Downsizing in America: Reality, Causes, and Consequences By William J. Baumol, Alan S. Blinder and Edward N. Wolff, Russell Sage Foundation, 321 pages, $29.95Back in 1994, the late, great Bennett Harrison published Lean and Mean: The Changing Landscape of Corporate Power in the Age of Flexibility. It is about how "giant American companies have found ways to flourish in the new, more uncertain, more competitive environment." Harrison mentions "downsizing" a few times, but it is not a theme of his book.The Betrayal of Work: How Low-Wage Jobs Fail 30 Million Americans and Their Families By Beth Shulman, The New Press, 255 pages, $25.95
In 1996, the late, great David M. Gordon published Fat and Mean: The Corporate Squeeze of Working Americans and the Myth of Managerial "Downsizing." Enough said about the theme of that one.
Now come William J. Baumol, Alan S. Blinder and Edward N. Wolff, who offer Downsizing in America: Reality, Causes, and Consequences. According to the jacket blurb by Alan Krueger, this book "explodes several myths about downsizing with hard facts ... ." What myths, exactly, remain to be exploded is not very clear.
As the authors relate, the concept of downsizing was "coined by journalists" and has no very precise meaning. And whatever it may mean, interest in the concept as measured by a Lexis-Nexis search of The New York Times and The Wall Street Journal peaked at 666 mentions in 1996 and has been falling ever since, reaching 140 mentions in 2002, the fewest since 1991. This is despite the fact that Michael Moore published Downsize This! in 1997. The idea that the media are preoccupied with this issue seems, on the whole, a trifle thin; all the quotations from the press about downsizing cited in this book date from 1997 or before.
That said, there is nothing wrong with Downsizing in America that I can see. It is balanced, judicious, fact-filled, sensible and a little bit dry. It shows that while some manufacturing firms have been getting smaller (with a lot of variation in the pattern), retailers have been getting bigger (Wal-Mart). The overall picture is mixed; regression toward the mean (where bigger firms get smaller and smaller ones get larger) is a feature of the statistical picture. There has been a lot of churning in the labor market, as many individuals who have lost positions they hoped would be secure can attest.
But on the whole, firm employment fluctuates with total employment. Companies add workers when they need them and fire them when they don't. Downsizing in recessions is offset by upsizing in times of growth. This is good news at one level. It shows that, contrary to much other evidence -- including the adherence of so much of big business to George W. Bush and the Republican Party -- modern American capitalism is not completely insane.
And what happens when firms do downsize? At the end of a great deal of statistical analysis, Baumol and colleagues offer one very interesting generalization: Leaving out many details, downsizing firms typically increase their profitability by decreasing their unit labor costs. But downsizing does not achieve these cuts by increasing productivity. Instead, downsizing firms somehow manage to squeeze wages.
This is very good, even if David Gordon said it first. Indeed, Baumol, Blinder and Wolff might usefully have built an additional chapter around this observation, showing us exactly how the threat and practice of downsizing has been used as a weapon against labor. But the subject, alas, is left hanging.
Beth Shulman, on the other hand, in The Betrayal of Work, hits a theme of timeless importance: the mistreatment of low-wage workers in America and what can and should be done about it. This slim, graceful book speaks to the condition of 30 million working Americans -- those at the bottom of the working barrel. It combines personal vignettes, social statistics and policy prescription in a wonderfully readable manner.
What do low-wage workers need? They need health insurance. They need child care and public preschools for their 3- and 4-year-olds (which, as Shulman says, "is not a radical idea"). They need shorter and more flexible hours. They need higher pay and more generous Social Security pensions. They do not need "training" for the most part, for these workers are not unskilled for the jobs that they hold. Most of all, they need union representation. They need an organized voice that will represent them full time, when the attention of the liberal reading public and the progressive political classes flags (as it is wont to do).
The Betrayal of Work is not, of course, the only recent book to highlight the harsh conditions that low-paid workers in America face and the hard lives that they live. But it has one feature that other treatments, such as Barbara Ehrenreich's Nickel and Dimed, lack. This is an appreciation of how to build on current public policy in this area. For instance, Shulman views the Family and Medical Leave Act as "good public policy" whose coverage needs to be expanded. As for universal preschool, she notes that Georgia and Oklahoma already provide it for 4-year-olds. (France and Italy start at 3.)
Shulman's book is a model combination of compelling portraiture, common sense and understated conviction. She would evidently make a splendid secretary of labor in the next civilized administration. In the meantime, everyone should read her book.
