The Disposable Work Force

Worker Displacement and Employment Instability in America

Thomas Moore

• Publisher: Routledge
• Year: 2018
• Print ISBN: 9780202305196
• eBook ISBN: 9781351328340
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The twenty-first century has witnessed a transformation of the organization, opportunities, and terms of work. Downsizing, restructuring, and outsourcing are the forces altering employment relationships throughout the work force. Those who tend to see the future in a positive light view the evolving role between employer and employee as empowering for the individual.

This book examines the consequences of economic instability due to job loss and the displacement of millions of workers. It draws upon case studies of worker displacement as well as national labor force surveys. Thomas S. Moore finds that consequences of economic instability are productivity slowdown, increased disparities in earnings and income, and higher average unemployment. He assesses the extent of job loss nationwide, its costs to the individuals directly affected, and the way in which the incidence of displacement and earnings loss has shifted over time. Although drawn from an earlier period, the data have an obvious relevance to today's labor markets.

Moore argues for an employment and training system that gives employers an incentive to invest in the skills of their employees. Federally funded training programs have not improved the earning ability of displaced and disadvantaged workers, and state-sponsored programs tend to exclude those most in need of assistance. Moore suggests direct employer investment in the general skills of employees. Initially published in a different economic downturn, this continues to be a must read book for all economists, sociologists, and policymakers.

I The Costs and Consequences of Worker Displacement

1 Anatomy of a Plant Closing

As a catalyst for ritual communication, a plant closing symbolizes different things to people in different social positions. The Chrysler plant closing dramatized a deep cultural antagonism that has long divided the city of Kenosha.

—Kathryn Dudley, The End of the Line: Lost Jobs, New Lives in Postindustrial America

Plant closings and mass layoffs are unique events, and no single incident is representative of the job loss that is occurring nationwide. But case studies of communities that lose a major employer illustrate some of the trends that are reshaping the employment relationships of millions of Americans. This chapter describes the widely publicized closing of the Chrysler auto assembly plant in Kenosha, Wisconsin.¹ It looks at both the labor market impact of the closing and the efforts of the community to promote economic development and recovery. Those efforts long preceded the Chrysler closing, but they acquired a sense of urgency in the aftermath of the shutdown.

In her study of the Chrysler shutdown, anthropologist Kathryn Dudley (1994) describes how plant closings have come to symbolize change in the economy and the occupational structure. Because of their symbolic importance, they often precipitate a community debate about the meaning of economic change and the sources of communal well-being and future prosperity. As parties to this debate, local elites view plant closings as part of a process of economic development that is ultimately beneficial for the community. For them the Chrysler closing provided an opportunity to assert their belief that the public interest in economic revitalization is best served by reducing the local costs of doing business. The workers directly affected by the job loss are usually more concerned about the unequal costs imposed by plant closings, and they are more likely to question the effectiveness as well as the equity of local economic development initiatives.

Economic development has become the primary focus and substance of local politics in the United States. State and local governments have actively promoted the development of particular locales at least since the 1930s, when southern states began issuing municipal bonds to help finance the construction of industrial plants. The issuance of tax-free bonds to reduce the borrowing costs of private firms has since evolved into “public-private partnerships” through which state and local governments offer a wide variety of financial incentives to attract private investment. There is little evidence that subsidizing private firms reduces the long-term unemployment rate or improves the employment prospects of local residents, but the prevailing approach to economic development emphasizes boosterism and business investment incentives as the way to attract companies and jobs to hard-pressed communities. And communities that lose their major industrial employer are certainly hard-pressed.

THE EVENTS LEADING UP TO THE CLOSING

Kenosha’s main assembly plant had been used to produce cars since 1902, when a local businessman, Thomas P. Jeffrey, began building Ramblers in what had been a bicycle factory. At the time of the closing in December 1988, it was the oldest operating car assembly plant in North America. The community’s employment and income levels had been highly unstable for decades, both because of the cyclical nature of the auto industry and because Chrysler’s predecessor, the American Motors Corporation (AMC), held only a small and declining share of the domestic car market. But when Chrysler purchased AMC in the summer of 1987 and spent millions of dollars to retrofit the old plant for assembly of its Dodge Omni and Plymouth Horizon subcompacts, it reassured residents that auto production would continue. Expectations soared when thousands of laid-off workers were recalled, and many left full-time jobs to return to what they were assured was a renovated plant.

