******************************************************
PAN Discussion Group Wednesday July 26th 2006
Subject: Downsized Americans: impact, options,
entitlement
******************************************************
Location: Logan Square RSVP for details

Time : 7pm to 10pm - ish

Bring drinks and snacks to share

General:
The articles are the basis for the discussion and
reading them helps give us some common ground and
focus for the discussion, especially where we would
otherwise be ignorant of the issues. The discussions
are not intended as debates or arguments, rather they
should be a chance to explore ideas and issues in a constructive forum Feel free to bring along other stuff you've read on this, related subjects or on topics the group might be interested in for future meetings.

GROUND RULES:
* Temper the urge to speak with the discipline to
listen and leave space forothers
* Balance the desire to teach with a passion to
learn
* Hear what is said and listen for what is meant
* Marry your certainties with others' possibilities
* Reserve judgment until you can claim the
understanding we seek


Any problems let me know..
847-963-1254
tysoe2@yahoo.com

The Articles:

******************************************************First
from Mr Moore of Roger and Me, etc, fame .

http://www.michaelmoore.com/dogeatdogfilms/letsal.html

Let's All Hop in a Ryder Truck

Since making Roger & Me in 1989, I've listened to a
lot of stories from people, strangers in the street,
who want to buy me a beer or a burger and tell me what
happened to their American Dream. Roger & Me
chronicled how the world's richest corporation,
General Motors, destroyed my hometown of Flint,
Michigan, by firing 30,000 workers during a time when
the company was making record profits. I filmed my
search to find the chairman of GM, Roger Smith, and
tried to convince him to come to Flint so he could see
what he had done to the people there.

Although Roger never made it to Flint, a lot of other
people have. These days everyone, it seems, lives in
their own Flint, Michigan.

The stories I hear are pretty much the same, with a
few variations to allow for the pink-slipped brother
who committed suicide, or the mother who lost her life
savings when the pension fund went belly-up. I have
heard so many of these stories that I can fill in the
blanks before the sentences are finished. I find
myself doing this to keep from sinking into an even
greater despair.

It is not pleasant when a homeless person actually
knows you and calls out, "Hey, Mike!" as you are
trying to walk quickly past him and his shopping cart.
This happened to me on 46th Street in New York City in
front of the Paramount Hotel. I was with a vice
president of NBC and the producers of my show "TV
Nation." The homeless man grabbed my hand for a shake
and told me he, too, was from Flint, Michigan, but now
lives here on the street.He wanted to describe his
favorite part of Roger & Me, which he had seen three
years ago when he had a job. While the NBC executive
was watching in disbelief, I'm thinking to myself ...
I know this guy!"You remember me, don't you?" he
asked. "I used to deliver your newspaper, the Flint
Voice."Why was it him standing there like that? Why
not me? But for the grace of Warner Bros. and NBC? I
emptied my pockets and gave him everything I had. We
left him on the street and went inside, where I had a
$30 steak. The NBC suit had a salad. My buddy from
Flint was probably already
guzzling his aptly named Colt .45.

As I write this I am on a plane to Ames, Iowa, to
speak to a group of students and farmers who, like the strangers in the street, are angry and depressed that the America they once believed in has all but told them where to get off. When I arrive, the auditorium is overflowing. I begin to hear the same stories of betrayal and bewilderment and, always,
the Big Question. Why is it that if they worked so
hard for so long, and played by the rules, and voted
for the Republicans, their reward has been foreclosure
and divorce, bankruptcy and "the bottle"?

As I sit offstage listening to the introduction, I
think about how I, too, was raised to believe in an
America where everyone had the opportunity to achieve
a decent life. I was the all-American boy, an Eagle
Scout. I won my Marksman certificate from the NRA. I
was religious, attending the seminary in high school
to become a Catholic priest. I obeyed all the rules
(to this day, I have yet to smoke a joint) and worked
within our political system (at the age of eighteen, I
was elected to public office in Michigan). Until the
1990s, I never earned more than $17,000
a year. I have stood in the unemployment line at least
three different times in my life and was collecting
$98 a week in "benefits" when I
decided to make Roger & Me.

Now, after years of living when I barely had enough
money to even go to the movies, I find myself suddenly
blessed with the opportunity to make
them. I feel truly privileged to be able to speak to
so many people. But tonight, I can't stop thinking
about the two people I met on my way here to
Ames."Bill" is what the name read on his shirt, as he
stood under the big Delta logo (you'll love the way we
fly) behind the airline counter. He took my ticket,
looked at the name, looked up at me (one of those "you
look so much thinner on TV" looks), and smiled.

"I just saw your movie for the third time," he said,
his face turning red because he thinks he's meeting a
movie star or something. "I just want to thank you for
what you did." I thanked him for thanking me and then
he told me his story. "I'm fifty years old. Worked
here at Delta for twenty-one years. Two
years ago, they announced they were downsizing the
company and told me I was being laid off. I went into
shock. Almost twenty years with the company. Where was
I going to get a job at fifty years old? They told us
they were bringing in outside part-time contractors to
do our jobs. Temps. We were welcome to apply for those
jobs if we wanted to at half our
former wage. I just couldn't do it." "So," I
interrupted, "how many prescriptions did you
eventually go on?" "Six," he replied, without missing
a beat. "Prozac, Xanax, Pepcid, Lasix, Clonidine for
my blood pressure ..." "... And something to help you
sleep at night." "Yeah, Ambien, how'd you guess?"
"I get stopped a lot. People who have lost their jobs
want to show me their portable pill cases you know, a
little compartment for each day of the week or "
"Or each pill compartment divided by color," he said,
finishing my sentence as he pulled out his plastic
medicine chest to show me. "You're not flying this
plane I'm taking, are you?" I asked half-seriously.
He told me that the only way he got to come back to
work was because someone had died and he was highest
on the seniority list. "I'm down to three pills a
day," Bill said, mustering a little pride. "Things are
looking up."

The cabbie on the way to the airport had also seen
Roger & Me. "Hey, you're that guy, Roger Moore," he
said as he turned around. "Yeah." I don't tell him my
name is Michael. I probably should. Michael Moore,
son of Frank and Veronica, brother to Anne and
Veronica, no relation to 007.
"I have two master's degrees," he began. "I've been
laid off from two different jobs in the last five
years. Nobody wants a guy with this much education. So
now I'm driving a cab." "I'm supposed to be in Flint
building Buicks," I tell him, "but I quit
the day I was to start. Many years ago." The cabbie
glanced at me in the rearview mirror, probably glad I
wasn't the one who had built his Buick. "I've got a
question for you, Mr. Moore. Why is it that Al D'Amato
and the rest of Congress have spent TWO
YEARS and TEN MILLION DOLLARS investigating why seven
seven, mind you SEVEN people lost their jobs in the
White House travel office and not a single dime or day
has been spent investigating why Thirty MILLION other
Americans have lost their jobs? WHY IS THAT?"
"I've got a few ideas," I reply, but before I can
offer them, he answers the question.
"Because the Big Guys who threw us out of work are the
same ones paying these politicians to keep the country distracted with some phony Whitewater issue. Any fool can see that." We are kind of crazy, aren't we? Today, we're actually earning less than we earned, in real dollars, in 1979. Millions of people officially are out of work 7,266,000. But the Bureau of Labor Statistics and the Census Bureau estimate another 5,378,000 are also unemployed but uncounted. Another 4,500,000 more are working part-time but looking for a full-time job. And then there are the 2,520,000 Americans who are working full-time and earning a wage that is below the poverty line. That's nearly 20 million people who cannot make the bare minimum they need to survive.

