It's a Shame that We Allow Wall St. Analysts to Dictate Employment and Work

This week, a Bloomberg News article revealed that the 62,600 jobs slated to eliminated by U.S. companies is the biggest two-month figure in two years. These losses include significant cuts by Ford, Colgate-Palmolive, Dow Chemical, and others. Most telling is the article's revelation that "the reductions coincide with a majority of U.S. companies missing analysts' third-quarter revenue estimates." John Challenger, chief executive officer of a Chicago-based human resources consulting firm, is then quoted as saying that these misses are "a sure prescription for layoffs starting to heat up as companies take immediate action to show their shareholders how responsive they are." True. Very true. But such a shame.

It's important to remember that these announcements follow three years of record profits--profits that resulted from aggressive cost-cutting (that is, layoffs) and minimal hiring. In other words, workers and their families have already borne the burden of the recession, and now comes more bad news for them. So why more cuts? Because the companies are failing to meet Wall Street's sales expectations. Colgate-Palmolive's latest earning report included $654 million in quarterly profits, up from the same period last year, but a decline in sales. At Dow Chemical, profits exceeded analysts' expectations, but sales fell short.

So profits are up, but analysts want even more. Since Wall Street continues to see workers as costs, companies respond by shedding more jobs. Economists, in turn, continue to see work simply as a source of income so as long as these workers have alternative income sources such as savings, spousal income, and unemployment insurance, then no big deal.

Unfortunately, all of this significantly misses the true importance of work. Workers should be seen as an organization's source of competitive advantage, not costs on a balance sheet. Work should be seen as a deeply-rich human activity with numerous rewards beyond income. The real costs to workers, their families, and their communities that result from the existence of lousy work and from an absence of work need to be fully recognized. On a broader level, the true purposes of corporations should be questioned, and their responsibilities should include deeper concerns than simply meeting the short-term expectations of a never-satisfied Wall Street. In other words, work is simply too important to let it be dictated by the narrow, short-term focus of Wall St. analysts.

Tweets from ILERA

I just returned from attending the World Congress of the International Labour and Employment Relations Association (ILERA) in Philadelphia. With over 400 scholars and policymakers from outside of the United States in attendance, it was a very diverse and stimulating conference. Here are my tweets which I hope others will find stimulating in the questions that they imply.

2 Jul
On my way to #ILERA World Congress. Delta agent felt sorry for me having to work on the fourth of July. #thethoughtofwork
2 Jul
Glad to see that faculty at Univ of Warwick are still proud to use the term "industrial relations." Not true in the US anymore. #ILERA
3 Jul
#ILERA opening: Tom Kochan on jobs crisis. Need jobs compact to combat financialization & institutional failure. Start with infrastructure.
3 Jul
#ILERA opening: but also need labor law reform to ensure good jobs. But how given that political stalemate has turned to polarization?
3 Jul
Tom Kochan: appropriate that we are in Philadelphia because we need a revolution in employment policy. #ILERA
3 Jul
Former #nlrb chair Wilma Liebman: at least ill-founded rancorous attacks on nlrb have raised awareness of labor law issues. #ILERA
3 Jul
#fmcs dir George Cohen's examples of cooperative labor-mgmt relationships suggests that labor law is not the problem, it's attitudes #ILERA
3 Jul
Depressing state of US employ policy & divisive political rhetoric at least make many intl #ILERA attendees feel better about own countries
3 Jul
Alex Colvin @ #ILERA : mandatory arbitration coverage probably 2x that of union coverage in US.
3 Jul
Great opportunity to learn more about employment issues in China, especially importance of decent #work. #ILERA

3 Jul
Sarosh Kuruvilla: big shift underway in Chinese strikes, from protests of desperation & discrimination to strikes for wages & respect #ILERA
4 Jul
Today I'm a session chair, plenary chair, & panelist so it will be hard to tweet from #ILERA. #workingonthe4th
5 Jul
Bradon Ellem: lobby groups immensely resistant to recent IR law change in Oz, but much employer behavior is routine. Sounds familiar. #ILERA
5 Jul
Rafael Gomez: corp social responsibility typically only occurs after something bad prompts it--see Nike, Apple. #ILERA
5 Jul
John Howe: why is enforcement of building codes stronger than enforcement of construction labor standards? #ILERA
5 Jul
#ILERA ends with appealing promos for future congresses in Melbourne, Amsterdam, and Cape Town. Life is good.

