We Need to Protect Employment

I don't know of anyone who thinks that the employment crisis is not at the top of the list of government priorities. And yet, despite the combination of massive stimulus packages and financial bailouts, little success has been achieved to date. As I write, unemployment is at generational highs; and it is going to get worse. I have a suggestion that I think would really help. Whenever the government decides to throw a financial lifeline to a company (bank, insurance company, automobile manufacturer, or anyone else), it should come with two mandatory strings attached. First, the recipient must agree that it will not reduce headcount for an extended period (say 18 months). Second, it must also agree to reduce compensation and benefits for everyone (not just the senior executives, and this should also include retirees receiving benefits too) by a minuimum percentage, say 5-10 percent over that period (and, perhaps longer). Now I know that this will not be a popular suggestion to people working for these institutions (and, if unionized, the unions either). However, lets face it, companies in need of these rescue packages will probably not survive without the assistance, so all employees are receiving a pretty big benefit from these government rescue packages. In most cases, compensation and benefit programs are the predominant expense. So cutting this expense raises the likelihood that the company will survive and pay back the taxpayers. However, beyond this, there are other important benefits. First, by interrupting the lay-off cycle, we may actually stabilize the economy faster and help us return to growth. This should have a less disruptive impact on the economy than large headcount reductions. It will help alleviate the uncertainty that all employees at struggling companies have, so they will be more inclined to spend and make other financial commitments. Furthermore, it will help alleviate strains on government resources. Unemployment insurance payments are a tremendous drain on state and local economies. Keeping people at work will allow such resources to be used for other purposes. Other sources of assistance will also be freed up. Finally, it will raise the likelihood that the taxpayer will be repaid, which means that the future of this economy is brighter for everyone.

Comments

[JobExchange]

And let's not forget that there are governors that may not be interesting in extending or expanding unemployment benefits. http://plasticskyscraper.wordpress.com/

[JobExchange]

I couldn't agree more with the author and wholly disagree with the commenter. Companies that are receiving assistance have been, until now, using those funds to keep their companies viable while simultaneously crafting an announcement of massive job cuts. With this, how is the layoff cycle to end?

The comment that "The managers of those firms...ar­e best equipped to make staffing decisions" could not be any more misguided. These managers are the ones that led their respective companies to the point of needing assistance. Perhaps one of the conditions for a company to receive funding is to evaluate the actual value those managers bring to a de-valued staffing arrangement.

[johnrharris]

You've stated a worthy goal, Neil, but your prescription for achieving it is wrong.

Consumers ultimately determine the appropriate staffing and compensation levels for producers. Your top-down, central-pl­anning-bas­ed, one-size-fits-all prescription for saving jobs is certain to be right for no individual firm. The managers of those firms - the people closest to the consumer and possessed of the best information concerning the proper constellation of headcount and compensation - are best equipped to make staffing decisions. As we have seen, such people are quite fallible, but so are politicians and government planners.

Your prescription would force firms to expend precious resources on headcount when the same resources might be better devoted to automation. It would keep labor in certain jobs when, by the free choices of consumers, that labor would be better positioned in other jobs.

While your concern about unemployment compensation expense is well-placed, it would be better to expand unemployment benefits to deal with the fallout of layoffs than to force staffing arrangements the market no longer values.

[Neil Grossman - Huffpost Blogger]

actually, i don't think the government should be giving any aid (except in fully taking over the institutions). if the government provides aid for broader purposes, such as the economy, it should be able to apply restrictions that help it achieve those goas--in fact, without those broader societal goals, it is questionable if what the government is doing is even constituti­onal..