Meanwhile, the chief executive officers, the CEOs of
our top 300 companies, are earning 212 times what
their average worker is earning. As these CEOs fire
thousands of employees, they, in turn, become even
wealthier. AT&T chairman Robert Allen lays off 40,000
workers while making $16 million. Louis Gerstner of
IBM fires 60,000 workers, then takes home $2.6
million. Scott Paper fires 11,000 people, merges with
Kimberly-Clark, and CEO Albert Dunlap bags $100
million!

These corporations then go on to post record profits.
And how do they celebrate their success? By firing
even more people! General Motors made $34 billion in
profits over the past fifteen years and eliminated
over 240,000 jobs. Yet, with every round of firings,
the societal problems we must deal with rise at a
corresponding rate. According to a study conducted by
economists at the University of Utah, for every 1
percent rise in the jobless rate, homicides increase
by 6.7 percent, violent crimes by 3.4 percent, crimes
against property go up 2.4 percent, and deaths by
heart disease and stroke rise by 5.6 and 3.1 percent, respectively.

No matter how rosy Washington tries to paint the news
about the economy ("The lowest rates of unemployment
and inflation in years!"), the average American knows
that the jig is up. No one, these days, can remember
what job security used to feel like because everyone
lives in total fear that he or she could be next. No
one is safe. So you learn not to complain as you are
forced to work longer hours for lower pay. Health
benefits? Paid vacations? You've already kissed them
good-bye.

Remember the American Dream? For those of you too
young to have ever experienced it, this is what it
used to be:If you work hard, and your company
prospers, you, too, shall prosper.That dream has gone
up in smoke. Now it's the American Bad Dream: You work
hard, the company prospers and you lose your job!
There is no more telling sign about the state of the
union than this one simple fact: Manpower, Inc .the
nationwide temp agency has surpassed General Motors as
the number one employer in America. More people now
work for a company that guarantees you a job for a day
than for the world's largest manufacturer
a company that once proclaimed "What's good for
General Motors is good for the country."

We all know it's over, this way of life we once had,
or thought we could have if we put in a decent day's
work. Now we must fight each other for whatever scraps
are left, leaving the rich to enjoy the greatest
wealth this country has ever seen.

From the look of things as I've described them, you'd
think the whole country would be up in arms over how
the well-to-do have gotten away with bloody murder.
You would think that we'd have mass political
movements organizing the middle class and the working
poor. You would think new political parties would be
forming to stop this destruction of the American
Dream.You would think that, but you would be wrong.
Instead, the majority of Americans have decided that
the best statement they can make is no statement at
all. In the 1994 election, more than 60 percent of all voting-age Americans 118,535,278 people, or the equivalent of the voting-age population of 42 states chose to stay home and not participate. They did
so not because they are apathetic or ignorant or
careless. They didn't vote because they have had their
fill of it. The candidates and the two
political parties no longer have anything to say to
the citizens of this country. The Democrats and
Republicans are so much alike, obediently supporting
the very system that has brought ruin to so many
families, that the average American couldn't care less
what any of them have to say. They know that voting
will not improve their lives, not one single
bit.

It is significant to note that, in the 1992
presidential election, nearly 20 percent of those who
did vote actually took the time to drive to the polls
and stand in line to cast their ballot for a man most
of them knew was a certified fruitcake Ross Perot.
That's how intense the level of anger is in this
country. Millions threw away their vote simply
because they thought it would send a message! Perot,
as nutty as he is, was saying a lot of the things that
no one else was saying about the American worker
a real irony considering the billions he owns and the
fact that his Democratic opponent, Bill Clinton
(raised by a single mother, at times impoverished),
said little or nothing.

It is even more surprising that in 1996 a majority of
Americans said that if they had the chance, they would
elect Colin Powell as president. That so many of these downsized Americans would be able to push through their own personal racism just so they could send a message about how angry they were over their plight was a powerful signal that all is not
well in the U.S. of A. Did you ever think things would
get this bad in America that you would live to see the
day when a majority of white voters pleaded for a
black guy to run for president? They would never want
him to move next door or marry their daughterbut they
would put him in the highest office in the land! Wow.

In my home state of Michigan, the situation has sunk
so low that only 12 percent of the voters went to the
polls in the March 1996 primary, even though at that
time there was a bitterly contested race between Bob
Dole and Pat Buchanan. Buchanan knew firsthand just
how bad things have gotten for the country in part
because he had spent most of his life in the Nixon and
Reagan White Houses making it bad. But now he had
transformed himself overnight into The Great White
Workers' Hope. Like a man who had preceded him on the
political scene over sixty years ago (albeit in
Germany), Buchanan knew just what to say to the disenfranchised, abused American worker: HATE! FEAR! MORE HATE! BLAME THE IMMIGRANTS!

He almost pulled it off, getting about a third of the Republican vote, even winning a few states. It speaks well of the goodness of the American people that they did not fall for his ruse. It is very easy to
manipulate people when they are down on their luck.
Very easy to plug in to their psyche with all the
"right" answers to "Who did this to you?"

Many citizens, though, are not just sitting idly by
watching their country go down the drain. In October
1995, one million African-American men marched on
Washington, D.C., to let America know they had had it.
It did not matter to most of them that the march was
led by a weirdo. What mattered was making the
statement. And did they. One out of every ten
black men in this country found a way to get to
Washington, D.C., that day (the equivalent of 8
million white guys holding a demonstration). It
made a powerful impression on an already frightened
white America.Just how frightened is evidenced by the
growing militia movement. Tens of thousands of men and
women are training, with weapons, for what they
believe will be the ultimate confrontation with the
government. Although most of them are motivated by
racist beliefs, a lot of their sympathizers are just
the average Joes who live next door to you. But not
for long. The bank has foreclosed on their house and repossessed their car and the money they had put away to send the kids to college is now used to buy food, clothes, and maybe someday a few semi-automatic weapons.

They have, in essence, snapped. It's one thing to have
always been poor and never possessed those niceties of middle-class life. It's a whole other thing to have enjoyed those privileges and then have them taken away from you by the very people you voted for! When that happens, many individuals who are already on the edge and can't figure out how to respond po-litically are going to do one of two
things: (a) Take it out on themselves (sit in the dark
and drink), or (b) Take it out on you. In Michigan
alone, the birthplace of downsizing,
there are over fifty militia groups, the most in the
country.

