The short but destructive history of mass layoffs

On July 8, Deutsche Bank began laying off 18,000 workers across its international offices as it retreats from the equities business, reducing the size of its workforce by roughly a fifth. The layoffs, which are expected to be concentrated in New York and London, are striking in scope. But the German bank is by no…

The short but destructive history of mass layoffs

On July 8, Deutsche Bank began laying off 18,000 workers across its international offices as it retreats from the equities business, reducing the size of its workforce by roughly a fifth. The layoffs, which are expected to be concentrated in New York and London, are striking in scope. But the German bank is by no means an outlier.It’s fairly standard for large corporations to axe tens of thousands of workers at a time, especially in the United States. Even in the context of a tight American labor market and a historic economic expansion, major US-based organizations have continued to make sweeping job cuts. Last year alone, Verizon Wireless laid off 44,000 workers, while Toys R Us shed 30,000. Wells Fargo let go of 26,500 over the course of three years, and General Motors laid off 14,700.Mass layoffs like these tend to disappear fairly quickly from the mainstream news cycle, grabbing headlines for just a few days. And even then, as with Deutsche Bank, the layoffs are often discussed more as an indicator of a company’s struggles and strategic turns than as a life-changing disaster for huge numbers of human beings.Of course, for the people who actually lose their jobs, it’s a very different story. Losing your job ranks among the 10 most stressful life events on the Holmes-Rahe Stress Inventory, a scale used to estimate people’s vulnerability to major health breakdowns.It should be no surprise that layoffs can cause deep harm to the people who experience them. It’s not just because of the financial hardships that are involved with losing one’s job, although 78% of Americans live paycheck to paycheck. It’s not just because of the difficulty of finding a new job, although research shows it’s significantly harder to get hired when you’re unemployed, and only becomes more difficult the longer you’re out of work. It’s also because, in a society that teaches us to base much of our identity and self-worth on our jobs, a layoff—which usually has little to do with one’s performance at work—can destroy an individual’s self-confidence for years to come, with devastating effects on their mental health and the long-term course of their careers.From the company’s perspective, the psychological toll of layoffs might seem sad but inevitable. Sometimes companies need to cut costs. Sometimes, as with Deutsche Bank, they need to change strategies. They always need to survive, lest they go under entirely.But as New York Times journalist and author Louis Uchitelle argues in his 2007 book The Disposable American, the working world doesn’t need to be so cruel. He suggests that layoffs, like cigarettes, should come with a warning label, designed to shift the stigma surrounding job loss from the workers who are victims of it to the executives who see human suffering as the unfortunate cost of doing business.Job security was the norm in the US for much of the 20th century, and it still is in many European countries. Mass layoffs are in fact a fairly recent phenomenon, emerging for the first time in the late 1970s. In the span of just a few decades, Americans came to accept frequent, large-scale layoffs as the price they have to pay in a dynamic global economy, a mindset that impacts blue-collar and white-collar workers alike.There’s no question that the bankers affected by the Deutsche layoffs are in a far better position than, say, the factory workers at GM. While automation on Wall Street and reduced demand for investment bankers means that some of them will have trouble finding new jobs, they are nonetheless extremely well-paid, well-educated people with presumably a fair amount of social capital and, hopefully, some savings.But the news of the Deutsche Bank cuts offers a timely opportunity to ask whether the pain that mass layoffs inflict upon workers of all stripes is, in fact, necessary, and to discuss how American workers resigned themselves to the idea that the employers to whom they dedicate one-third of their waking lives have a right to quickly dispose of them the moment their continued employment becomes inconvenient. As Sandra Sucher, a professor of management practice at Harvard Business School, sums up the culture of layoffs: “There’s this funny disconnect. People are valuable until they’re not.”A brief history of mass layoffsAs Uchitelle explains in The Disposable American, from the 1890s through the 1970s, mass layoffs were rare, perceived as “a sign of corporate failure and a violation of acceptable business behavior.” This was the era of the company man, in which workers could reasonably expect to remain employed by the same organization for the bulk of their careers.The prevailing view in the US through the mid-20th century held that government had a responsibility to ensure full employment, with federal spending on infrastructure as a way to fill in gaps when the job opportunities in the private sector were insufficient. Though this expectation began to fade in the aftermath of World War II, Uchitelle explains, the economic boom of the next few decades nonetheless served to ensure that workers remained in popular demand, while unions and the regulation of the airline, banking, trucking, telephone, railroad, and utilities industries served as further backstops for workers.But the deregulation of those industries under the administration of former US president Jimmy Carter, championed by free-market advocates who sought to bring about greater competition and lower consumer prices, created an environment in which thousands of jobs could disappear in an instant. As Uchitelle writes, the “pattern of using mergers and acquisitions to chase higher and higher profits while closing or shrinking or selling less promising operations spread widely in corporate America, and layoffs greased the way.” The labor movement simultaneously weakened, and with it the job protections that unions had afforded to workers, cemented by the union-busting tactics employed by the Reagan administration during the 1981 air traffic controllers’ strike.By the early 1980s, General Electric chairman Jack Welch was popularizing the idea of layoffs as a sign of corporate competitiveness. The man nicknamed “Neutron Jack” was responsible for eliminating the jobs of one out of every four GE employees between 1980 and 1985, with 118,000 casualties, according to Uchitelle. Welch in turn paved the way for executives like Robert Allen, the CEO of AT&T who made headlines in the 1990s for getting
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