Sunday, August 19, 2012

Who Are The Job Killers?

[this appeared as a Viewpoint piece in the Jacksonville Business Journal]

“Job-killing” is a favorite phrase among politicians these days, particularly Republicans, as well as members of the business community. In fact, a House bill was actually titled “Repealing the Job-Killing Health Care Law Act”. The accusation is leveled primarily against policies that are designed to regulate business, protect the environment, increase revenue through taxation, raise the minimum wage, or increase the role of government.  These are the usual suspects.

But rather than using the term to target policies we happen to disagree with, we should acknowledge that “job-killing” is a perfectly apt description of recent periods of US capitalism over the past few decades. The U.S has been hemorrhaging jobs in many economic sectors for years. The decade of the 2000’s yielded no net gain in the number of jobs. 

These job losses cannot be linked to a particular policy.  They have occurred under relatively favorable historical business conditions of low taxes, deregulation, weak or non-existent labor unions, free-trade agreements, and welfare reform. Over this period “jobless” has been frequently used to describe economic cycles – we have experienced jobless growth, jobless recoveries, and jobless expansions.

Yes, the private sector is and should be the engine of job growth but let’s recognize that job-killing has also become a standard business practice, particularly among the largest US corporations.  

One of the most significant job-killing acts is the decision of U.S. corporations to move jobs offshore. The impact has been greatest in manufacturing, where millions of domestic jobs have been relocated to less developed nations where labor costs are lower, environmental regulations weaker, and governments accommodating. Offshoring destroys not just blue-collar jobs but increasingly higher skilled white-collar positions.

Another job-killing practice involves downsizing the work force, or “permanent layoffs”, and the outsourcing of business functions to subcontractors. These practices are intended to make the firm meaner and leaner. When they are carried out executives are typically rewarded with additional compensation, Wall Street responds favorably as stock prices rise, and the actions are justified in the name of “enhancing shareholder value”.   

Jobs also disappear when businesses replace workers with technology or develop more efficient procedures that reduce human labor requirements. Such practices are regarded positively as innovative and productivity-enhancing.

People don’t usually describe these acts by the private sector as job-killing because they are based on the profit motive or the pursuit of competitive advantage. They are rational business decisions based on the calculation of costs and benefits, and a desire to maximize profit and share price.  Whatever the ultimate intention may be, the net effect is the elimination of jobs.

Job killing as well as job creation has always been an expected consequence of capitalist development. When people describe competitive capitalism as a form of “creative destruction” it means that the dynamic process of creating new organizations, technologies, and products involves the simultaneous destruction of existing jobs and firms. For the recent history of the United States, unfortunately, more good jobs have been destroyed than created. Those that have been created have tended to be lower paying and less secure.

Further, two of the three examples of job killing above – offshoring and downsizing – are more accurately forms of “uncreative destruction”; nothing new is created, but many jobs, communities, and livelihoods are destroyed.

The current presidential campaign has rekindled the job-killing language with Obama now accusing Romney and Bain Capital of job-killing. But again, like other economic actors, this is what rational private equity firms are supposed to do -- increase the market value of the firms they restructure, and frequently downsize, with the objective of turning a profit. If Obama has a problem with this he should recognize that it is not a problem unique to private equity but is a systemic characteristic of the US economy. As long as job killing increases the bottom line, or is rewarded by Wall Street, it is likely to continue.

The chances are slim that Obama, let alone Romney, will make any significant changes to the existing job-killing system; this would require acting against the financial and corporate elite who lavish them both with campaign contributions.

And, as absurd as it sounds, policies to prevent corporations from killing jobs would inevitably be attacked as “job killing” government regulations.

No comments:

Post a Comment