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Subjects:Economics, Economy, Business, Labor, Public Policy, Public Affairs/Community Affairs, Politics and Opinion, General Interest, Features
Roots of 'Jobless Recovery' Found in Downsizing
According to the U.S. Dept. Of Labor Statistics released on September 5, 93,000 jobs were lost in August 2003 and the unemployment rate is 6.1 percent. While other economic indicators show some signs of improvement, unemployment continues to rise, as it has for 22 months, leading to the prospect of a "jobless recovery." President Bush has reiterated his Labor Day call for tax cuts and the creation of a jobs post, while Democratic presidential candidates remain critical of Bush's policy. Job losses are a major issue of national concern now, and are likely to be one of the most important issues of the 2004 Presidential election.
Before the 'jobless recovery,' downsizing was the most widely recognized type of job loss and threat to employment. Downsizing, a major phenomenon of the 80s and 90s, is still a continuing threat to all American workers, say Professors Baumol, Blinder and Wolff, authors of a new book, Downsizing in America, (Russell Sage Foundation, October 2003). The book investigates the realities, causes and consequences of downsizing. William J. Baumol is professor of economics, New York University. Alan S. Blinder is Gordon S. Rentschler Memorial Professor of Economics, Princeton University. Dr. Blinder was the Vice Chairman of the Board of Governors of the Federal Reserve System from June 1994 until January 1996. Edward N. Wolff is professor of economics, New York University.
Downsizing in America examines the phenomenon of downsizing which swept across corporate America in the late 1980s and the early 1990s. Top U.S. corporations announced both major restructuring of their businesses and sizable reductions in their workforces. Wall Street analysts typically greeted downsizing announcements with cheers, say the authors, but research reported later showed little support for the popular notion that downsizing boosted share values.
Downsizing in America is one of the most comprehensive analyses of the subject to date. It explores three main issues: the extent to which firms actually downsized, the factors that triggered changes in firm size, and the consequences of downsizing.
The authors show that much of the conventional wisdom regarding the downsizing in the 1980s and 1990s is inaccurate. Nearly half of the large firms that announced major layoffs subsequently increased their workforce by more than 10 percent within 2 or 3 years. The only arena in which downsizing predominated appears to be the manufacturing sector-less than 20 percent of the U.S. workforce.
Baumol, Blinder, and Wolff also reveal what they call the dirty little secret of downsizing: it is profitable in part because it holds down wages. Downsizing in America shows that reducing employee rolls increased profits, since downsizing firms spent less money on wages relative to output, but it did not increase productivity. Nor did unions impede downsizing. The authors show that unionized industries were actually more likely to downsize in order to eliminate expensive union labor. In sum, downsizing transferred income from labor to capital-from workers to owners.
Downsizing in America combines an investigation of the underlying realities and causes of workforce reduction with an insightful analysis of the consequent shift in the balance of power between management and labor, to provide us with a deeper understanding of one of the major economic shifts of recent times - one with far-reaching implications for all American workers.
If the current record rate of unemployment continues or gets worse, this issue is likely to loom large in the 2004 Presidential election, making Downsizing in America especially timely reading for all concerned citizens.
Downsizing in America is available from booksellers nationwide and online. Further information is available at:
Suggested Interview Questions/Discussion Topics:
What is downsizing?
What are the myths about downsizing which you uncovered in your research for your book Downsizing in America?
Did corporate America actually profit from downsizing while workers lost their jobs?
Who lost the most jobs and in what sectors of the economy?
Were the media reports about downsizing generally accurate according to your research?
Is downsizing still a threat to American workers today?
On Labor Day 2003, Bush announced the creation of a new jobs post, an assistant secretary of commerce for manufacturing. Will this help to bring back blue -collar jobs?
Bush continues to defend tax cuts as a remedy for job losses, despite the Labor Department's recent release of statistics showing 93,000 jobs lost August 2003. Is this a defensible remedy from an economist's perspective?
How do you foresee the issue of unemployment affecting the 2004 Presidential election?
ABOUT THE AUTHORS:
William J. Baumol
is professor of economics, New York University. Alan S.
Blinder is Gordon S. Rentschler Memorial Professor of Economics, Princeton
University. Dr. Blinder was the Vice Chairman of the Board of Governors of the Federal
Reserve System from June 1994 until January 1996. Edward
N. Wolff is Professor of Economics, New York University.
THE RUSSELL SAGE FOUNDATION, publisher of Downsizing in America, is the principal American foundation devoted exclusively to research in the social sciences. Located in New York City, the Foundation is a research center, a funding source for studies by scholars at other academic and research institutions, and an active member of the nation's social science community. The Foundation also publishes, under its own imprint, the books that derive from the work of its grantees and visiting scholars.
Downsizing in America: Reality, Causes, and Consequences
William J. Baumol, Alan S. Blinder, and Edward N. Wolff
Publication Date: October 2003
Published by Russell Sage Foundation
For further information, review copies, or to schedule an interview, please contact Susannah Greenberg, Susannah Greenberg Public Relations, (212) 208-4629 or e-mail firstname.lastname@example.org
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