My parents called yesterday to tell me that GM has
announced two more plant closings in Flint (are there
any left to close?). Another 3,000 lives will be torn
apart. Some of these people who will lose their jobs
are recent arrivals from Oklahoma City. They moved to
Flint (a few months after the bombing of their federal
building) when GM began laying off
workers at its factory there and told the ones with
higher seniority that they could relocate to Flint if
they chose. So they rented their Ryder trucks and
headed to Michigan with the promise of the company
that they would be secure (in Flint!). Now, nine
months later, they will be forced to call Ryder Truck
and move again. They've been told this time that they
can go to Lansing.

What is terrorism? There is no question that, when an individual rents a Ryder Truck, loads it with explosives, and blows up a building, it is an act of terrorism and should be severely punished.

But what do you call it when a company destroys the
lives of thousands of people? Is this terrorism?
Economic terrorism? The company doesn't use a homemade
bomb or a gun. They politely move out all of the
people before they blow up the building. But as I pass
by the remnants of that factory there in Flint,
Michigan, looking eerily like the remnants of the
Alfred P. Murrah Federal Building in Oklahoma City, I
wonder: What will happen to those people? A few will
kill themselves, despondent over the loss of their
livelihood. Some will be killed by their spouse an
argument over the lack of a new job or the loss of
money at the racetrack turns suddenly violent (the
woman is the one who usually ends up dead). Others
will be killed more slowly through drugs or alcohol,
the substances of choice when one needs to ease the
pain of his or her life being turned upside down and
shoved into an empty, dark hole.

We don't call the company a murderer, and we certainly
don't call their actions terrorism, but make no
mistake about it, their victims will be
just as dead as those poor souls in Oklahoma City,
killed off in the name of greed.There is a rage
building throughout the country and, if you're like
me, you're scared shitless. Oklahoma City is the
extreme extension of this rage. Though most people are
somehow able to keep their wits through these hard
times, I believe thousands of Americans are only a few figurative steps away from getting into that Ryder Truck. How terrifyingly ironic that the vehicle now chosen for terrorist acts is the same one used
by that vast diaspora of working-class Americans who
have spent the last decade moving from state to state
in the hopes of survival.

This moving van, this symbol of their downsized lives,
has become a means to an end. Eighty pounds of
fertilizer and a fuse made of ammonium nitrate and
fuel oil now fill the trusty Ryder instead of the
kids' bunk beds and the dining room set.

Timothy McVeigh couldn't get a decent job in Buffalo,
so he joined the army and got the "first kill" of his
unit in Iraq during the Gulf War. We gave him a medal
for that kill, that taking of a human life. That
murder was sanctioned because he was doing it on
behalf of Uncle Sam for the oil companies.
The next year, he was unemployed, hanging around
Niagara Falls, New York. A photo of him that has been
widely published shows him and fellow defendant Terry
Nichols horsing around on the ledge at Niagara Falls.
I was there at the Falls, writing and prepping my film
Canadian Bacon, at the time that photo was taken. I,
of course, have no recollection of
seeing McVeigh there, because who was he then? Just
another son of a GM worker who couldn't get a job, not
even as a toll-taker on the bridge to Canada (he had
scored second highest on the test; there just weren't
any openings). In the first scene we filmed a few
months later at the Falls, the character "Roy-Boy" is
a laid-off worker (also a veteran of the
Gulf War) and is on that same ledge, preparing to jump
and end it all.McVeigh and Nichols had met in the
Army. The day that Nichols decided to join the Army he
drove through the decimated downtown of Flint,
Michigan, walked into the recruiter's office, and
signed up for a better life better than whatever Flint
could offer.

After the war (and their stint looking for work around
Niagara Falls), McVeigh and Nichols then moved to a
farm Nichols' brother owned an hour northeast of
Flint. They went to Michigan Militia meetings. They
blew up "things" in the backyard. It was no surprise
to me that McVeigh and Nichols found themselves on a
road that led from Flint, Michigan to Oklahoma City, Oklahoma.How was it that Timothy McVeigh became so confused and filled with so much anger? What struck me most about his alleged act was that he had
decided to kill his own people to make his point. This
was a strange twist for those on the extreme Right who
had always used their violence against blacks, Jews,
and immigrants. But McVeigh is not accused of taking
that Ryder Truck to the place where his "enemies" were
the Capitol Building, the World Trade Center, a Jewish
temple, the headquarters of the NAACP, or other
potential targets of his hate. No. He blows up his own
people! In mostly white, Christian conservative, Republican-voting,
redneck-lovin' Oklahoma City! Talk about the final
insanity. I do not like guns. I am a pacifist at
heart. As a member of that minority of Americans who
are unarmed, I am committed to finding a way to
combat the downsizing tide that seems to be rising
against us. So I have written this book. I have no
college degree, so take what I say with
that in mind. I'm not even supposed to be writing this
book right now, because I'm under contract to produce
a sitcom I've been hired to write
for Fox. A sitcom! What am I doing with my life? Hell,
I still owe Mr.Ricketts an English paper from
twelfth-grade Shakespeare! How did I ever get here
from Flint?
Oh, yeah. In a Ryder Truck.
1996 Michael Moore.

******************************************************But
has downsizing been all that bad?

http://web.mit.edu/krugman/www/downsize.html

Down-sizing Downsizing
The Clinton administration is at war with itself on
the hottest economic issue of the day. By Paul Krugman
The Clinton administration isn't particularly
mendacious on economic matters--in fact, economic
analysis and reporting under Clinton have been
unusually scrupulous. But the president has changed
his mind about economic policy so often that now his
officials sound insincere even when they speak the
plain truth.

And so I feel a bit sorry for Joseph Stiglitz, the
eminent economist who chairs Clinton's Council of
Economic Advisers. In April,
Stiglitz released a report on the state of the
American worker, more or less confirming what most
independent economists had already concluded:
Workers are not doing as badly as recent headlines
might suggest. In particular, the impact of corporate downsizing has been greatly exaggerated.

Stiglitz's report was, to all appearances, a sincere
attempt to produce a realistic picture of the American
labor market. Yet it was treated by
nearly all commentators as a purely political
document--an election-year effort to accentuate the
positive.

But the commentators had reason for their
skepticism. After all, other members of the administration--especially Labor Secretary Robert
Reich--have been insistently pushing a very different
view. In the world according to Reich, even well-paid
American workers have now joined the "anxious
classes." They are liable any day to find themselves
downsized out of the middle class. And even if they
keep their jobs, the fear of being fired has forced
them to accept stagnant or declining wages while
productivity and profits soar.

Like much of what Reich says, this story is clear,
compelling, brilliantly packaged, and mostly wrong.
Stiglitz, by contrast, is telling the complicated
truth rather than an emotionally satisfying fiction.

To understand why Reich is wrong (about this
and most other things), think about the strange case
of the missing children. During the early 1980s,
sensationalist journalism, combining true-crime
stories with garbled statistics, convinced much of the
public that America is a nation where vast numbers of
children are snatched from their happy
families by mysterious strangers every year. TV shows
about "stranger abductions" are a media staple to this
day. In reality, however, such crimes
are rare: about 300 per year in a nation of 260
million.

