One of the bigger stories we missed last month was the Circuit City Saga. In a way, I’m glad I didn’t get to it because while most of the stories covered by Trenches are snapshots in time without a beginning or an end, this one actually plays out to a near conclusion. We know what happened, we just don’t yet know what Circuit City is going to do about it.
The CC Saga begins at the end of March when Circuit City fired 3400 employees because they were making too much money.
Circuit City fired 3,400 employees in stores across the country yesterday, saying they were making too much money and would be replaced by new hires willing to work for less.
The company said the dismissals had nothing to do with performance but were part of a larger effort to improve the bottom line. The firings represent about 9 percent of the company’s in-store workforce of 40,000.
“Retail is very competitive and store operations just have to contain their costs,” said Jim Babb, a Circuit City spokesman. “We deeply regret the negative impact that was had on these folks. It was no fault of theirs.”
No, we know whose fault it was. Wal-Mart’s. Writing on her blog, Barbara Ehrenreich quotes the NYT’s David Leonhardt.
In his economics column last week, Times columnist David Leonhardt showed some pious sympathy for the laid-off, who will, after a 10 week cooling off period, be able to re-apply for their old jobs at much reduced pay. But he goes on to explain that Circuit City’s employee abuse is just part of the larger corporate demand for “efficiency.” Wal-Mart, after all, has capped employee pay and taken the stools away from its elderly employees. Sadly, Leonhardt notes:
It’s probably not possible to halt these changes. It may not even be desirable. The flexibility of the American labor force seems to be one reason that recessions have become less frequent and unemployment is less of a problem here than in Europe, notes Jason Furman, a leading Democratic economist.
CC was responding, it claimed, to pressure from “the marketplace”. Mostly, as Philadelphia Daily News columnist Stu Bykofsky noted a few days later, CC CEO Philip Schoonover was responding to his failure to get CC positioned above its competition.
I placed a call to Circuit City Chairman, President and CEO Philip J. Schoonover to ask how much he would cut from the $4.5 million CC says he got last year. (Bloomsberg News says he grabbed $8.5 million.)
I’d take all three of Schoonover’s titles for 1/10th of what he makes and I think I could keep Circuit City safely behind Best Buy, which is where Schoonover has led it.
Bykofsky never did reach Schoonover but a CC PR flack named Bill Cimino eventually returned Stu’s call to tell him a completely different story.
My call was shunted to PR honcho Bill Cimino, who explained the layoffs were made because the workers were paid above the “market range” for their jobs. (He blamed that on managers not observing salary caps.)
Schoonover’s salary is set by the board of directors and an “independent committee,” Cimino said.
Bloomsberg News says Brad Anderson, CEO of front-running Best Buy, received $3.85 million last year, $1 million less than No. 2 Schoonover.
Schoonover seems to be paid above “market range.”
An apparent case of “do what we say, not what we do”. And damn the consequences. Ehrenreich extends CC’s mangled logic to its ludicrous extreme.
I experienced this myself a few years ago when I lost a lucrative writing contract with a major media outlet. “Why?” I asked my agent. “They said they were paying you more than any of their other outside writers,” she told me, as if that were a sufficient explanation. Foolish me, I thought the raises I had gotten meant the bosses were pleased with my work. What they meant was that I was doomed.
Once you fire the high-performers and experienced workers, the next step will be to demand that employees pay you for the privilege of working. Why not? Most workplaces provide air-conditioned environments and bathroom facilities, complete with soap and paper towels. These are things you’d expect to pay for in a hotel, so why should workers get them free? Having busted his $10-20 an hour senior employees down to $7 and change an hour, Schoonover’s bound to see that the best route to higher profit margins is negative pay.
She’s being sarcastic but she knows as well as anyone that that’s exactly what the Scrooges running the corporatocracy truly want in their heart of hearts. They know they won’t get it, but I’ll tell you what they do think they can get: employees working for free.
