How Corporate Cost-Cutting Makes People Invisible

A Dialog Between Quincy and Arthur

Q. It is January 2011. There is talk about the economy improving because the largest companies in the United States are going to report greater profits. Does that mean that those without jobs will soon be getting back to work?

A. That would be good news, but it is simply not so.

Q. Why not?

A. Because greater profits more often than not mean the company has saved on costs. And what are costs? Perhaps the greatest cost factor generally is the cost of labor. When companies save on the "cost of labor," it simply means they spend less money on salaries and wages. And that means fewer people, both blue and white collar, earning less money.

Q. Yes, it is hard to see how the economy is improving when people have fewer jobs and get paid less. It just does not make sense that when corporations are earning more, people are not better off. Where does the money go that is earned?

A. While some of the earnings translate into dividends for investors, a greater part goes to the top of the company and to its cost-saving base. It is no secret that every year company executives, whether in sectors like banking, insurance or manufacturing give themselves huge sums in salaries and bonuses.

Q. What about that money going to the bottom? Doesn't the staff at the middle and at the bottom also benefit?

A. Well, it depends how you define "staff at the middle and bottom." In a traditional American corporation it meant skilled and unskilled blue collar workers and white collar staff from middle management on down. The salary schedule would be somewhat standardized as the pay at one company would be roughly the same for the same tasks as that of other companies. For a company to remain reasonably profitable, management would strive for reasonable compensation at all levels.

Q. That sounds like everybody would be kept happy, so where is the problem?

A. The problem lies with top management. Ideally, the mission of a business is to serve society through whatever its product or services are while making a profit doing so. In this process small companies are like families, larger companies are like communities ranging from small towns to large cities and so on. Whatever the nature of the community there is a greater or lesser connection between those on top with those at the middle and the bottom. Ideally there is a measure of respect for a person at one level for anyone at any other level.

Q. Looks like you are painting an idyllic picture. So what can go wrong?

A. Communities fail when their members become confused about their priorities. With a business operation two main priorities are contributing to society with products or services on the one hand and earning enough money to keep the business viable. Where decades ago the two elements were somewhat balanced, it is no secret that today making money far outweighs any other priority. So one of the quickest ways for management to increase earnings is to cut as much of the funds going to the middle and lower strata of its workforce.

Q. So how do corporations manage? Wouldn't operations simply break down if most of the workforce were eliminated?

A. Yes, companies cannot survive without a workforce. But at this point in history, an American company can do without an American workforce. At this point you might have guessed how top management keeps operations going without paying the kind of salaries middle and working class Americans are used to.

Q. Well, it's obvious. They simply send the high-paying jobs overseas to China or India, right?

A. That's it--exactly. If you want get your work done cheaper, you outsource. There is nothing easier.

Q. But isn't there an obstacle to laying off practically an entire workforce, how can top management simply get rid of people who have worked loyally for years and years?

A. It is difficult if there is a sense of community within a firm, but there is none. If there is a sense of community, those who have the power to hire and fire hesitate to visit economic disaster upon people they know and feel close to. But with most of today's corporations upper management functions within a gated community, and those who are outside the gates are considered nothing more than a cost factor.

Q. Strange--what does this lead to? What happens when human beings are nothing more than cost factors?

A. There is a major psychological shift. As long as a person is seen as a human being, he or she benefits from a cultural value system: Thou shalt not steal, nor lie , nor above all not kill. But as long as someone is nothing but a cost factor, he can be annihilated quite easily because costs are there to be cut.

Q. So any idea of how many formerly employed humans who were eliminated as "cost factors" there in the U.S.?

A. The official figure is around thirteen million, but it is probably a lot higher because long-term unemployed are no longer part of the statistics.

Q. So what happens to all these people?

A. Some try their very best to get back to work in their area of expertise--if there is nothing where they can apply their skills, they become willing to accept any job whatsoever. If they can't get any kind of job at all, their new economic reality pushes them into becoming invisible.

Q. Hmmm, why invisible?

A. A job or any valid source of income provides dignity. Having neither job nor income brings with it a sense of shame for being seen as someone who cannot function in life. The jobless/incomeless person tends to keep his lack of wherewithal under wraps to avoid embarrassment. More often than not the need to become invisible is met through a life of seclusion.

Q. So what does that mean?

A. Someone whose identity has been annihilated because he was no more than a cost factor that has been cut will have to find a new path in life.

Q. How do you do that? Is there a formula?

A. There is no formula and there is no easy answer. One may look for a clue in two words adopted from the collapse of the Soviet Union: glasnost and perestroika...