It's not that abductions never happen. They do,
and they are terrible things. Nor is the point that
the kids are all right: For hundreds of thousands of
American children, life is sheer hell. Almost always,
however, the people who victimize children are not
strangers. For every child kidnapped by a stranger, at
least a thousand are sexually abused by family
members. But stranger abductions made good copy, and
therefore became a public concern out of all
proportion to their real importance.

Corporate downsizing is neither as terrible nor as
rare as stranger abduction, but the two phenomena
share some characteristics. Like stranger abductions, downsizing is a camera-ready tragedy, perfect for media exploitation, that is only a minor part of the real problem.

Stiglitz's report is full of dense statistical
analysis making this point, but here's a quick
do-it-yourself version. A February Newsweek cover
story entitled "Corporate Killers" listed just about
every
large layoff by a major corporation over the last five
years. The number of jobs eliminated by each company
appeared in large type next to a photo of the CEO
responsible. The article implied that it was
describing a national catastrophe. But if you add up
all the numbers, the total comes to 370,000. That is
less than one worker in 300--a tiny blip in the
number of workers who lose or change jobs every year,
even in the healthiest economy. And the great majority
of downsized workers do find new jobs. Although most
end up making less in their new jobs than they did
before, only a fraction experience the much-publicized
plunge from comfortable middle class to working poor.
No wonder Stiglitz found that the
destruction of good jobs by greedy corporations is
just not an important part of what is happening to the
American worker.

The point is that Reich's style of
economics--which relies on anecdotes rather than
statistics, slogans rather than serious
analysis--cannot do justice to the diversity and sheer
size of this vast nation. In America anything that can
happen, does: Strangers kidnap children;
mathematicians become terrorists; executives find
themselves flipping
hamburgers. The important question is not whether
these stories are true; it is whether they are
typical. How do they fit into the big picture?

Well, the big picture looks like this: Both the number
of "good jobs" and the pay that goes with those jobs
are steadily rising. The workers who have the skill,
talent, and luck to get these jobs generally do very
well. Only a relative handful of "good job" holders
(which is to say only a few hundred thousand a year)
experience serious reverses.
America's middle class may be anxious, but ojectively,
it is doing fine.

The people who are really doing badly are those
who do not have good jobs and never did. Those with
lousy jobs have seen their already-low wages slowly
but steadily sink. In other words, the main victims of
(to use another of Reich's phrases) the "new economy"
are not the few thousand managers who have become
hamburger flippers but the tens of
millions of hamburger flippers, janitors, and so on
whose real wages have been declining 1or 2 percent per
year for the last two decades.

Does this distinction matter? It does if you
are trying to set any sort of policy priorities.
Should we, as some in the administration want, focus
our attention on preserving the jobs of well-paid
employees at big corporations? Should we pressure
those companies to stop announcing layoffs? Should we
use the tax system to penalize companies that
fire workers and reward those that do not? Or,
instead, should we fight tooth and nail to preserve
and extend programs like the Earned Income
Tax Credit that help the working poor? It is
disingenuous to say we should do both: Money is scarce
and so is political capital. If we focus on
small problems that make headlines, we will ignore
bigger problems that don't.

So let's give Joe Stiglitz some credit. No
doubt his political masters allowed him to downsize
the issue of downsizing at least partly
because they believed that good news re-elects
presidents. Sometimes, however, an economic analysis
that is politically convenient also happens to be the
honest truth.

Paul Krugman is a professor of economics at Stanford
whose books include The Age of Diminished Expectations
and Peddling Prosperity.

**************************************************
Another slant on the effects of downsizing

http://www.prism-magazine.org/april04/teaching_toolbox.cfm

BY THOMAS K. GROSE
In the late 1980s into the early 90s, Americans heard
a new word to explain why growing legions of them were
losing their jobs: downsizing.
As opposed to old-fashioned layoffs, downsizing s
rationale, we were told, was to transform bloated
corporations across the business spectrum
into lean, mean, fightin machines, ready to take on
global competitors. Moreover, downsizing had a
technical aspect: A growing reliance on
innovations apparently meant that companies needed
fewer people to operate efficiently. And it also
seemed that, unlike past rounds of layoffs,
downsizing was aimed particularly at well-paid, highly educated, white-collar workers like engineers. Now, however, a recently published book argues that most of the widely held beliefs about downsizing are wrong. Yes, technology and globalization certainly played a role in what we ve come to call downsizing, but the exercise did not make corporate America any smaller or more productive.

Downsizing in America: Reality, Causes, and
Consequences (Russell Sage Foundation; 321 pp.) is the
first comprehensive study of the origins of
downsizing. Written by New York University economists
William J. Baumol and Edward N. Wolf, with Princeton
economist Alan S. Blinder, the book is a result of
their crunching data from a wide variety of
government, business, and academic sources, including
a previously untapped and deep well of industrial
data, the U.S. Census Bureau s Enterprise
Statistics. They also plowed through nearly 2,000
articles on downsizing culled from the Wall Street
Journal and the New York Times from the years
1993-97. Their efforts produced a book that dispels
many more beliefs than it upholds.

First of all, downsizing has not been an economywide phenomenon. It s occurred primarily within the manufacturing sector, which employs only 15 percent of America s workforce. Indeed, the authors found, within retailing, wholesale trade and other service industries, there s been job creation, or upsizing, and in other sectors the trend has been mixed.
And within manufacturing, downsizing is not something
new, either. Many though not all U.S. manufacturing
industries have been dancing to the steady drumbeat of downsizing since 1967.And what s the main cause? Basically it s this: Downsizing occurs in
shrinking industries, which are contracting because of
a lack of demand for their products. Moreover, in
growing industries, like retailing, upsizing is the
norm. That s a conclusion they admit is
embarrassingly simple, yet it s not one they had
anticipated. Still, it s a finding they deem strong
and statistically significant.

But if a lack of demand for an industry s product is
the main reason in the short term for its companies to
cut payrolls, it s not the only determinant.
Technology plays a role, too, in the long term,
because in dwindling industries it tends to make
smaller firms more efficient. Market forces push
companies to operate efficiently, which means having
an optimally sized workforce, and technology
determines what that efficient size is, and long-run
downsizing occurs when technical change requires a
reduction in the size of the labor force.

But Downsizing notes that technology can also force
some companies to grow. Innovations tend to require
larger firms to cut their workforces, while requiring
smaller firms to increase theirs. That s a phenomenon
economists call a regression toward the mean. And,
within declining industries, the net result is fewer
employees in the long run. There was also evidence
that manufacturing industries facing foreign
competition are pushed to downsize. And, the book
says, there s a technological edge to that aspect, as
well. Increased globalization is fundamentally
rooted in technological advance: Reduced
transportation costs, faster telecommunications, and
the like are among the primary drivers of increased
trade.

In the retailing and service sectors, growth has
resulted in upsizing. And those retailing and service industries that face import competition upsize the most. Interestingly, the book says, industries in those sectors that have lower profitability are also pushed to increase hiring. Technological improvements didn t have any noticeable effect on upsizing in those sectors.

