The Underworld of Work


Downsizing in America opens with excerpts from mid-1990s articles in The New York Times and Wall Street Journal telling of longtime workers from firms like Kodak, General Motors, and IBM who had recently lost their jobs. But, the authors ask, was this a fair account? “Did companies actually reduce the size of their workforces?” After an exhaustive analysis, supported by more than a hundred tables, William Baumol, Alan Blinder, and Edward Wolff conclude that “media attention lavished on downsizing may have left people believing that job insecurity had increased more than it actually had.” In fact, they say, “the creation of new jobs always overwhelms the destruction of old jobs by a huge margin.”

Indeed, statistics can be cited to confirm their position. Between 1980 and 2002, while the population grew by 23.9 percent, the number of employed Americans rose by 37.4 percent. In fact, as a fraction of the population, more people now hold full-time jobs than ever before. The principal reason is that millions of women have not only joined the workforce, but have helped to expand its size. The same holds for teenagers, even if we take account of the fact that most of their jobs are part-time. In view of these and similar facts, Baumol, Blinder, and Wolff propose that most large firms “may have simply altered the compositions of their workforces more than their sizes.” They describe a process of “restructuring,” in which

companies may have first reduced the number of less-educated or older workers or middle managers. Then, after a suitable interval required for retooling and reorganization, they may have replaced most of their former employees with others deemed more appropriate to the company’s current needs.

The key word here is “replaced”: Who replaces whom and what happens to those who leave?

Almost all the calculations in Downsizing in America are based on the total number of people employed by the nation’s largest corporations. (Only four tables focus on specific companies.) However, the experience of actual firms can be quite surprising. Their employment records are easily extracted from Fortune’s annual tables, which show how many people worked for each company in the previous year. The percentages cited in Table A compare the payrolls on its 1981 and 2003 lists. Between those years, for example, General Motors shed more than half its workers, going from a payroll of 746,000 to 350,000 people. Xerox dropped from 120,500 workers to 67,100, and DuPont from 135,000 to 79,000. During this period, it will be recalled, the overall population had grown by 23.9 percent.

The authors’ view is that what has been seen as a “downsizing trend is more or less restricted to manufacturing.” In part, this is the result of automation: not as many workers are needed to build a car. Some other companies, like Campbell Soups and Sears, simply haven’t kept up with the competition. Still others, such as Xerox and Goodyear, have lost ground to foreign companies. Moreover, mergers can create pink…

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