The Business of America/Plant Closings and the Republicans
Stelzer, Irwin M.
THE BUSINESS OF AMERICA PLANT CLOSINGS AND THE REPUBLICANS Is Ronald Reagan really intent on making Michael Dukakis the next President of the United States? His vigorous opposition to legislation...
...In the absence of some economically sound solution to the problem of increased insecurity, we're likely to have Dukakis's notion of "equity" imposed on employer-employee relations...
...economy or national security...
...An "employment loss," for example, is deemed to have occurred not only when a worker finds the plant gates padlocked: such a loss includes a 50 percent reduction in working hours over six consecutive months...
...It also required similar notice of "mass layoffs," defined as layoffs affecting 33 percent of the work force, or 500 workers, whichever is less...
...Competition from Korean shoemakers is "unfair," as are employment-creating wages that contravene the Fair Labor Standards Act...
...30 THE AMERICAN SPECTATOR JULY 1988...
...Such notice must be given both to affected workers and to their communities...
...Only when we know the answer to those questions can we intelligently decide whether the President is sacrificing George Bush's election chances on the altar of some outdated ideology--l'It's going to be a tough sell from a campaign point of view," says one of the Vice President's aides—or whether he is quite properly resisting some ill-conceived tampering with the labor market...
...The claim that an advance notice requirement would stifle employment growth in America is unsupported by the international comparisons offered by the Reaganites...
...And there would be other costs if this bill became law...
...For one thing, many factors other than the presence or absence of such a requirement affect employment levels: to attribute America's spectacular relative success in creating jobs to an absence of severance notice is, for example, to ignore the impact of Reagan's regulatory and tax reforms...
...And so it does...
...Employer organizations are virtually unanimous in pointing out that laid-off workers often have no skills in job hunting, and need time to organize relocation efforts (a key factor when plants close, drying up opportunities in an entire community...
...The community can sue for damages of $500 per day...
...Or charge my 111 VISA ^ MasterCard Signature Name Address City State Zip Exp Date CA residents, add sales tax...
...The problem with basing legislation on notions of "equity," of course, is the extraordinary elasticity of that word in the hands of liberal politicians...
...Lee Iacocca A recovery plan for American education *John A. Murphy, Superintendent of Schools, that can give all our children—black and Prince George's County ICS, Press, Institute for Contemporary Studies 243 Kearny Street, San Francisco, CA 94108 Please send me WINNING THE BRAIN RACE...
...The Nathan report's figure of $1.8 billion annually results solely from the unsubstantiated assumption that 10 percent of the difference between U.S...
...Reagan's men argue that employment growth rates in countries without advance notice laws—the U.S., Hong Kong, Taiwan, and South Korea—have averaged 3.2 percent since 1982, compared with only 1.6 percent in countries with such laws (Britain, Germany, Canada, Brazil, Mexico, and Singapore...
...white, rich and poor—the skills they will radical in its common sense and dictated by en- need for tomorrow's world: lightened self-interest for all" —Vernon Jordan, Former President, —Dr...
...The first is tactical...
...After all, polls show that over 70 percent of Americans favor such notice...
...If, on the other hand, one believes that the employment relationship goes beyond a straightforward money-forwork exchange, that equity requires employers to provide advance notice of layoffs beyond what the employees have been able to obtain in individual or collective bargaining, then a good by Irwin M. Stelzer case can be made for advance notification legislation, especially since such notice is now a rarity...
...So, too, if he can show that giving notice would have kept him from obtaining capital "which, if obtained, would have enabled the employer to avoid or postpone indefinitely the shutdown...
...Employees who do not receive "timely notice" can sue for back pay and fringes, even if they receive severance pay pursuant to their employment agreements, and even if they have found jobs elsewhere...
...End of obligations...
...And the President is ignoring possible benefits from advance notice...
...Moreover, a study by Robert R. Nathan Associates puts the employers' cost at $1.8 billion per year, and adds that we would have had 460,000 fewer jobs in 1986 had an advance notice requirement been in effect during the five preceding years...
...the reform and revitalization of our educa- —Bill Clinton, Governor of Arkansas tion system, using recent business experi- "No issue is more important than educaence as the model for success:' tion ...and this book will contribute sig-Donald E. Peterson, Chairman and CEO, nificantly to improving the educational Ford Motor Company system in our country...
...kampniann and Co...
...Studies by the General Accounting Office show that relatively few of the firms laying off workers in recent years provided much notice: 32 percent provided none at all, another 34 percent provided one-tofourteen days...
...I enclose my check or money order for $16.95 plus $1.50 postage and handling...
...For another thing, Japan has long required warnings of layoffs, with no noticeable negative effect on its ability to maintain full employment...
...But before deciding whether the President is right to buck the popular tide, we have to answer two often-ignored questions...
...As such, he would be subject to all of the parochial pressures brought to bear on individual congressmen by industries located intheir districts...
...Remember: agreements to provide severance pay do not relieve the employer of the necessity of giving advance notice of layoffs, nor of the obligation to pay THE AMERICAN SPECTATOR JULY 1988 29 back wages if notice is not given...
...The Reagan economic arguments against advance notice requirements are couched in terms of job growth and costs...
...In short, the economic case against advance notice legislation has not been made...
...The cost estimate used by Reagan's business partisans is also baseless...
...If one believes that workers are entitled to market wages and benefits for each day's work performed, and that those wages reflect the various risks (including being laid off) associated with the specific employment, the employer owes the worker only the payment of those wages...