Adding Jobs
Within manufacturing, however, downsizing is really a
misnomer for much of what s occurred. What s actually
happened, the authors say, is restructuring, or
churning. That means that many supposedly downsizing
companies weren t really reducing bloated workforces,
but merely reshaping them. Of 133 companies
scrutinized by the authors that had announced
major downsizings during the period of 1993-97, 55
percent were no smaller in 1998 than they were in
1990, and the majority actually increased their labor
forces by more than 10 percent. So much for trimming
down to fightin shape.

The book offers several rationales for this finding.
Some companies downsize as a short-term fix to a
cash-flow problem. Some wrongly assume cutting staff
will make them more efficient, then have to correct
their
mistake. And some, because of new technologies, are
exchanging unskilled workers for those better
prepared to deal with the requirements of new
technology. Technology may require changing the
composition of a workforce, the book says. But it
rejects the notion that productivity improvements
wrought by technology lead to increasing joblessness.
Jobs are lost to technology, yes. But many more jobs
are created as a result. Since 1879, they note, U.S. productivity has risen more than elevenfold, yet there has been no long-term upward trend in unemployment.But downsizing does not bring about increased productivity, the authors
determined, despite industry s claims to the contrary.
(Indeed, as noted above, some companies realized they
became less productive after they
shed employees perhaps in part because the job cuts
damaged the morale and increased the skittishness of
the remaining workers.) What companies do get from
downsizing is an increase in profits, mainly stemming
from the cutting of wages and other employee
compensation.

Additionally, downsizing depresses worker
remuneration, so downsizing firms do not get more
output per labor hour, but do get more output per
labor dollar. They pay less for the same amount of
work, and that makes it an effective way to hold down
wages. That is the dirty little secret of downsizing,
they claim. And forget about unions acting as a
buffer to pink slips; they act more like a magnet.
Unionized firms are more likely to trim workers,
perhaps because they tend to be higher paid
and, ultimately, downsizing is about cutting employee compensation. It s possible that this new hard-headed attitude of manufacturers toward wages was dictated by efforts to please results-oriented institutional
investors. Yet, despite the jump in profits enjoyed by downsizing firms, those companies are not rewarded by Wall Street. In fact, the usual result is a slumping share price. Why? Perhaps, the book suggests, investors view massive job cuts as an omen of trouble ahead.

As for downsizing focusing on white-collar workers
didn t happen. While it s true, the authors note, that
older, more-educated, white-collar workers have
experienced more increases in joblessness . . .
less-skilled workers are still bearing the brunt of
job loss. In fact, the percentage of managers in the
workforce increases in downsized companies.
Moreover, better educated workers are much more likely
to find new jobs than those with only high school
diplomas. And men and white Americans
get re-employed more easily than do women and black
Americans.
Low-skilled American workers may eventually get back
some lost jobs as technologies become more
user-friendly and require a less skilled workforce.
Then
again, they note, as skilled jobs morph into unskilled
ones, they often travel offshore to low-wage,
underdeveloped countries. Then again, even
simpler-to-use machines have complex workings that
require specialists to keep them running. Of course,
those specialists needn t be Americans, either. The
cycle continues.

The book also disputes the hoary notion that
downsizing has transformed a huge segment of well-paid industrial workers into low-paid burger
flippers. The authors did uncover evidence that
workers changed occupations and industry more often
between 1981 and 1992 than during 1969 to
1980, and that more men than women did the changing.
And it s true that most job-changers suffered a loss
in earnings. But things have actually improved over
time. Workers who changed occupations between 1972 and
74 suffered an average earnings loss of 13 percent;
those who switched jobs between 1990 and 92 had a
loss of just 9 percent. Those who moved to
a new industry between 1972 and 74 had earnings
losses of 13 percent; those who moved to a new
industry between 1990 and 92 had no loss in earnings.


The two main mechanisms that trigger either downsizing
or churn aren t likely to disappear. Consequently,
downsizing can be expected to recur
repeatedly in the future, though only for limited
periods, the authors predict. Still, they caution
against enacting policies designed to limit or stop
downsizing because it s not a long-term threat to
employment. Better, they write, to make more effective
the familiar solutions designed to give fired workers
relief: retraining programs, job counseling and
placement services, and income support for workers in transition.

They further argue against Luddite policy efforts to
protect jobs from innovation, even though technology
can lead to long-term downsizing in shrinking
industries. They note that after India gained
independence, the government banned computers in the
insurance industry to protect the jobs of clerks using
pen and ink. Such protections, they write,
contributed little, if anything, to the economy s
total employment, but go a long way toward explaining
the country s continuing and spectacular
poverty.

Thomas K. Grose is a freelance writer based in
Washington, D.C.

******************************************************
Are there kinder, better, alternatives

Alternatives to Downsizing
Martin G. Evans, Hugh P. Gunz, & R. Michael Jalland

Rotman School of Management, University of Toronto

Downsizing has been a pervasive managerial practice
for the past ten years. It has been the unquestioning
norm that, if a company finds itself in financial
difficulties, THE way out is to downsize by cutting
personnel. Yet concern is growing about the human
costs that accompany downsizing, and questions are
being asked about its impact on the macro-economy: as
more people are downsized out of jobs, who is there to
buy the downsized companies' products? Furthermore we
now know that downsizing rarely returns the benefits
expected of it: a downsized firm is often
worse placed, not better, to compete. Does that mean
that downsizing is always to be avoided? Clearly not;
sometimes it is unavoidable, and in previous articles
we discussed some of the best practice
procedures that firms can use to accomplish downsizing effectively. But there are alternatives which it may well be wise to consider first,
before taking the risk of joining the 80% of firms
dissatisfied with the outcome of their downsizing
activities, and we list some of them in this
article.

Alternatives to downsizing
Over the past decade, a number of companies have
resisted the downsizing fad and made alternative
arrangements. These alternatives typically
exploit the skills and expertise of their employees
rather than losing them and expertise can be lost just
as surely in "survivors" as it is in
those who leave. The central paradox of downsizing is
that the very people who are likely to suffer the job
cuts are expected to be the source of accurate
information about what to cut. But anyone fearful that
their is job at stake is sure to develop
rationalizations and good rationalizations about why
their jobs should be safe in the coming organizational decimation.

Although alternatives to downsizing do exist,
managers, especially in the public sector, need
reminding of them as the siren call to downsize
dominates the political agenda.

1. Adopt a compensation system similar to that used by
many large Japanese firms: a base salary coupled with
a bonus based upon profitability and exceeding
performance standards. If the bonus in the most
profitable year is about 20% to 25% of base salary,
then in years that the firm is not profitable, a major
cost saving can be achieved without layoff.
This tactic requires a proactive stance by the
organization. The new compensation scheme has the best
chance of adoption when the firm is
fairly profitable, not when cost reductions are
imminent. In situations where employees are unionized,
the scheme can be negotiated as a way of
securing job security -- a priority item with today's
unions. Unfortunately, for obvious reasons, this
tactic is unavailable to public sector
managers.