Those expectations were shared by the state and local officials who made every effort to accommodate the carmaker’s demands for public assistance, including job retraining funds, infrastructural improvements, a thirty-mi I nondollar state loan financed at below-market rates by the sale of government bonds, and the assignment to Chrysler of up to four thousand tons of the state’s allotted emissions of volatile organic compounds. The provision of this emission allotment is indicative of the importance that states and localities attach to keeping major employers. Southeastern Wisconsin has poor air quality and is classified as a nonattainment area by the Environmental Protection Agency. By granting such a large portion of its emissions credits to Chrysler, the state effectively limited the expansion or entry to the area of other industrial firms.

In return for acceding to Chrysler’s demands, Wisconsin officials received assurances that car production would continue through the 1992 model year. In a letter to the Kenosha city administrator dated July 26, 1987, Chrysler’s manager of state relations, James Kilroy, recalled the promises he had made at an earlier meeting with the Kenosha Common Council and stated,

Based upon our current production plans, it is our intention to maintain production of our L-body vehicles for at least five years in the American Motors facilities located in your city.²

Despite this assurance, it became increasingly clear during the fall of 1987 that Chrysler’s intentions had changed and that it was planning to close the plant. By acquiring AMC, the company had raised its break-even point in annual vehicle sales at a time of growing overcapacity and intense competition in the domestic car market. Its Kenosha work force had an exceptional quality control record, but the antiquated facility imposed production costs well above the company average. Lowering those costs would have required substantial new construction, and Chrysler was already committed to rebuilding its Jefferson Avenue plant in Detroit. In a clear signal of its true intent, Chrysler refused to negotiate a written agreement with the state’s Department of Development that would have allowed disbursement of the job retraining funds demanded just months earlier.

Disregarding this and other warnings, the state’s Republican governor, Tommy Thompson, continued to exude what one Democratic lawmaker later termed an “inflated optimism.” Since winning the governorship in 1986, Thompson had cultivated a political image as Wisconsin’s biggest economic development booster, and he kept his dealings with Chrysler private, involving neither the Democratic-control led legislature nor the union. This strategy fueled accusations that he was playing “Lone Ranger” in order to take political credit for the state’s economic development efforts. Those efforts were now highly politicized, and he faced the risk of being blamed for an economic development failure. That risk became reality on January 27, 1988, when Chrysler announced that it would close the assembly plant by the end of the year, leaving some 5,500 employees, or half of the city’s industrial work force, without a job.

Reenacting a drama that has played across the country, area residents responded to the announcement with a mixture of anger and dismay. The loss of so many well-paying jobs threatened hardship both for the workers and families directly affected by the closing and for those whose livelihoods depended, one way or another, upon the income that auto production brought into the community. The depth of the resentment over what was perceived as a betrayal of trust was not hard to gauge. Within weeks the largest labor rally seen in southeastern Wisconsin in years gathered to hear Jesse Jackson denounce the closing, union members began picketing Chrysler meetings and press conferences, and the state assembly voted ninety to two to ask Chrysler to honor its commitments to the people of Wisconsin. Reflecting the feelings of their constituents, the state’s congressional delegation, led by Kenosha’s representative Les Aspin, pointed out in a letter to Chrysler’s chairman, Lee lacocca, that the company had asked for and received substantial public assistance in return for agreeing to keep the plant open for five years. Perhaps the most telling indicator of community feeling was the tavern sign across from the main Kenosha plant. Following the closing announcement its message was changed from “Lee lacocca for President” to “Lee lacocca Lied to Us.”

Disappointed to learn that the plant would shut down, a number of public officials called upon the state to file a lawsuit against Chrysler. Among those threatening legal action was Governor Thompson, who declared at a meeting with the Chrysler workers,

I’m darn serious about the lawsuit. It’s not a threat, I’m not afraid of filing a lawsuit. It’s not going to hurt business. If businesses can’t keep their word, we don’t want them in Wisconsin. (Racine Labor 1988)

Surprised and politically embarrassed by the announced closing, and not wanting to become a target of the anger it aroused, Thompson sought to focus attention upon the apparent duplicity of Chrysler while presenting himself as the state’s chief prosecutor of corporate wrongdoing. Declaring himself disgusted, he vowed to sue Chrysler either to keep the plant open or to pay one hundred million dollars in damages. He also responded to the charge that he had been naive in his dealings with Chrysler by directing the state attorney general to release three hundred pages of documents that, along with the company’s oral assurances, supposedly proved that it was legally obligated to continue assembly operations in Kenosha. Whether a court would have agreed that a contractual obligation existed is debatable, but the threat probably got the attention of Chrysler’s lawyers.³ It certainly shored up the governor’s political image. A telephone poll of state residents in February revealed that 61 percent favored a lawsuit and that Thompson’s approval rating had not changed while that of lacocca had plummeted (Milwaukee Journal 1988).

