Falling Faster
Peter Drucker | Lay Off the Layoffs | Factoids | Elsewhere and Elsewhen
Quote of the Moment
No class in history has ever risen faster than the blue-collar worker. And no class in history has ever fallen faster.
| Peter Drucker
And now, white-collar workers?
Lay Off The Layoffs
It’s high time we stop the wanton disregard for the impacts of mass layoffs on people.
The Olden Days
There was a time in America when the social contract between workers and their employees included a high degree of job security. But that day is gone, and with it, the concept that layoffs are a sign of a mismanaged company, one in financial difficulties.
Checks on corporate downsizing included strong unions and regulated industries, like the airlines and railroads, which significantly constrained layoffs.
Jimmy Carter, hypnotized by neoliberal economist Alfred Kahn, deregulated the airline industry in 1978, followed quickly by railroads, trucking, and intercity bus lines. This led to exactly the opposite of what was promised for airlines and other industries, as Alana Semuels wrote:
the worst of both worlds: a consolidated industry with few airlines and little regulation. Airlines took a no-holds barred approach to competition, trying to drive each other out of business. There were massive waves of airline bankruptcies in the 1980s, and the industry went through a wave of consolidations and mergers in the 1990s.
With lots of layoffs. The deregulation craze took some of the stink off layoffs, which began to be imbued with an aura of cost-conscious good management. As Louis Uchitelle wrote in The Disposable American,
The pattern of using mergers and acquisitions to chase higher and higher profits while closing or shrinking or selling less promising operations spread widely in corporate America, and layoffs greased the way.
Jack Welch of GE laid off 118,000 staff between 1980 and 1985, and AT&T CEO Robert Allen got a salary rise of $10 million after cutting nearly 50,000 in the ‘90s. “Chainsaw Al” Dunlop got his nickname from the furious cuts he made as CEO of Scott Paper and Sunbeam in the 90s. After that period, the aggressive management mantras about the benefits of layoffs became more muted, but they have become established as a tool in the corporate playbook and one that often was applauded by Wall Street.
Mass layoffs should be considered mass murder and not the inevitable outcome of free market actions.
The decline of unions — sparked by Ronald Reagan’s breaking the PATCO union of air traffic controllers in 1981, and a history of corrupt union officials — removed another barrier to layoffs.
Bill Clinton’s embrace of layoffs as an aspect of a competitive economy, coupled with the decline of U.S. manufacturing following various free trade agreements in the '90s, made the practice of laying off lots of workers commonplace.
That’s how layoffs became acceptable — just a part of doing business — and spelled the end of employee-employer loyalty: the employee no longer could expect long-term (perhaps lifetime) employment, and the employer no longer could expect workers to remain with the company.
In this century, mass layoffs come along with economic crises: the Great Recession led to an estimated 8.7 million sacked between December 2007 and early 2010, for example, and the recent round of downsizing in the tech industry involved a staggering bloodbath. According to Crunchbase:
In 2024: At least 31,227 workers at U.S.-based tech companies have lost their jobs so far in the year, according to a Crunchbase News tally. In 2023: More than 191,000 workers in U.S.-based tech companies (or tech companies with a large U.S. workforce) were laid off in mass job cuts.
Others estimated 120,000 laid off in 2022, at least.
And there doesn’t seem to be any reluctance by corporate leaders to continue the practice.
What are the real causes and costs of layoffs?
The direct economic impacts of layoffs are considerable. The most critical is the direct impact on human lifespan: Layoffs increase mortality by 15-20% over the following 20 years, according to research by economists Daniel Sullivan (Federal Reserve) and Till von Wachter (Columbia) [emphasis mine]:
We find that job displacement substantially raises mortality rates. The mortality increase is particularly high in the years immediately following job loss and then converges to a persistent positive effect of 15-20%. If sustained beyond the 20 year window we can follow workers, these increases imply substantial loss of life expectancy for workers displaced in middle age or earlier. In contrast, we find little effect of job loss on mortality for workers displaced near retirement age.
These results are consistent with an initial increase in mortality from acute stress and a longterm increase in mortality from chronic stress, partly resulting from permanently lower average earnings and initial increases in the instability of earnings and employment. Given our estimates of the correlation of the mean and standard deviation of earnings with mortality, the effects of job displacement on these career outcomes could explain about 50-75% and 20% of the mass-layoff effects on long-term mortality, respectively. A comparison of groups of workers with different earnings losses confirms that a majority of the long-term increase we find could be driven by persistent earnings losses. The stress or depression caused by job displacement is likely to have additional direct effects on mortality not captured by our measures of career outcomes.
In effect, being handed a pink slip is also a game of Russian roulette, where 15-20% of those fired die young due to persistent earning losses, which lead to increased stress, increased mortality, and other secondary effects even for those who survive.