2. Share the cuts across the organization. Rather than
firing 10% of the workforce, all members of the
organization can take a 10% cut in both hours of work
and pay. Perhaps surprisingly, this is the alternative
for which employees often vote given the chance. It
attracts a number of objections:
If coupled with a reduction in the number of functions performed, or in the services and product lines delivered, it may be necessary to reassign and retrain employees from the discontinued work areas.
Fringe benefit costs will not be proportionately
reduced (they represent semi-fixed costs) so that a
larger percentage of salary cut may be required.
However these costs are, in the short run, likely to
be less severe than the costs of downsizing.
Reducing wages renders the firm uncompetitive in the
labour market.There are three responses. First, if the
firm is considering downsizing then allowing some
people to be attracted away helps achieve that aim;
although it is the good people who have the most
mobility, these are the same people who typically
leave when the firm downsizes anyway. Second,
it is often better to retrain some of the existing
workforce than to go through the expensive and risky
process of hiring . Third, the compensation cut is
temporary: it can be restored when the firm recovers
from the current crisis. Such an action can enhance
the attractiveness of the firm in the external labour
market.

3. Adopt the "hour bank", a strategy recently adopted
by BMW in Germany. A variant of flexitime (also first introduced at BMW), employees who are asked to work overtime probably when the economy is booming can,
instead of receiving overtime pay, bank those hours.
Then, if the firm has to go to a shorter work week,
the employees can draw on their banked hours and
receive full pay for working a partial work week.

4. Instead of contracting work out, the organizations
can reduce the amount of work contracted out and bring
the work "in house." For example components usually
bought can be manufactured, services bought outside
can be performed in-house. The feasibility of this
approach will depend upon the skills and competencies
of the current work force as well as
the status of existing contracts with suppliers.

5. Services or products currently provided to in-house departments can be sold to outside customers. For example, the cash management services
provided by banks, or internal consultants in MIS
selling their services externally.

6. Use staff more flexibly. As some parts of the
business expand and other parts decline, employees can
be transferred from one to the other.
This, of course, requires additional training to
ensure that the transferees have the knowledge and
skills to do the new tasks. Skilled employees can be
assigned as trainers to keep training costs down. This
may also require the geographical relocation of
employees. The strategy followed by IBM for forty
years (but which it has recently abandoned), it
is still used by companies such as Hallmark Cards,
Hewlett Packard, and Federal Express. Often, the firm
benefits if it breaks out of the conventional narrow
concept of the degree of flexibility that is possible.

In some case (e.g., Hallmark Cards) factory employees
are retrained for office jobs. This ability to escape conventional views of which person is suitable for which job enables the firm to develop creative
solutions to the cost containment problem. In
addition, the payoff to the organization from
retaining and retraining workers, in terms of
increased loyalty from employees, is incalculable. If
people believe that there will still be a job for them
in the organization, they will be more likely
to develop innovative cost cutting ideas. Absent that
belief in the ultimate security of their position,
such suggestions are unlikely to be broached.

7. Make more use of Part-timers, Sabbaticals and
Leaves of Absence. Not every employee wants to work
full time. Employees can be polled for the kinds of
flexible arrangements they prefer. Some full time
employees who are later in their career can welcome
the chance of a part-time, part pay schedule. Others
might opt to take a leave of absence for a year.
Yet others might prefer a deferred compensation
arrangement in which they work full time at 80% salary
for a number of years and then take a
full pay sabbatical. Freeze hiring. Again this means reassigning people to new positions with concomitant retraining costs. Paradoxically, there are even advantages to hiring when the rest of the
world is downsizing:
a. When firms are downsizing and jobs hard to find,
the quality of applicants is much higher than at other
times in the economic cycle. This is manifested in two
ways: first, in the skills and competencies of the
employee; secondly in their commitment to work. By
comparison, at the peak of the economic cycle good
people are harder to find, more
expensive, and more readily lured away by better
offers elsewhere.
b. The demographic mixture of the organizational
"survivors" is not skewed severely. Under most
downsizing scenarios, older people leave the
organization taking their experience with them.
Counter-cyclic hiring can replenish the pool with
persons with experience in other organizational
settings and avoid dramatic "bulges" in certain age
groups which play havoc with succession planning and
hiring patterns.
c. The firm is better placed to exploit any upturn
that occurs at the end of the depressed phase of the
cycle. There is nothing new in these techniques; they
are all in use today. But the downsizing fad has
pushed them from centre stage, and the risk is
that they are considered too late, if at all. As we
learn more about the human, economic and social costs
of downsizing it is not hard to foresee a time when
downsizing has the same status in society as
environmental pollution. Far-sighted firms in the late
60s and early 70s adopted environmental policies which
their competitors saw as uneconomic and
uncompetitive, and as a result were much better
positioned when the environmental revolution struck.
Will "free-market riders" companies that unload loyal
and dedicated employees onto an unwelcoming labour
market face the same stigma in the near future?

*********************************************
A moral justification for downsizing s effects ?

http://www.robertreich.org/reich/20051201.asp

Of Darwinism And Social Darwinism
The American Prospect, December, 2005

The Conservative Movement, as its progenitors like to
call it, is now mounting a full-throttled attack on
Darwinism even as it has thoroughly embraced Darwin s
bastard child, social Darwinism. On the face of it,
these positions may appear inconsistent. What unites
them is a profound disdain for science, logic, and
fact.

In The Origin of the Species, published 150 years ago,
Charles Darwin amassed evidence that mankind evolved
through the ages from simpler forms of life through a
process he called "natural selection." This insight
became the foundation of modern biological science.
But it also greatly disturbed those who believe the
Bible s account of creation to be
literally true. In recent years, as America s
Conservative Movement has grown, some of these people
have taken over local and state school boards
with the result that, for example, Kansas s new
biology standards now single out evolution as a
"controversial theory." Until a few weeks ago,
teachers in Dover, Pennsylvania were required to tell
their students they should explore "intelligent
design" as an alternative to evolution. (The good
citizens of Dover just booted out the school board
responsible for this, summoning a warning from
Conservative Coalition broadcaster Pat Robertson that
God would wreak disaster on them.)

Social Darwinism was developed some thirty years after
Darwin s famous book by a social thinker named Herbert
Spencer. Extending Darwin into a realm Darwin never
intended, Spencer and his followers saw society as a competitive struggle where only those with the strongest moral character should survive, or else the society would weaken. It was Spencer, not Darwin, who coined the phrase "survival of the fittest." Social
Darwinism thereby offered a perfect moral
justification for America s Gilded
Age, when robber barons controlled much of American
industry, the gap between rich and poor turned into a
chasm, urban slums festered, and politicians were
bought off by the wealthy. It allowed John D.
Rockefeller, for example, to claim that the fortune he accumulated through the giant Standard Oil Trust was "merely a survival of the fittest, ... the
working out of a law of nature and a law of God."

