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Downsizing Becomes Normal

by Clark Davis on Apr 15, 1998

Corporate downsizing has proved one aspect of American life apparently unchanged by El Nino this winter. Massive layoffs from American corporations have continued unaffected by weather, criticism, or the economy.

Fifty-eight thousand Americans received termination notices last December (56 percent more than the previous December). In the months since, AT&T, Chase Manhattan, Raytheon and Boeing alone announced cuts totaling more than 30,000 people.

The rash of downsizing throughout the 1990s represents a major watershed in American experience. Layoffs have ripped the fabric of middle-class security by unraveling a 75-year-old contract between big business and employees that promised secure futures in return for loyal service.

Recent cuts have stung thousands of Americans, who now feel betrayed by their employers. Take, for example, the case of William Myers, who joined Southern California Edison in 1971, after his father, also an Edison employee, counseled him that the company would provide a secure life. Myers’ forced retirement during company retrenchment in 1996 broke that contract, and he has remained bitter ever since.

The frustrations Myers and all those laid off have felt reflect neither naivete nor arrogance. Rather, layoffs have provoked particular outrage because they have broken an implicit agreement, widely promoted in American corporations throughout the twentieth century, that dedicated employees would receive cradle-to-grave security. Give your life to IBM and it will take care of you, was the understanding.

Job security first became a central lure of corporate employment in the 1910s and 1920s as growing firms cultivated ranks of salaried workers. Executives confronted a difficult challenge because the young white men they sought for salaried posts viewed employment in big businesses with disdain. The idea of working in a complex hierarchy for a firm they would never own conflicted with individualistic ambitions.

“Being a man” meant having one’s own business, trade or profession. Executives responded by developing corporate cultures based on the one thing big business could provide that other careers could not: security. Leading firms began offering a variety of fringe benefits such as health insurance, pensions and paid vacations, and they established internal promotion systems that allowed employees a chance to climb the corporate ladder.

Even amid the economic calamity of the Great Depression, the nation’s largest firms terminated salaried employees only as a last resort. Most companies implemented pay cuts and shortened workweeks, but sought to retain most of their workers. Depression-era unemployment rates among salaried personnel were barely half those in other occupational sectors.

When Myers’s father urged him to accept a white-collar position in 1971, he spoke on behalf of a generation for whom job security, promotions and benefits were established features of corporate employment. Salaried positions meant middle-class security.

William Whyte’s “The Organization Man,” C. Wright Mills’s “The Power Elite,” and Sloan Wilson’s “The Man in the Grey Flannel Suit” became prominent illustrations of the nation’s stable and secure company men who, starting in the 1960s, were gradually joined by women and racial minorities.

Americans began to feel the pinch of corporate belt-tightening in the 1970s, but it was not until the early 1990s that wholesale layoffs became standard practice and generated significant anger.

The furor peaked in 1996 when Newsweek’s “Corporate Killers” issue featured menacing photographs of four executives and the number each had laid off, amounting to 131,000 jobs. Weeks later, CBS “60 Minutes” reporter Leslie Stahl cornered AT&T chief Robert Allen, demanding to know why the suddenly nervous and shaken-looking boss had raised his own salary while eliminating those of thousands of subordinates.

While still tragic to those who receive their termination notices, this winter’s downsizings have produced less generalized outrage. Media coverage has generally ignored the plight of workers and focused instead on industry health, the politics behind layoffs and firms’ long-term strategies. The Los Angeles Times, for example, reported recent AT&T cuts with the headline: “AT&T Lays Out Bold Plan for Its Future.”

For most of the twentieth century, American firms kept a bargain initially struck with a generation dubious about the corporate order. The 1990s will be remembered as the decade in which that contract was broken. Work security is no longer an unwritten clause in the job description of salaried personnel.

As we enter the new millennium, Americans will have to find new avenues to middle-class security.


Clark Davis is assistant professor of history at La Sierra University in Riverside, Calif., and a writer for the History News Service.