Francis Rutz Rutz 1 Dr. Oguine ENWR-105-30 Essay 5 20 November 2003 Manning Marable vs. Robert J. Samuelson: The Downsizing Controversies Downsizing has become an acceptable part of modern business. The value of the individual worker has faded from view as companies strive to channel all their energies toward greater profits. According to Manning Marable, in his essay “Fighting for a Decent Wage,” presently we have “companies that only are concerned about profits and not people” (376). Unlike Marable, Robert J. Samuelson points out that this focus on profits may actually be beneficial to our economic system. In his essay, “Downsizing Isn’t All That Heartless,” he states, “the anxieties that unsettle people may make them more prudent and more productive in ways that strengthen the economy” (373). Samuelson definitely deserves credit for his compelling and optimistic argument. However, the facts presented in Marable’s essay must not be ignored. Marable says that, “The typical CEO of America's 100 largest corporations receives about $900,000 in annual salary, and $3.5 million in overall compensation” (376). The astounding difference between these salaries and those of the common workers should send us a negative message. In fact, downsizing is not the answer to our present economic situation, because it will not help the average workers who need to provide for their families, rather, we must make sure that salaries are assigned in a fairer manner. Rutz 2 As Marable puts it, in his essay “Fighting for a Decent Wage,” there has been a decline in living standards for American workers. Too many people do not make enough money to support families, and the situation is not improving. Once, it was a problem faced solely by blacks and other minorities, now white Americans too are feeling the painful effects of poverty. According to a study by Isaac Shapiro, of the Center on Budget and Policy Priorities, “One-half of all Americans living in poverty, nearly 18 million people, are white” (qtd. in Marable 375). This rise in poor white Americans has only occurred fairly recently. “Between 1979 and 1991, the poverty rate for white families headed by an individual between 25 to 34 years old nearly doubled” (375). This is due to the collapse of protective unions and a rise in corporate layoffs, that is why downsizing cannot be a solution to the problem, instead, it complicates it. Another reason is that America operates around a capitalist society that is constantly looking for a way to minimize costs while maximizing profits. This sounds like a very good policy; however, when companies start to put profits above employees, it can lead to mass layoffs that are harmful to our society. In December, 1991, General Motors announced that it was firing 74,000 workers. Barely one year later, Sears, Roebuck and Company fired 50,000 employees. Soon other corporations began to fire thousands of workers to improve their profitability. […] Boeing dismissed 28,000 workers, Philip Morris cut 14,000, and IBM slashed 60,000 jobs. (Marable 376) This is definitely quite shocking, and rightfully so. Manning Marable would like to avoid any future layoffs of this proportion. He suggests that companies should be held Rutz 3 responsible for the individuals they are composed of. Capitalist society or not, companies should place people above profits and not jeopardize the economic wellbeing of their workers in the push for greater economic profits. On the contrary, Robert J. Samuelson believes that companies need not be responsible for the economic success of their individual workers. He says that in a market economy, such as our own, there is no way that downsizing can be prevented. He believes many people are over concerned about downsizing when, in fact, it actually can be very beneficial to society. In his essay, “Downsizing Isn’t All That Heartless,” he states, We are uneasy with the possibility that what’s bad for individuals may be good for society. But this may be, and the argument is not simply that downsizing enables some companies to survive. The notion is broader: It is that the anxieties that unsettle people may make them more prudent and productive in ways that strengthen the economy. (373) Samuelson admits that downsizing can be painful for those victims of it. However, he believes that it is for the greater good. Similar to Marable, he uses historical and statistical evidence to support this position. He says that our country’s past experience revealed the ineffectiveness of concentrating on saving jobs: Rather, we should focus on raising market share and profits. “In the 1980s, economic ideas changed,” said Samuelson. “[…] Companies grew less concerned with saving jobs and focused more on raising market share and profits. The result is that, since then, average unemployment has dropped” (374). Rutz 4 However, throughout my research, I found that the vast majority of writers disagreed with Samuelson. Perry J. Ludy, author of the book, Profit Building, believes that “although downsizing yields short-term shareholder gains, it hampers economic growth and undermines long-term competitiveness” (12). This is directly opposite Samuelson’s point of view. Similarly, Dr. Alan Downs, author of Corporate Executions, presents a strong argument against downsizing. He says that it is only a myth that businesses benefit from layoffs. In his book, he states, “Layoffs are utterly destructive of everything they are mistakenly thought to fix” (xi). These writers, in opposition with Samuelson, agree that layoffs not only hurt the individuals involved, but also are harmful to our economic society and do not have long-term benefits. It is interesting to know that both Samuelson and Marable agree that downsizing has recently become a major part our economy. In addition, they also agree that mass layoffs are not good for our