The modern Conservative Movement has embraced social
Darwinism with no less fervor than it has condemned
Darwinism. Social Darwinism gives a moral
justification for rejecting social insurance and
supporting tax cuts for the rich. "In America," says
Robert Bork, " the rich are overwhelmingly people
entrepreneurs, small businessmen, corporate
executives, doctors, lawyers, etc. who have gained
their higher incomes through intelligence,
imagination, and hard work." Any transfer of wealth
from rich to poor thereby undermines the nation s
moral fiber. Allow the virtuous rich to keep more of
their earnings and pay less in taxes, and they ll be
even more virtuous. Give the non-virtuous poor food
stamps, Medicaid, and what s left of welfare, and they
ll fall into deeper moral torpor.

There is, of course, an ideological inconsistency
here. If mankind did not evolve according to Darwinist
logic, but began instead with Adam
and Eve, then it seems unlikely societies evolve
according to the survival-of-the-fittest logic of
social Darwinism. By the same token, if you believe
one s economic status is the consequence of an
automatic process of natural selection, then,
presumably, you d believe that human beings
represent the culmination of a similar process, over
the ages. That the conservative mind endures such
cognitive dissonance is stunning, but not nearly as
remarkable as the repeated attempts of conservative
mouthpieces such as the editorial pages of the Wall
Street Journal and the Weekly Standard to convince
readers the conservative movement is
intellectually coherent.

The only consistency between the right s attack on
Darwinism and embrace of social Darwinism is the utter fatuousness of both. Darwinism is correct. Scientists who are legitimized by peer review and published research are unanimous in their view that evolution is a fact, not a theory. Social Darwinism, meanwhile, is hogwash. Social scientists have long
understood that one s economic status in society is
not a function of one s moral worth. It depends
largely on the economic status of one s parents, the
models of success available while growing up, and
educational opportunities along the way.

A democracy is imperiled when large numbers of
citizens turn their backs on scientific fact. Half of
Americans recently polled say they don t believe in
evolution. Almost as many say they believe income and
wealth depend on moral worthiness. At a time when
American children are slipping behind on international
measures of educational attainment,
especially in the sciences; when global competition is intensifying; and when the median incomes of Americans are stagnating and the ranks of the poor
are increasing, these ideas, propagated by the
so-called Conservative Movement, are moving us rapidly backwards.

******************************************************
So who is entitled and is it a good thing?

http://www.itjungle.com/tfh/tfh072505-story04.html

As I See It: In Defense of Entitlement

by Victor Rozek

Two disparate stories caught my attention as I was
reading the morning paper. The first was about a
20-something young man who was interviewing for a job. Apparently his expectations were judged to be somewhat unrealistic because the Boomer interviewing him scoffed and said "Ah yes, you're from the Entitlement Generation . . . you think you're entitled to everything." The second story was about China scrambling around the globe trying to secure a reliable source of oil that is not controlled
by American interests or subject to American military
might.

At first read the two stories didn't seem related, but
they most assuredly are. They are bound together by
the laws of cause and effect. Given the connective
nature of the global economy, where one nation sneezes
and another catches cold, a young American job
seeker's career expectations may well be realized in
inverse proportion to China's success in
obtaining oil.

The probable reality is that the more oil China is
able to procure, the worse the bargaining position for
the next generation of American workers. More oil for
China means more jobs for China. And with negligible
labor costs by Western standards, the Chinese will be
in a position to produce even more goods for export,
and provide more outsourceable
services. And, since oil is a dwindling resource, a
greater Chinese demand means higher domestic oil
prices which raise the cost of living and
increase the cost of doing business. That, in turn,
provides incentive for reducing domestic labor costs
by exporting more jobs overseas--none of
which provides much leverage for job seekers.

There is one hell of a large butterfly flapping its
wings in Asia and eventually the hurricane will reach
us. But if China's strategic search for oil is a
manifestation of shifting economic fortunes, so is the
coming battle over so-called entitlements. Because
when the hurricane hits (and the winds are just
beginning to buffet our shores), the gains made
by generations of American workers will be denounced
as entitlements and stripped away. We are already
seeing evidence of the rollback with dwindling health
care benefits and disappearing pension funds. Server
maker Hewlett-Packard killed off its pension for new
employees last week, for instance.

"Entitlement" has become a politically-charged word
with situationally flexible meanings. As applied to corporations, entitlements are subsidies which maintain competitive advantage or balance competitive
injustice and are therefore essential to market
dominance. As applied to individuals, they are
impediments to competition and therefore antithetical
to free market principles. But "entitlement" has yet
another meaning. As applied to job seekers it does not
refer to handouts or subsidies. In this context it is
a baseline of expectations backed by generations of back-breaking labor and negotiation. It is the desire to build a career on a pre-existing foundation, dearly earned by those who toiled before
us, rather than expecting every generation to start
from scratch. The "entitlement" to a living wage is
the essence of why people work: to achieve a
comfortable existence where the basic requirements of
life (shelter, food, clothing, education, medical
care, elder care, etc.) can be provided. What the
pundits dismiss as undeserved is a desire for
balanced compensation with sufficient salary and
benefits to cover essential expenses and allow for
some discretionary spending or saving. That
expectation has been earned over many lifetimes by
those who worked to eat and ate to work. Each
generation toiled with the hope that the next
generation would not be required to work as hard. That
is the essence of human progress, and this is what is
meant by entitlement--that our
children are entitled to begin their journey from a
baseline of what we have collectively achieved. There
are few parents who do not hope that their children
will enjoy a better life than they did. But that is
precisely what is being rolled back--our next
generation's future.

When the market rhapsodizers instruct the American
workforce that it must now compete with the developing
world's labor market, what they
conveniently omit is that to do so, our workers must
be willing to adopt a developing world's lifestyle.
Because that's what the pay scale supports. Tellingly,
a number of Americans with technical skills have
sought employment in both China and India, where they
can live reasonably well on pay that would be
considered inadequate back home. And, they can work.

But that's not an attractive option for most of us.
The antidote for entitlement is not stripping workers
of all benefits, and squeezing every ounce of
security, stability, and ease from their lives. That,
after all, is what work should provide. If you buy a
coat, you expect it to protect you from the elements,
and not have a dozen holes and missing pieces. When
you accept a white-collar job, you expect it to cover reasonable middle class expenses without an assortment of missing pieces that make you vulnerable to accident or illness, or leave you unprepared for retirement after a lifetime of work. The antidote to
so-called entitlement is not imposed hardship, but
innovation.

Innovation has always kept the U.S. a few steps ahead
of its global competition. From aerospace technology,
to computing, to the telecommunications revolution;
new ideas and products originated here. And since new
technologies demanded fresh skills, that, in turn,
kept wages high, which fed our expectation that wages
would always remain high.

But, as Thomas Friedman argues in his book The World
Is Flat, the infrastructure is now in place for
innovation to occur literally anywhere in the world.
Instant telecommunications, the Internet, global
financial markets, open sourcing, technology
transfers, international supply chains, or, as
Friedman puts it: "a Web-enabled playing field which
allows for multiple forms of collaboration without
regard to geography or distance and soon--even
language."

