As one of the thousands who have been downsized by IBM, your article on wages really hit home. I did not have a great deal of trouble getting a new job, but it pays half what I was paid before, and I have absolutely no benefits. Who am I working for? IBM. In other words, "we need you but not at the salary you were earning after 21 years."
One other thought on the subject: All of the people in my position are paying half the taxes they were paying before. Not great for helping to balance the budget.
In the five years prior to my retirement, I watched the company I worked for reduce wages, reduce benefits, essentially eliminate the retirement medical program, subcontract for outside help, institute one-time payments instead of raises, and reduce the company's workforce from 11,500 to 4,400.
There is much talk about empowerment and feverish activity in quality-improvement programs, but suggestions from employee groups are infrequently implemented, and most basic procedures are unchanged. Sales have stayed essentially the same, and profits are up. The company, of course, points out that productivity, measured as cost per unit sales, has increased. Individual productivity is not mentioned.
In my opinion, morale is low, productivity is low, and loyalty is nonexistent.
Richard M. Sherwood
I would like to take a different point of view toward your cover story. For once, companies are doing what they have been criticized for not doing in the past: taking the long-term view. Companies are finally considering the value of the employees' contribution. That value must be measured in how any employee's effort translates into sales for the company. Briggs & Stratton cannot pay $21-an-hour wages with benefits to a factory line worker because that worker does not produce a satisfactory return on the wage investment. The value is not there. Even the laid-off worker who fears "she may never earn so much again" suspects that she may have been overcompensated for her efforts.
The answer to all of this is education. An educated employee has the potential (should the employer choose to exploit it) to add value to the task and become more valuable. In my company, that is the only yardstick by which I reward employees. In this way, an employee can make real gains in income.
Thomas C. Zebovitz
I have been an employee in the computer business for going on 30 years now and must admit I do not understand the outsourcing phenomenon one whit. We no longer have stationery stores, so now, when I order a printer ribbon, it's delivered by this guy driving a tractor trailer. I envision him driving from company to company, some paper clips here, some envelopes there. But is it more efficient? Facilities, security, reprographics are all contracted. What manufacturing we do locally is done with contractors. Customer service, too, has gone to nonemployees. Our plant looks cruddy, things aren't getting fixed.
What's going on, all the turmoil, has changed me forever. We had a supermarket strike last year, and for the first time ever, I assiduously avoided crossing a picket line. I never thought that I would ever consider joining a union, though I'm white-collar. If Norma Rae ever shows up in front of my plant, I'll sign. This excruciatingly painful time will ultimately backfire on CEOs everywhere. You were right to say that I have become a lot more tight-fisted. My 1989 car is the oldest car I have ever owned. At 47, I'm saving more than ever and worried about my future. Unlike some of the subjects of your article, I am very lucky to have my job.
Stephen P. Huntington
San Jose, Calif.
Perhaps we should ask Corporate America: Hey, pal, can you spare a new minimum wage?
William A. Spriggs
"Mutsourced--and out of luck," which accompanied your "Wages" Cover Story, states that American Airlines employees at Oakland were terminated in May. In fact, while American has outsourced the work at Oakland, none of our permanent employees there were terminated. American offered all of them a number of options, including relocation and pay protection, a generous voluntary early-retirement program, and extended leaves of absence. Several relocated, others retired or decided to take a leave--but not one was terminated.
Your article misses the other side of the equation. If corporate profits are getting fatter, shareholders are now benefiting. When investors have realized gains on their stock, they spend it. They are usually upper income and have different spending patterns, but the money is reinjected into the economy.
The bottom line of your Cover Story, that Corporate America is robbing the bank while workers are left holding the bag, is both inaccurate and unfortunate. The story states that corporate profits are at a 45-year high--true in lominal dollars, but not in inflation-adjusted dollars. In fact, corporate profits in real terms were 10% higher in 1979 than in 1993. The author's statement about corporate profits would not be so misleading had he not gone on to compare these record nominal profits with inflation-adjusted wages and benefits. Obviously, one can choose to make comparisons in real or in nominal dollars, but the two cannot be mixed.