Wal-Mart, the acknowledged leader in the field of worker exploitation, has begun to demand that its employees work a half-day a week without pay if they want to keep their jobs, and it’s getting away with it. Not a peep has been heard from the Bush Administration’s employer-friendly Labor Dept despite the fact that requiring unpaid work is, like much of the rest of Wal-Mart’s treatment of its employees, blatantly and unarguably illegal. If Wal-Mart escapes consequences for its arrogant, fuck-you law-breaking, can the rest of corporate America be far behind? And might that explain this?
In surveying more than 65 organizations and 50,000 employees over the last few years, Discovery Surveys Inc., a Sharon consulting firm, has concluded that one out of three employees are seriously thinking about leaving their employers.
Defections on such a scale would be costly to employers so companies are well advised to take some steps to hang onto productive workers, suggested Bruce Katcher, an industrial/organizational psychologist who founded Discovery Surveys.
“In order to keep good employees, it is important to provide them with a sense of personal accomplishment, good one-on-one communication from their supervisors, a commitment to quality, a sense of pride, and confidence in the future,” Katcher said in a statement.
But American corporations don’t care about anything but the bottom line and thanks to Wal-Mart they’re focused on getting employees as cheaply as possible. How is a worker supposed to have confidence in her present let alone her future when, as Barbara said, moving up the ladder is a death sentence?
And we wonder why the poverty rate is rising in the middle of a robust “recovery”.
The Good News – and it’s only good if the corporatocracy pays attention to it – comes in the way this played out. Back at the end of March when the layoffs and the reason for them were announced, Wall Street responded by sending CC’s stock price higher, which was, after all, the point of the massacre. But a stock analyst also warned that the company might be shooting itself in the foot.
“It’s definitely going to have some cost-savings, but I think the bigger impact could be seen in weaker, poor service,” said Timothy Allen, an analyst with Jefferies & Co. “I have a feeling the people they’re letting go have probably been there longer, have more experience, more product knowledge.”
Probably? No, definitely, and letting them go had an impact: in the very next quarter, CC lost money.
Circuit City fired 3,400 of its highest-paid store employees in March, saying it needed to hire cheaper workers to shore up its bottom line. Now, the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.
The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.
“I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates,” said Tim Allen, an analyst with Jefferies & Co.
In particular, the televisions showing disappointing results are “intensive sales” requiring more informed employees, Allen said. “It’s a big-ticket purchase for somebody. And if they feel like they’re not getting the right advice or are being misled by someone who doesn’t know, it would be definitely frustrating. They will take their business elsewhere.”
Which they did. And CC suffered. The Big Question is, which lesson will American business take away from this? That firing experienced people makes the investor class happy and your stock will go up? Or that firing experienced people makes your customers unhappy and your profits will go down?
Unfortunately, I think I know which way the employee-hating, quick-buck-loving corporatocracy is going to go.
The Weekly Toll : Pittsburgh Workers’ Memorial Day, workers’ comp in Texas, and a guilty plea by the owner of a Staten Island construction company in the death of one of his employees in a trench collapse. (Talk about rare birds….)
Atlanta Journal-Constitution: “Air controllers tie safety to workload”
Ever since Ronald Reagan broke PATCO in the early 80’s, working conditions for the people who keep our skies safe have been less than optimal. Periodically they deteriorate to the point that controllers feel they have to speak out. We are going through one of those now.
Some veteran air-traffic controllers in Atlanta say they are working too many overtime shifts as the result of chronic understaffing, which they contend endangers air safety.
The Federal Aviation Administration confirmed that many controllers are working overtime shifts but stressed that the agency is hiring controllers as veterans retire.
“Neither management nor the controllers would allow an unsafe situation to occur in Atlanta or any other airport,” said Kathleen Bergen, FAA spokeswoman in Atlanta. “Safety is the No. 1 concern, and that is what everyone is focused on.”