In a May 2005 interview with Wired magazine, Friedman
recounts an insight Bill Gates shared. Gates asked,
"20 years ago, would you rather have
been a B-student in Poughkeepsie or a genius in
Shanghai? Twenty years ago you'd rather be a B-student
in Poughkeepsie. Today? Not even close.
You'd much prefer to be the genius in Shanghai because
you can now export your talents anywhere in the
world." Which suggests that B students
everywhere are in trouble. From that perspective
perhaps it's not surprising that the president of
Intel reportedly said that his company could flourish
in perpetuity without ever hiring another American
worker again. A sobering disclosure for the unemployed
B student.

Indeed, we seem to be missing the point, or perhaps
are simply looking at the wrong part of the
globalization elephant. While the American worker sees globalization as a race to the bottom, India and China see it as a race for affluence in which they have just acquired starting blocks. For the new generation of job seekers, the baseline is shifting and, curiously, Friedman offers both a warning about entitlements and a way in which the playing field can be re-leveled for the benefit of Americans.

On the one hand he says: "The entitlement we need to
get rid of is our sense of entitlement." That point of
view is not unexpected from an enthusiastic advocate
of free trade and globalization. But on the other,
Friedman offers some surprisingly socialized solutions
which could ease the transition for the U.S. labor
force. He calls for portable benefits, lifelong
learning, greater investment in science, government
funding for tertiary education, and a system of wage
insurance. Such measures
would surely help flatten the playing field for the
beleaguered American worker, but unfortunately they
are strategies toward which the current administration
is either blind or hostile.

"Entitlement," it seems, has yet another possible
definition: wise investment. But in order to pay
dividends, the investment must be made now
before our competitors get too far out in front and
both jobs and innovation migrate overseas.

In The World is Flat, Friedman recounts the advice he
gives his children and, tangentially, reveals how
parental admonitions have changed with changing
economic realities. When he was a kid, Friedman said,
his parents would tell him to finish his dinner
because there were millions of people starving in
India and China. Now he tells his own kids to finish
their homework because there are millions of people in
India and China starving for their jobs.
It's enough to make you lose your appetite.

******************************************************

And if we question entitlement how should we deal with
the disabled?

http://www.johnlocke.org/policy_reports/display_story.html?id=44

Policy Reports
From Entitlement to Investment: Rethinking U.S.
Disability Policy for
the 21st Century
March 09, 2004

More than a decade after the passage of the Americans
with Disabilities Act (ADA) in 1990, disability policy
in the United States remains fraught with uncertainty,
dashed hopes, and contradictions. While most persons
living with disabilities today have an unprecedented
quality of life largely the product of medical and technological advancements that
would have seemed more the realm of science fiction
than science fact a generation or two ago they are
also experiencing some surprisingly
negative trends.

A key concern is employment. A smaller percentage of non-elderly disabled Americans are working today than before ADA s passage, a phenomenon that is not just the result of changes in reporting or survivability,
and is present across a range of disability types and severities. Analysts suggest a variety of xplanations for this surprising, and depressing, trend, including employer fear of future employee lawsuits under
ADA, the costs associated with legally mandated
expenditures to assist disabled workers, and increases
in spending and eligibility for public
assistance programs for the disabled. While welfare
reform more generally appears to have dissuaded many able-bodied Americans to forgo long-term
dependency in favor of work, we have not engineered a
similar change in thinking for the disabled
population, and indeed in many ways their
dependence on government seems to be growing rather
than shrinking.

Another set of problems surround long-term care, as
families struggle with ways to take care of disabled
relatives without having to put them in costly and
impersonal nursing homes. Although disability rates
among the elderly have declined in recent years, and
some predict a reduced need for long-term care in the
future due to improving health and wealth among those
nearing retirement age today, increasing rates among
younger Americans and the overall aging of the
population promise to put these issues at the
forefront of public debate during the next two
decades.

For the country as a whole, existing disability
programs are proving to be expensive, ineffective, and sometimes counterproductive. A conservative estimate of total federal and state spending on services to the non-elderly disabled in the 2002 fiscal year was $263 billion, a number that far exceeded public assistance for able-bodied recipients. Some of the most
controversial issues of the day from education
funding and health care inflation to economic growth
and the future solvency of Social Security and
Medicare reflect the costs imposed on all of us by a
flawed model for disability policy that focuses on
rights and redistribution rather than responsibilities
and the creation of wealth. This Entitlement Model
for serving the nation s disabled has smuggled
concepts and principles from the civil rights era into
an arena where they are largely inapplicable. It also
treats too many disabled Americans as hapless and
dependent wards of the state rather than as productive
citizens
whose value as human capital often remains untapped.

Policy-makers should replace this outmoded and costly
Entitlement Model with an Investment Model for
disability policy. Elements of the model include:

Redefining disability itself to better target
services to those who truly need them and separate
more clearly the responsibilities of the public and
private sectors. The current federal definitions of
disability are mutually inconsistent, encourage
long-term dependency, and help to disrupt what would
otherwise be normal, private responses to individual
hardships. As was demonstrated in a brief period of
tighter eligibility standards in the early 1980s,
defining disability more narrowly, at least for the
purposes of doling out government cash or free health
care, will help to control cost and allow federal and
state authorities to focus their dollars more
effectively on the severely disabled Americans
who truly cannot find work or secure living conditions
on their own.

Reforming entitlement programs such as Social
Security, Medicare and Medicaid to build real
financial and human capital and to promote
self-sufficiency. The disabled, no less than other
Americans, would benefit from a system that allows
them to redirect at least a portion of the
payroll and income taxes they now pay into private
savings accounts. In most such proposed systems, they
would also be required to purchase private insurance
for disability and long-term care. The accounts
invested in stocks, bonds, and other private assets
would grow over time to such a degree that they would
likely provide far greater benefits to those who
develop disabilities later in life, as has already
been demonstrated in jurisdictions with account-based
systems.

Reshaping the delivery of disability services to
include real incentives to place the disabled in
competitive employment and shorten their
stays on public assistance while spending taxpayers
dollars where they are likely to generate the greater
return. The success of integrated case-management
practices in the private disability insurance market
suggest that privatization, accomplished as part of
Social Security reform and in other ways, would
benefit both taxpayers and the disabled. As
studies by the General Accounting Office have
demonstrated, state-run vocational rehabilitation and disability-determination agencies have a poor record of getting injured or ill workers back on the job. If workers were able to purchase private insurance with their payroll taxes, rather than being compelled to support the public system, they would benefit
from innovations already prevalent in the private
sector, such as prevention, early intervention, and self-employment options.

Renewing American federalism to give states and
localities more control over disabled programs and
more room for creativity and innovation.
Unlike other programs serving disabled workers,
workers compensation insurance is typically not
provided by the government, although employers are
usually required to purchase it. A competitive market
offers employers a variety of providers and delivery mechanisms. Restoring federalism to the rest of disability policy would provide similar advantages.
States should have more latitude to experiment with
their Medicaid programs, including such ideas as
vouchers, competitive contracting, and medical savings accounts. Even in programs traditionally monopolized by the federal government, such as Medicare, a less centralized approach could well result in better services to the truly disabled and lower costs to taxpayers.

That s all folks!


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