 1/2 years ago after being laid off by General Motors, is preparing to move to another state, if necessary, to find a new job. He and an unemployed friend plan to take a two-week trip along the Eastern Seaboard, distributing resumes as they go.
Whitaker, on the other hand, said he does not have the freedom to either change careers or move to another area. With two young sons already, he and his second wife, JoAnn, are expecting a baby in February. If he moved, he would be forced to leave his 12-year-old son, who lives with his first wife.
While their personal circumstances differ, each of these workers recognizes one fact of life that they have in common: No matter what happens to them in the future, their standard of living is likely to decline.
Medoff said many policy-makers in Washington have overlooked the fact that while the economy is once again starting to create new jobs, these jobs are not as good as the ones that are being eliminated.
The unanswered question in the minds of some economists is whether this continuing loss of spending power by American manufacturing workers foreshadows a kind of Catch-22 for the American economy as it struggles to recover from the recession. As Chrysler Chairman Lee A. Iacocca recently observed, “If we lay off enough people, there’ll be nobody to buy the cars and houses.”