Not really. It may be No. 2 but it is certainly not No. 1. Since the FAA budget for controllers was cut yet again in 2006, the FAA’s No. 1 concern has been keeping the number of controllers down by increasing rather than decreasing shift length. This has created a condition known as “controller fatigue” yet again, and both the controllers themselves and their new union, the Air Traffic Controllers Union (ATCU), have been complaining about it for months. Finally the National Transportation Safety Board (NTSB) is listening.
Controllers argue the FAA has not been focused enough, and their complaints about “controller fatigue” recently got a boost when the National Transportation Safety Board issued a set of recommendations to combat the problem.
The FAA is expected to respond to the recommendations within 90 days, Bergen said.
“Controller fatigue decreases aviation safety,” said the April 10 NTSB memo. The recommendations noted the FAA has conducted reams of research on the issue but “has been slow to change controller-scheduling practices.”
Though tensions have been building for years between the FAA and the ATCU and they’re currently in the grip of a long-term contract dispute, the fatigue issue is really about the FAA’s refusal to boost its new-hire rate. Control towers are, the ATCU says, chronically understaffed and have been for years.
Bobby Smelley, a veteran controller at the Peachtree City TRACON (Terminal Radar Approach Control) facility, said he’s averaging two six-day weeks a month. The TRACON facility handles air traffic within 40 miles of Atlanta, home of Hartsfield-Jackson International Airport, the world’s busiest airport.
“We are much more fatigued and more tired than we have been in the past,” Smelley said. “It’s become a big deal to get two days off per week. You almost feel like you’ve had a vacation.”
That’s not good for passengers, never mind the controllers, and it’s the same issue that the old union, PATCO, under another miserly, anti-union, anti-worker Republican president, was trying to solve. IOW, nothing much has changed in the past 25 years.
If I had to travel right now, I think trains would be looking mighty good to me.
A number of players in the NFL are suing their own union over its perceived endorsement of investment counselor Kirk Wright, who was arrested in Miami a year ago after more than $$100Mil$$ went missing from his firm’s accounts. The players’ lawyers are arguing that the appearance of an ad on the union’s website amounted to a stamp of approval. The union says No.
The NFL Players Association, in recent filings in federal court here, sued the players – Steve Atwater, Blaine Bishop, Ray Crockett, Carlos Emmons, Clyde Simmons and Al Smith – for breach of contract. The countersuit contends they violated a union regulation when they sued, because the union doesn’t endorse any financial advisers registered on its Web site.
Wright, who operated hedge funds as head of International Management Associates out of Marietta, was listed by the NFLPA on its site. The players cited that factor in their suit, which seeks to hold the league liable.
It’s an interesting argument. Does a union have an obligation to vet any business that pays to advertise on its website if that business offers services to its members?
Boston Globe: “Hub hotels, union reach accord after year of talks”
This has been a long, looooong time coming.
More than a year after negotiations began, four Boston hotels managed by New York-based Starwood Hotels yesterday reached an agreement with the labor union representing about 5,000 hotel workers in the Boston area.
While the proposed 6 1/4-year contract covers wage and benefit increases only for the Sheraton Boston, the Park Plaza, and two Westin hotels in the city, it is expected to set the stage for new pacts at 15 other unionized hotels, including the Colonnade, the Parker House, and the Ritz-Carlton, that signed so-called me too agreements last fall committing them to abide by the contract terms negotiated by the Sheraton Boston.
Washington Post: “Guards Go on Strike at Nuclear Weapons Plant”
If this doesn’t rattle your cage, it ought to. The Bush Energy Dept, a creature of Dick Cheney’s, has allowed its hatred of unions to interfere with proper maintenance of nuclear facilities.
More than 500 security guards at the nation’s only nuclear weapons assembly plant walked off the job just after midnight yesterday to protest what they said is a steep deterioration in job and retirement security since the government changed fitness standards for weapons-plant guards in response to the Sept. 11, 2001, terrorist attacks.