Chrysler officials were clearly surprised by the extent and the tone of the publicity generated by the closing announcement, lacocca’s image as a straight-talking man of the people was being tarnished, and he tried to defuse the situation by becoming personally involved. In a strikingly candid admission of the company’s miscalculation, if not mismanagement, the Chrysler chairman stated, “We are guilty of being cock-eyed optimists. . . . Blame us for being dumb managers, but don’t call me a liar” (White 1988a). lacocca also promised to repay any money that the city and county of Kenosha had spent on the Chrysler facilities and announced the creation of a twenty-million-dollar trust fund for the Kenosha workers to be financed from the company’s 1988 Wisconsin sales. Although well received, this trust fund was motivated by more than a sense of moral obligation to help. Chrysler’s sales had dropped sharply within a one-hundred-mile radius of Kenosha, and tying layoff aid to sales improved both the corporate image and the sales of its Wisconsin dealers. Most importantly, the favorable publicity given the trust fund eroded support for legal action against Chrysler, which was undoubtedly the intended effect of the offer.

Following the public rally in early February, the auto workers' union, UAW Local 72, initiated a campaign to mobilize public opinion, hoping to force Chrysler to honor its commitment and keep the plant open. As part of that campaign, the union local also prepared to file suit against Chrysler for using fifty million dollars in federal grants to retool its Detroit facilities for production of the Omni and Horizon subcompacts. The use of federal funds for the purpose of relocating plants and/or jobs is prohibited, and Chrysler claimed that the federal monies it received were being used to construct a new plant, not to retrofit the older plant to which production was being shifted. This accounting practice may have been legal, but the threatened suit served as a bargaining chip in the union’s negotiations with the company. In late April, Chrysler reached agreement with the union on pension and severance benefits and guaranteed that the engine plant in Kenosha would remain open for at least five years. In return, the union dropped its lawsuit.

At the time, union members hoped that the legal actions threatened by state and local officials would prevent or further delay the closing. Both the Kenosha city council and the county board had voted unanimously to pursue every legal option to keep the plant open, and the governor had publicly supported a breach-of-contract suit against Chrysler. However, during the months following the closing announcement, prominent business leaders and organizations became increasingly vocal in criticizing the proposed lawsuit as injurious to the state’s investment climate. Within Kenosha, the Manufacturers' Association, the Chamber of Commerce, and the Kenosha Area Development Corporation all urged the city council and the county board to oppose the suit. The pressure on local lawmakers increased as it became clear to Thompson that public concern over the closing was diminishing. The governor was anxious to resume his role as the state’s major business booster, and he needed to diffuse responsibility for a settlement with Chrysler that would amount, in essence, to dropping the lawsuit.

At a public town hall meeting on September 22, the Kenosha city council voted fourteen to three and the county board voted nineteen to three, with three abstentions, to accept a plant-closing deal offered by Chrysler. The hundreds of Chrysler workers who attended the meeting were outraged by what they regarded as a sellout, and most of the politicians had to be escorted out of the meeting hall by police. Many later defended their action by claiming that representatives of Governor Thompson and of Congressman Aspin had argued that the area’s future economic development would be jeopardized if they proceeded with the suit. They voted for the settlement to avoid being labeled antibusiness and to put the plant closing behind them.

The following day Thompson signed an agreement with Chrysler. The press release outlining the terms of the agreement pointed to its endorsement by the local lawmakers and claimed that the settlement was the best attainable. In the press release, the governor’s office also took credit for the far more substantial concessions that had already been won by the union, even though the settlement between Chrysler and the State of Wisconsin actually amounted to about six million dollars in additional grants and loans. With this agreement to drop the breach-of-contract suit, the effort to keep the state’s largest industrial employer ceased. On December 23, 1988, the final car rolled off the Kenosha assembly line, bringing an end to eighty-six years of auto production.

Community leaders had long anticipated the end of auto production in Kenosha and had urged diversification of the local economy. But the timing of the closing announcement, coming as it did after assurances that assembly operations would continue, came as a surprise to residents and as an embarrassment to public officials. Their anger was genuine. Whether or not the closing could have been avoided, the way in which the decision was reached caused needless hardship. It is conceivable that Chrysler management misread the market in recalling thousands of laid-off workers and assuring the community of their intention to ...

Table of contents

• Cover
• Half Title
• Social Institutions and Social Change
• Title Page
• About the Author
• Copyright Page
• Dedication
• Table of Contents
• Preface
• Introduction: The Rise of Employment Insecurity
• I The Costs and Consequences of Worker Displacement
• II The Sources of Economic Dislocation
• III Toward an Active Labor Market Policy
• 7 The Case for Worker Training
• 8 Work Sharing and Job Security
• References
• Index
• Social Institutions and Social Change