Labor Pains Run Deeper Than Numbers

Just because 23 million Americans are looking for work and can't find it doesn't give businesses the right to treat the employees they do have worse and worse, writes MoneyShow's Terry Savage.

The pendulum has swung too far—and Labor Day made us recognize the simple fact that business is now destroying its most important asset: talented and loyal workers!

For the past decade, even before the global economic meltdown, American business has been “cutting the fat” from its workforce. Many of those jobs were indeed unnecessary in today’s technologically productive times. Economic changes make many jobs obsolete. We no longer have buggy whip-makers, or as many blacksmiths, once necessary occupations to keep American business going.

In fact, today we don’t need as many travel agents, now that you can book online. And we may not need as many stockbrokers in a world of online trading. We may feel it worthwhile to pay only those who can demonstrate added value—a personal recommendation of a little-known vacation spot, or good advice on an investment.

Yes, times are changing when it comes to the labor market. But there are some talented workers who we will always need. And those workers should be rewarded appropriately for their valuable work—not squeezed between less pay and longer hours—just because employers know that jobs are scarce and people are afraid to quit and seek something better.

Many employers have gone too far—and here are just a few examples that have come to my attention in the past few months. These are the true stories that make you wonder just how shortsighted American business has become.

• A hospital nurse in a major hospital confided to me that in her intensive-care ward, they are so short-staffed that these caring nurses stay late on their shifts to make sure patients’ needs are covered. They rarely take lunch or breaks. When the administration learned that they were extending their hours, they were told they would lose a day of work each week, because the hospital didn’t want to be liable for overtime—even though the nurses never claimed overtime.

• A drugstore employee of 13 years, a department manager—whom I personally have known for years in my local store, and noticed because she is so outstanding and helpful—confided to me that her store manager told her that under a new company policy, she would never get another raise or cost-of-living adjustment. She was told this is the company policy for department heads because they already “made too much money.” When I called, a company spokesman refused to comment on their new wage policy.

• A star salesman posted a record year for sales and profitability. He earned more than his boss—or any other salesman in the company. His territory was promptly cut in half and given to others, though he had developed the relationships. And his commission rate was cut by a similar percentage. This is the reward for success and hard work?

• A major American corporation reports record profits, and increases its dividend to shareholders by 13%. Its employees organize a strike, but within months are forced to sign a contract that includes a six-year wage freeze for most employees, loss of cost-of-living adjustments, increases in health-care costs, and loss of some seniority rights. In dog training, that’s called “rubbing his nose in it.”

Wake up, corporate America! If you’re the boss and you’re demanding profits, maybe you should take a closer look at the impact your bottom-line demands are having on your most valued asset—your workforce.

And if you’re middle management, just hanging on to your job by squashing others, then take a look at your conscience. You’re likely to be next.

There’s no denying that capitalism moves in cycles. There’s no denying that at some points in the cycle, labor gets overpaid and over-rewarded. But equally, there is no denying that we have reached an opposite point in that cycle, where the simple fact that 23 million Americans are out of work has given bosses the edge in their demands for longer hours, less pay, and fewer benefits.

Taking advantage of a frightened, anxious, and angry workforce is no recipe for economic success. Taking away incentives and rewards does not produce better work or more profits. A vindictive management does not inspire loyalty. Instead it incites negativity.

America is better off when the economy is growing, when more people are employed, and when workers have incentives to do better work and earn more money. That positive synergy creates even more jobs, fewer people depending on government benefits, more tax revenues—and a greater hope for our future.