The contractor at the plant, BWXT Pantex in Carson County, Tex., replaced the striking guards with a contingency force that it says will secure the plant’s weapons, nuclear materials and explosives as long as necessary. The issue is not confined to Pantex because guard union leaders at other weapons plants also are raising concerns about the new security requirements, which they say will force many older guards out of their jobs.
Congressional Democrats criticized the Energy Department for not acting to resolve the guards’ concerns in time to avert a strike.
“This employment instability not only raises the potential for significant costs to the American taxpayer, but also raises serious nuclear security concerns,” said Rep. Bart Stupak (D-Mich.), who chairs the oversight subcommittee of the Energy and Commerce Committee.
This is Circuit City all over again. The Energy Dept is holding out for a chance to hire newer and therefore cheaper guards, and they’re using the new security requirements to do it. The fact that their stinginess makes us considerably less safe is apparently of profound disinterest to them.
More than 90 percent of Delta Air Lines pilots decided to cash in their claims rather than take new stock in the airline after its expected emergence from bankruptcy court later this month.
The move means pilots will get checks averaging about $186,000, probably in the first couple of weeks of May, as compensation for deep pay cuts and other concessions their union agreed to almost a year ago.
In a letter to pilots Thursday, Air Line Pilots Association Chairman Lee Moak said the union sold 92 percent of a $2.1 billion unsecured claim at pilots’ request. The resulting $1.16 billion —- which works out to 60 cents for each dollar of claims —- will be divvied up among roughly 6,200 pilots who opted to cash out, the union said.
Give Delta credit. It has handled its financial problems and still kept its promises to its employees. That makes it a rare duck these days.
Central and South America continue to be deadly for trade unionists.
SANTA MARTA, Colombia — Zully Codina was a mother, veteran hospital worker and union activist. The last role was the one that cost Codina her life at the hands of paramilitary death squads, whose records show they collaborated with the country’s intelligence service to liquidate her and other union activists.
Codina was killed on Nov. 11, 2003, when a gunman pumped three bullets into her head moments after she kissed her family goodbye and walked out of her Santa Marta home. Her murder remains unsolved, as do those of the vast majority of the 400 union members killed since President Álvaro Uribe took office in 2002.
Uribe has been turning a blind eye to the murders of union organizers and opposition journalists for so long that people are beginning to wonder if he ordered them. Democrats, who are now in control of the Congress and don’t have the same “they deserved what they got” attitude of the Pubs towards these assassinations, are starting to ask questions and express doubts about Bush’s pending trade agreement with Colombia. As they should.
Recent disclosures about the purported role of the Colombian intelligence service, the Administrative Security Department, or DAS, in the murder of Codina and several other union leaders has ignited a political firestorm here that is reaching Capitol Hill just as the Bush administration is fighting for congressional approval of a free-trade pact with Colombia, the third-largest recipient of U.S. aid.
Some U.S. lawmakers have already voiced concerns. “You cannot put together a free-trade agreement when there isn’t freedom for workers in terms of their basic international rights,” said Rep. Sander M. Levin (D-Mich.), chairman of the House Ways and Means subcommittee on trade.
Actually, they should do more than express doubts. They should kill the trade bill. South American autocrat-conservatives are no different from the ones we have – you have to hit them in the pocketbook before they’ll pay attention to minor details like the wholesale assassinations of union leaders.
Associated Press: “Jobless Rate Hits 4.5 Percent”
Jobseekers had a harder time finding work last month as the economy cooled and wary employers added the fewest positions in two and a half years. The jobless rate edged up to 4.5 percent.
The fresh employment picture provided by the Labor Department on Friday showed that payrolls grew by just 88,000 as job losses spread beyond the struggling manufacturing and construction sectors and into retailing and financial services. Workers’ paychecks also grew more slowly.
Given the housing slump, rising energy prices and sluggish overall economic activity, “businesses are a bit more cautious and reluctant to hire as aggressively as they had,” said Mark Zandi, chief economist at Moody’s Economy.com. “Businesses were voraciously hiring people a year ago and now they’ve got a bit of indigestion.”