...Contrast this with the golden parachutes enjoyed by business opponents of advance notice for blue-collar workers, and the general conclusion will be that the Democrats care, while the Republicans are the Rhett Butlers of American politics: they frankly don't give a damn, at least for the ordinary working man...
...Without a powerful economic case, voters are left to weigh Reagan's free-market inclinations against a variety of equity arguments...
...Add to that the fact that every businessman's files contain memoranda about problems—cancelled orders, rising costs, foreign competition—that others will argue should have led him to "foresee" the closing...
...So it is far better to rely on a comparison of roughly measurable costs and benefits than to use an elastic "equity" yardstick to appraise economic legislation...
...The worker works, the employer pays for that work a sum which includes an unemployment risk premium...
...But does that mean it isn't needed...
...they need time to acquire new skills...
...The employer would be faced with provinghis case in some local court, after having laid off hundreds of workers or closed a plant in that jurisdiction...
...they often lose medical coverage...
...Little wonder that almost two-thirds of Americans believe that, if elected, Bush will favor his country-club friends...
...In short, a powerful representative of protection-seeking special interests would be created...
...That's why the mere fact of full employment won't be enough to persuade most workers to back Bush...
...Not a happy prospect...
...Workers suddenly laid off have fixed financial obligations, such as mortgage payments...
...The President would be required to take the recommended steps unless he can show that they would seriously harm the U.S...
...Just as "plant closing" grew to include layoffs in plants not being closed, so other words in legislation such as this take on meanings that would probIrwin M Stelzer is director of the Energy and Environmental Policy Center of the John F Kennedy Schoo4 Harvard University, and an American correspondent for the London Sunday Times...
...The average of all surveyed firms was seven days...
...Adam Urbanski, Vice-President, National Urban League American Federation of Teachers "An important book ...a tough-Minded call "Kearns and Doyle lay down the gauntlet to that everyone in education and public polAmerica's businesses and schools to fight for icy needs to hear...
...If an employer can prove that the layoffs weren't "reasonably foreseeable," he is exempt...
...And such Republican operatives as Douglas Bailey are warning the President that "the issue goes beyond economics to emotions...
...And do workers need legislation protecting against sudden dismissals...
...No—for two reasons...
...The danger in this transfer of authority is that the trade representative is a creature of Congress—his selection requires Senate approval, and he is required to report to various congressional committees...
...The level of apprehension about the future is too great to be reduced by the fact of current prosperity...
...A bold plan to make our schools competitive...
...Not least would be the introduction of a European-style fear into the hearts of American employers: think twice about hiring someone it will prove costly to fire...
...Nor has the Administration developed economically sensible alternatives—cost-effective measures to improve worker mobility...
...I( S,PRESS/ Distributed b...
...The advance notice provision was only one part of a seriously flawed 1000-page trade bill...
...It required companies with at least 100 workers to give sixty days' advance notice of a plant closing that would affect fifty or more workers...
...interests...
...It is "unfair" to deny (often wealthy) Social Security recipients their cost-of-living increases, and at the same time "unfair" to reduce the tax burdens of this same well-off group...
...A call to revolution in the American education system...
...Reagan could have based his major case against it on those provisions that transfer much of the President's power over trade negotiations to the U.S...
...The answer depends in part on how one views the employer-employee relationship...
...employment growth and that of slowergrowing economies is due to the absence of advance notice bills...
...So much for the claim that advance notice is merely intended to make victims of plant closings whole...
...ably surprise even some supporters of the advance notice principle...
...They should also reduce support for demands to "protect" jobs in inefficient industries...
...The Democrats would give that representative the power to decide which foreign trade practices should be investigated and to recommend to the President the retaliatory steps to be taken...
...Failure to provide notice triggers stiff penalties...
...The second reason the President is wrong in opposing some sort of advance notice legislation is that the economic arguments he is using are seriously flawed...
...Bush will have to shed some Reaganite baggage and take a clear-eyed look at advance notice and other labor market legislation appropriate to today's fast-moving economy...
...There are, of course, the usual exceptions...
...o the legislation is clearly onesided...
...trade representative...
...Measures to give workers advance notice of layoffs should reduce the time they spend unemployed and the burden on the public purse...
...The magnitude and rate of change in the business community—corporate restructurings, the relative growth of service industries, the internationalization of markets—contribute both to our prosperity and to the fear that it will not last...
...The recently vetoed advance-notice legislation is sufficiently representative of the genre to provide a basis for analysis...
...No evidence for this figure is offered, prompting the General Accounting Office to point out that the Nathan results are "not supported by the information and analyses presented...
...In short, a laid-off employee who did not receive adequate notice, but did get severance pay and has found a new job, is eligible for back pay...
...Just what is in these advance notice bills that arouses such emotions on both sides...
...The problem with these exemptions is that they are of little practical value...
...Is the President, then, correct in arguing that he is protecting jobs and the vaunted mobility of America's labor market by opposing this bill, whatever its effects on his poor Vice President's efforts to retain the blue-collar votes that elected Reagan...
...These would be transmitted to the trade representative, who doesn't have the President's burden of balancing them against wider U.S...
...His vigorous opposition to legislation requiring employers to provide advance notice of plant closings, or of "mass layoffs," suggests that the answer is "yes...
Vol. 21 • July 1988 • No. 7