society. Samuelson concludes that they should be more spread out, whereas Marable, goes a step further in his opposition and suggests that it should be stopped entirely. Samuelson says, “[…] The social harm may be muted if layoffs are spread out and not concentrated—as in the past—in slumps or periods of industry crisis” (374). However, they strongly disagree as to whether or not downsizing, as a whole, is beneficial or not. Marable feels companies should look after the welfare of their workers and be held accountable for it, but Samuelson disagrees. Their main disagreement is this: Whether or not we should accept downsizing as unavoidable or do what we can to improve working conditions for those in need of assistance. Rutz 5 I believe Marable’s argument is more objective, and more accurately covers the topic. Marable takes a more personal approach and discusses more aspects of the issue than Samuelson does. Unlike Samuelson, Marable spends time focusing on the personal effects of downsizing, especially on family life. He is very concerned that “millions of Americans work over 40 hours each week, and never take home enough money to feed and clothe their families” (375). He looks more closely at how it affects employees, which is something Samuelson skips over. Samuelson does suggest that in a growing economy, it will be easier to be rehired because more jobs will be available. However, Marable points out that people do not just need new jobs; they need good jobs: In the 1980s, millions of new jobs were created in the U.S. economy, [. . .] Eighty-five percent of all new jobs were located in low-pay or part-time service work. Nearly two out of ten workers had no health insurance, and two out of five had no pension. (375) In addition, Marable informs us why there is not enough money available for regular workers and their benefits. He warns that, “the share of wealth held by the top 1 percent of the U.S. population doubled in the last 20 years” (375). Perhaps his most compelling statistics shows the difference in salary between a company CEO and a regular worker. “The typical CEO of America’s 100 largest corporations receives about $900,000 in annual salary, and $3.5 million in overall compensation” (376). This is ridiculous considering that even without counting the benefits package, it is still 190 times the salary of the average worker! Furthermore, downsizing will not solve this problem. It will only shift more money into the hands of those who are already wealthy. Rutz 6 Therefore, the reason there is not enough money to cover the benefits of workers who are lower down on the executive ladder is that a huge amount of money is being used to give the rich even more benefits. An Internet article by Diane Stafford, in the Kansas City Star, in July of 2003 states that there were already “over 955,700 layoffs in the United States for this year alone. If these layoffs have continued at the same rate, by now we will soon be approaching the 2 million mark.” Sadly, this is primarily due to the greed of those in top company positions. Moreover, Alan Downs discovers that “CEOs who lay off large numbers of employees are paid more than those who don’t” (28). He lists a large number of examples in his book. However, the most striking one was that in 1994 IBM laid off 85,000 workers while their CEO received a salary of 15,252,000. This is ridiculous. Workers should not be abused in this way. In a personal interview, my father, Raymond Rutz, responded to this by saying that “The workers are the ones who make the company run on a day to day basis. To kick them out of a job, that they have performed faithfully and well, so that a few stockholders can squeeze out more profit for themselves is unjust.” Some people, such as Samuelson, disagree, but the evidence is against them. In the Preface to his book, Corporate Executions, Downs writes: If layoffs truly were the cure for today’s business, there would be no story here. [ . . . ] But layoffs are not the cure, and the twisted carnage of human dignity and squandered corporate assets left in the layoff wake must be brought into the light of public inquiry and debate. (xii) Rutz 7 Finally, it is Downs’ suggestion to bring layoffs “into the light of public inquiry and debate” that serves as my inspiration for this research. It is easy to think of the number of people being laid off as a mere statistics. However, we are dealing with real people, with real needs, who are being placed out of work through no fault of their own. As both Marable and Downs point out, downsizing only improves the standard of living for a select few who already receive most of the company’s profits. The CEOs and other people in these high positions of authority already make many times more than the average worker, and downsizing does not benefit anyone but them. In fact, downsizing is not the answer to our present economic situation, because it will only make the rich, richer and the poor, poorer; the solution is equitable distribution of salaries and wages. Rutz 8 Works Cited Downs, Alan. Corporate Executions: The Ugly Truth About Layoffs—How Corporate Greed Is Shattering Lives, Companies, and Communities. New York: Amacom, 1995. Ludy, Perry J. Profit Building: Cutting Costs Without Cutting People. San Francisco: Berrett-Koehler, 2000. Marable, Manning. “Fighting for a Decent Wage.” Reading Culture. 4th ed. Ed. Diana George and John Trimbur. New York: Longman, 2001. 374-377. Rutz, Raymond. Personal Interview. 20 Nov. 2003. Samuelson, Robert J. “Downsizing Isn’t All That Heartless.” Reading Culture. 4th ed. Ed. Diana George and John Trimbur. New York: Longman, 2001. 373-374. Stafford, Diane. “More than 955,000 have lost jobs in mass layoffs this year.” The Kansas City Star 25 Jul. 2003. 19 Nov. 2003. <http://www.bradenton.com/mld/kansascitystar/2003/07/25/business/ 6376744.htm>.