The new count of jobs added to the economy was the fewest since 65,000 in November 2004. The rise in the unemployment rate, however, was slight compared with March’s 4.4 percent rate — which had matched a five-year low.
The so-called “recovery” had only just started to positively affect wages, which have actually risen the last few months after being stalled for 25 years.
Figures. As soon as the money finally begins trickling down to us, they put a stopper in it.
Opponents of raising the state’s minimum wage have come up with another attack on low-wage workers, a bill that would partly repeal the state’s new minimum wage law–approved by 73 percent of the voters in November. The ballot initiative raised the state’s minimum wage to $6.15 an hour, with annual cost-of-living adjustments to keep it from falling behind the inflation rate.
Backed by the state’s restaurant industry (which was part of an anti-raise coalition that last month lost a legal battle against the new law), the legislation (H.B.492) could cut by $4 an hour the pay of about 8,600 men and women who wait tables and earn tips, according to a study by the Brennan Center for Justice at New York University School of Law.
The study says that even with the new wage rate, the median wage for restaurant servers in the state is still projected to be just $7.32 an hour—after tips are included. That’s $15,226 a year for those lucky enough to work full time.
The corporatocracy never quits as long as they think they’ve got a chance to screw workers.
The Big Picture: “NFP: 88k (and I don’t believe even that)”
Economic analyst Barry Ritholtz examines the new payroll numbers and doesn’t like what he sees.
The Payroll numbers are out, and they are not particularly pretty:
88,000 new jobs were created in April, according to BLS. This is the weakest job gain since November ’04. Cumulative revisions for prior months were to the downside by 26,000.
As expected, losses were in Manufacturing (19k), Retail (26k) and Construction (11k). The weakness in Construction has been very [m]uted, implying that the full impact of the housing slow down has yet to be fully realized.
Biggest gains were had in Services (116k), Education and Health (53k), Gov’t (25k) Professional (24k) and Leisure/Hospitality (22k).
Temporary help jobs fell for a 3rd month (January was flat) making 4 consecutive months of no gains. Temp help tends to lead employment gains, and this weakness can be read as a future forecastor of employment.
But as bad as those are, Barry thinks the picture’s even worse: he caught the BLS (Bureau of Labor Statistics) playing games with the Household index.
We don’t pay close attention to the Household survey, (the self reported number is very volatile) but the drop of -468k was an eyebrow raiser.~~~
Birth Death Adjustment: A whopping 317k B/D adjustment — that is the single largest “adjustment” on record for any single given month. And despite that giant add, the number was a very soft 88k.
To put this into some context, of those 317k new jobs hypothesized by BLS, 49k of those supposed jobs are in construction. Now what are the odds of that?
While Wall Street celebrates the upcoming recession, let me remind you that this economy requires about 150k new monthly jobs to merely keep up with population growth.
If he’s right, there could be much more – and worse – trouble ahead than any we’ve seen yet.
Globe: “Bringing the jobs back home”
Offshore outsourcing has been the fundamental strategy of glabalization. It has also been a pretty dismal failure when it comes to customer satisfaction. Complaints have risen in both numbers and level of anger until now, as some corporations are reversing the trend. Robert Haynes and Jeremy Crockford speculate that offshoring may have finally run its course.
THE PLANE from Bangalore touched down last month and off stepped a group of trainees headed for The Boston Globe — here only briefly for job training before going back to India and taking 45 Massachusetts jobs with them.
What kind of sense does this make? Not much. According to whom? According to the Globe and The New York Times.
Both papers have recently run stories about “backsourcing” — the term used when business-savvy corporations that care about both customer service and the American economy pull back from shipping their jobs overseas and rehire locally. So who are these starry-eyed idealists who care enough to bring their jobs back to the United States? Dell Inc., Lehman Brothers, Sears Roebuck, Sovereign Bancorp Inc., Tweeter Home Entertainment Group Inc., Cingular Wireless, Comcast Corp., and dozens more.
