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Home Publications Blogs Beat the Press Should We Slow Efficiency Growth?

Should We Slow Efficiency Growth?

Sunday, 19 February 2012 10:22

The NYT had a very good piece from Barry Schwartz, one of my former college professors, asking this question. The context is whether the Bain Capitals of the world should be allowed to downsize without any consideration for workers or the community.

The United States is the only wealthy country that allows companies to dump long-serving workers at will. It might be reasonable to require some amount of severance pay when they fire long-serving workers (e.g. 2 weeks per year of work). This would nor prevent downsizing where there are large efficiency gains, however it may prevent some cases where the gains are marginal. 

Comments (9)Add Comment
Old and Out
written by jumpinjezebel, February 19, 2012 11:54
Having direct experience with the Boeing company's "lean and Mean" policy - if you get way up the pay scale and have long years of recognized service they try to get rid of you by any means possible. They can then promote their favorite "PowerPoint Ranger" up the line.
written by ellis, February 19, 2012 12:26
Companies must be more competitive. They must downsize. It's tough. But its win-win. Employees who get downsized have the chance to transition to new career opportunities. Economists, our latter day gods, call it creative destruction. Dean, you're absolutely right. Profits must go higher and higher. Hooray for downsizing!
written by Ethan, February 19, 2012 1:33
Is Ellis the new Izzazo?
What about the garbage?
written by sufferingsuccatash, February 19, 2012 3:09
The downsizing and abandoning of workers is a great loss in terms of wages and living standards, but there is other fallout. BP has been forced to pay for the area they soiled in the Gulf of Mexico. Not so many of these industrial and manufacturing corps. that close down shop and transfer the work overseas or elsewhere nationally.

Drive through the rust belt and witness the abandoned factories and mills that are abandoned and deteriorating--blighting the area just like the BP spill destroyed the Gulf area. What is the difference really? Just a big ugly footprint, a dumping ground of hazardous refuse that the corporations have no intention of cleaning up.
written by Ron Alley, February 19, 2012 3:14
I like Dean's minimum severance idea but I'm afraid that it would amount to a de facto ceiling. When most workers don't have collective bargaining, employers would treat this as a ceiling.

I think a more effective approach might be something such as 6 weeks per year of service, a minimum of 1 year's wages and a maximum of two year's wages unless reduced by a collective bargaining agreement.
written by ellis, February 19, 2012 4:34
Who the heck is Izzdatso, Ethan? But it's ironic how ya'll hold as sacrosanct the process that produces the unemployment that you bemoan.
written by SethB, February 20, 2012 9:06
I liked the analogy in Barry Schwartz's piece, but he glossed over the actual practice of what firms like Bain often do: Along with the "efficiency" gains, they load companies with debt and suck the firm's profits from that new pool of money. That's not efficiency.
written by PeonInChief, February 20, 2012 2:00
Many employers used to offer 2 weeks for each year of employment in exchange for not suing for age discrimination. To insure that it isn't just age discrimination, employers would have to be required to offer much more than 2 weeks!
Pawns Sacrificed
written by Beth in OR, February 21, 2012 11:08
Maybe it's the definition of "efficiency" which needs review. Rape, pillage, and plunder is only efficient for the aggressors.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.