Unlocking iPhone Work

iPhones and other smartphones are frequently sold in a locked format so that Apple and others can dictate how they are used, at least to some extent such as choice of carrier. Apparently, Apple and others would similarly like to dictate a specific narrative about the jobs that Apple creates (or doesn't create). A wonderful New York Times story by Charles Duhigg and Keith Bradsher, "How the U.S. Lost Out on iPhone Work" (January 22, 2012), describes how almost none of the 700,000 people who engineer and build iPhones and Apple's other products work in the United States. According to the article, "Apple executives say that going overseas, at this point, is their only option."

Why? Here's more from the article:

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone's screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company's dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
...
"We shouldn't be criticized for using Chinese workers," a current Apple executive said. "The U.S. has stopped producing people with the skills we need."

It's not skills that they are looking for, it's compliance! Apple can choose to make their products anywhere in the world, including the United States. They have chosen to outsource most of this work to Asia not because they have to, but because it's the most profitable. Many would say that this is Apple's right, or even its obligation. OK, but then Apple should be honest and say this is what they are doing.
Why can Apple produce its products much more profitabily in China?

That's because nothing like Foxconn City exists in the United States.
The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn's work force lives in company barracks and many workers earn less than $17 a day....
Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility's central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.

Foxconn cities used to exist in the United States. They were called company towns, and they became the scene of some of the country's worst labor strife. Think Ludlow Massacre. Pullman strike. Homestead strike. Workers tired of the abuse, and they fought for better working conditions and dignity. Chinese workers, too, are tiring of the abuse. Many have committed suicide. Others are turning to collective action and going on strike, just like American workers did 100 years ago.

So let's unlock the myth about iPhone work. The U.S. didn't lose iPhone work because of a lack of skilled workers, Apple chose to outsource its work elsewhere...elsewhere to places where workers are desperate enough to work longer hours for lower pay. And it's clear who the real winner is...last night Apple announced record quarterly profits of $13.1 billion.

Say What? Fighting the Jobs Crisis as We Would a War?

Last week I was at the annual meeting of the Labor and Employment Relations Association, an association notable for the number of academics, practitioners, and policymakers who are deeply concerned with employment issues in the United States. One panel featured Bob Herbert, a Distinguished Senior Fellow at Demos. Mr. Herbert argued that we should fight the jobs crisis as we would a war. I'm not a fan of using war metaphors in the economics arena (too many corporate behaviors have been justified by seeing business competition as a war), but the more I thought about the severe consequences of the jobs crisis, the more this made sense (and it's not really a metaphor anyways!).

Let's start with the war on terrorism. Terrorism seeks to disrupt the American way of life. These disruptions could take many forms, but could include lower economic consumption, reduced home ownership, declining property values, pressures on marriages, difficulties attending college, reduced geographic and economic mobility, lack of respect for government, weakened American institutions, and increased social conflict. Wait a minute...this sounds exactly like what the jobs crisis has done.

The United States has spent more than one trillion dollars, probably even much more than that, fighting the war on terror. And yet the jobs crisis has likely had a much greater negative impact on the American way of life. So maybe we should be fighting the jobs crisis as we would a war.

What would this mean? We fight wars through shared sacrifice. We fight wars by embracing a common cause across the political spectrum. We fight wars by respecting American institutions of government and other institutions such as labor unions. We fight wars by allowing the government to lead, and by expecting the private sector to join in rather than sitting on the sidelines. Wouldn't this be a great way to attack the jobs crisis? No pun intended.