The fact is that outsourcing is a business trend that is reaching its end and being reversed by companies that care both about their customers and their regional economies.
Yeah? Maybe. Keeping mine fingers crossed….
Discovery Communications of Silver Spring is laying off more than 3 percent of its workforce, with more cuts to come, as new chief executive David M. Zaslav reallocates resources to divisions most likely to position the media company for its digital future, the company said yesterday.
As part of an ongoing reorganization, Discovery is exploring whether it should get out of storefront retailing. The company, which has 100 Discovery stores around the country, pays high rent for premium mall space and is studying whether it could sell its branded products more efficiently with a combination of online sales and partnerships with established retailers, such as Wal-Mart and Target, executives said.
Citigroup, the financial services giant ailing after overseas scandals and lagging profit growth, said yesterday that it would slash 17,000 jobs and transfer 9,500 to cheaper locations around the world to cut the cost of its operations.
The layoffs are a small part of Citigroup’s sprawling, 327,000-person payroll but a centerpiece of chief executive Charles Prince’s effort to control a conglomerate criticized for becoming too big to manage.
The reorganization aims to strip out levels of middle management; force different parts of Citigroup’s operation to share legal, human resources and other services; and consolidate some offices. The company operates in more than 100 countries.
“We know how we are going to get every dollar. We know how we are going to get every head,” Robert Druskin, chief operating officer, said in a presentation to investment analysts and reporters. “Our confidence in execution is extremely high.”
“Execution” is the right word alright.
AJC: “UPS plans to shrink payroll”
Sandy Springs-based UPS will continue to shrink portions of its work force, but there are no plans for further layoffs or voluntary buyout programs, the company’s chief financial officer said Wednesday.
Instead, “most of it will be taken care of through attrition,” CFO Scott Davis said. He made his comments as UPS posted first-quarter profits that met analyst predictions despite weaker-than-expected results in its U.S. package business and a slower-than-anticipated U.S. economy.
Attrition, huh? I’ll believe it when I see it.
If Atlantan Roy McCrerey has his way, American workers would be uttering that phrase as they prepare for their weekly five-day weekends.
“In my dream world, the jerk boss is going to be the guy who makes you come in on Wednesdays,” said McCrerey, an actor who lives in Virginia-Highland. McCrerey is head of a quirky campaign to shorten the nation’s workweek to two days. The “Friends of the Five-Day Weekend” movement kicked off in Asheville, N.C., last week and was in Atlanta’s Woodruff Park on Tuesday. The rally, which drew about 90 people, featured bands, balloons and free giveaways.
“Maybe our message is a little crazy,” said McCrerey, who works about two days a week.
“But my response to that is our current situation is crazy. We need to fight crazy with crazy.”
This isn’t as crazy as it may sound at first blush. To begin with, something very like this has been suggested very seriously in the past as a solution to the employment crisis created by offshoring. There are more and more people competing for fewer and fewer jobs as they’ve been moved to low-wage countries or automated out of existence. On the Friends of the Five-Day Weekend website, McCrery points out in a video that our work week was determined in the middle of the Great Depression and hasn’t been updated since. He’s got a point.
The corporatocracy has been ripping off its employees for years by upping productivity without raising compensation, effectively pocketing the difference and making itself rich on our good work. It’s definitely time to take back what we earned and they stole. This could be one way to accomplish that.
Finally, there’s the issue of our quality of life. Bluntly, when you’re working 80 hrs a week, you don’t have any. Even if you’re working 40 hrs/wk, you don’t have much of one. Maybe it’s time for a mass movement aimed at hauling our lives forcibly out from under corporate control. They don’t have our best interests in mind when they lengthen the hours we’re expected to work. With the advent of cellphones, computers, and the internet, they now expect us to be on call 24 hrs a day.
This has to stop somewhere. Why not here?
Update: On the Top Story
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