This is not to deny that the process of structural change the economy is undergoing is painful and wrenching for large numbers of workers and their families (and many companies, as well). But setting the interests of Corporate America in opposition to those of workers seems truly bizarre in the pages of your magazine.
Kenneth L. Deavers
Employment Policy Foundation
Editor's note: The numbers in the story were based not on profit levels but on the rate of return on capital, which we consider a more accurate measure of profitability. Moreover, since that number is a ratio, and inflation is reflected in both the numerator and the denominator, the effect of inflation is canceled out.
Sadly, "Wages" is not a story of sustainability, or the growth of a strong, healthy nation. Nor is it a story with a happy ending for our growing problem of violent crime. Corporations learned during the '80s how to pay off mountains of debt out of the hides of workers. In the '90s, they're downsizing and reengineering to meet global competition. In truth, the cutting binges are leading to what is so aptly termed "corporate anorexia." And this condition may become terminal for many companies when, as your article points out, their prospective customers lack the wages to buy their products, and companies find they've laid off the workers who know how to get the job done.
The U.S. economy boils down to this: Most citizens are not participants. Who will buy your magazine? My house? College grads, if they have a job, are paying their earnings to banks for college loans and to the federal government for Social Security. No cars, no houses on their horizons for some time. People have lost income, wages, benefits, and time off. Pink slips are handed out on Fridays across this country, and a demoralized workforce comes in on Mondays.
Companies move to other states and countries, leaving taxpayers to pick up the wreckage and unemployment compensation. Inflation is important; jobs and wages are not. So-called leaders are planning their golden parachutes, living in gated communities, talking to their brokers, working with campaign- finance managers and public-relations advisers. Deregulation, which gave us failed S&Ls and lousy airlines, is back in Congress. No considered legislation will come from this sound-bite Congress, which has invited private lobbies in to write their legislation.
No Hewlett-Packards will be built in this decade. Profits have been privatized. Risks and costs are being picked up by taxpayers. Only 38% of people are voting in our democracy.
The media focuses on cheap news of the O.J. trial, the Susan Smith trial, and they propose 500 channels with no substance whatsoever. Whatever is accomplished in this decade will bubble up from the bottom; it will not trickle down from the top. Our television is off. We are talking to our family, friends, co-workers, and neighbors.
Emilie F. Nichols
Good story, but you miss the point when you ask how far the "cram down" of earnings will go until the consuming middle class stops buying. Multinationals are trading America's middle class of 200 million-plus for what they believe will be a 1 billion-plus middle class of Third World buyers of their products.
Stephen M. Ford
Your article underscores the failure of American business to recognize the real weakness in the core of U.S. enterprise, that of confusing cost with value. A worker making $10 an hour probably isn't going to produce world-class quality goods when the wage isn't worth getting out of bed for. We, in this country, are managing by the old formula: Cut heads, and the rest will work harder. Unfortunately, the effects of this myopia are yet to be felt. Many college-educated Americans over 40 have lost their homes, their IRAs, even their will to work. They will probably never get it back. Capitalism is chewing its own foot off. I'm afraid American products are going to get worse, not better.
William J. Rose
Your cover story highlights a frightening trend in the American economy. There is something terribly wrong, as executive compensation soars and companies replace workers with low-paid temporary workers or subcontractors and move jobs to lower-pay areas, creating an ever-expanding pool of working poor. These actions may be great for the corporate bottom line, but they are a disaster for an individual worker's bottom line. How can anyone earning $10 to $12 an hour be expected to rent or buy a house, support a wife and children, save for their kids' education, pay for medical insurance, and contribute to their retirement via an IRA and 401(k) plan (if they are lucky enough to work for a company that has one)?
As we decry the cost burdens of Medicare, Medicaid, and other social programs and tell people not to count on Social Security as their primary source of retirement funds, companies are making it more and more difficult for individuals to take on these responsibilities. There are more stakeholders than just stockholders and executives. There are the workers and society in general. Corporate America seems to have forgotten their responsibilities to these last two groups.
Robert R. Leavitt