This means, in effect, that mass layoffs should be considered mass murder and not the inevitable outcome of free market actions. As just one data point, research shows layoffs can cause suicide rates to double or more.
Mass layoffs are a policy choice. Companies treat the impacts of layoffs on workers as a negative externality that they take no responsibility for, like a computer chip manufacturer dumping toxic chemicals into the groundwater so long as they can do so without penalty.
However, in the 21st century, we have instituted a policy and legal regime in which manufacturing companies cannot ignore the pollution they release into the environment because responsible authorities no longer turn a blind eye.
Just so, we should enact a legal and policy framework that — to the greatest extent possible — prohibits managerial strategies that culminate in regular mass layoffs, like those we see today in the U.S. tech sector.
The saddest aspect of these business schemes is that layoffs are not even very good at what they are supposed to do for the companies that apply them. They don’t improve company performance, and studies show they cost money (severance, additional training, unemployment insurance, etc.), and cuts inevitably lead to lowered workplace morale and employee churn.
It’s clear that left to themselves, the CEOs of large corporations will be swayed by the sentiments of activist investors and Wall Street who repay layoffs by driving up the stock price of companies undertaking mass layoffs. This spike in stock value is like a sugar rush, incenting management of those involved to lay off even more people. Note that CEOs and other senior management often hold significant stock in their compensation plans, and have strong motivation to goose the stock price. And this spreads like a pandemic into other industries and companies.
Meanwhile, the employees involved—those who are fired and those who aren’t—have little or no say in these major corporate decisions. And the government—still ambivalent about government regulation of what companies can and can’t do in what is still a fairly unregulated labor market—may make noises about mass layoffs but generally limits its commentary to the raw economics of unemployment. Almost no one is taking the stand that mass layoffs kill people unnecessarily without even making the businesses behind them more productive.
In upcoming issues of Work Futures, I will dig into what the government and workers might do to help constrain layoffs and their deadly consequences.
Factoids
The United States spends lavishly on clinical care, doling out $4.5 trillion — more than 17 percent of our gross domestic product — in 2022 alone. Prevention accounts for less than 3 percent of our overall health spending. That ratio buys us some of the poorest health outcomes and shortest life expectancies in the developed world.
…
Northwestern Mutual has reported that one in three Baby Boomers, knocking at the door of retirement, has less than $25 thousand saved.
…
Data from the National Oceanic and Atmospheric Administration’s Storm Prediction Center show 5,879 reports of hailstones of one inch or larger in 2022, up 17 percent from 5,020 in 2021. Preliminary data for 2023 show 6,962 reports, including a significant increase in reports of very large hailstones of two inches or more.
…
More than half of female homicide victims are killed by current or former intimate partners. Every month, about 70 American women are shot and killed this way. One meta-analysis of 17 separate studies found that male domestic abusers who had access to guns were 11 times more likely than abusers without access to guns to kill their victims.
Elsewhere and Elsewhen
I spend a great deal of time each week reading prospective research, reportage, and analysis to find the most informative and important insights and recommendations for Work Futures readers. That is the first step in the processes leading to preparing and then encapsulating that into the several-times-a-week newsletter issues I share. That is the bottom of the iceberg, the part out of sight below the waterline. There are many articles I read and annotate but don't immediately distribute because they aren't salient enough on their own to bring to my reader’s attention, come to a weak conclusion, or only muddle an issue instead of bringing clarity.
That is a critical aspect of my work here, and it generally goes unconsidered. So I wanted to bring it to your attention. One of the most important aspects of this work is filtering, and I wanted you to know that I spend time nearly every day combing through the deluge of content to find and share the best.
Elsewhere
Ray Suarez, in It's a Long Way Down, tells a deeply personal story about discovering how quickly a famous and highly-regarded journalist, broadcaster, and author can become unemployable, simply by attaining his sixties:
After Al Jazeera pulled the plug on its young network, I headed to Amherst College as a visiting professor, while beating the bushes for jobs in radio, television, and print. I did not unravel. I calmly began calling old contacts, and applying for jobs I “qualified” for by every objective measure. I shoved down any rising panic, kept one eye on my bank balance, and starting freelancing, all while keeping an eye out for my next Big Thing. I had to reckon with the idea that the long-ago magazine article warned about, there might be no “big thing.” Like hundreds of thousands of men in their early 60s across the country, I was forced to start to get used to the idea that the marketplace may be deciding that I am “done.” Many men my age are “job bound,” imprisoned by their conviction they couldn’t find a comparable job at a comparable wage, even in a tight labor market, the way their young co-workers do.
He provides the stark economics for people this age:
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