|WE THUS SEE HOW THE method of production and the means of production are constantly enlarged, revolutionized, how division of labor necessarily draws after it greater division of labor, the employment of machinery greater employment of machinery, work upon a large scale work upon a still greater scale. This is the law that continually throws capitalist production out of its old ruts and compels capital to strain ever more the productive forces of labor for the very reason that it has already strained them – the law that grants it no respite, and constantly shouts in its ear: March! march! This is no other law than that which, within the periodical fluctuations of commerce, necessarily adjusts the price of a commodity to its cost of production.
Karl Marx, "Wage-labor and Capital"
NY Times, April 4, 2007
One Safety Net Is Disappearing. What Will Follow?
By DAVID LEONHARDT
Over the years, American companies have built a pretty extensive social safety net for their workers. The clearest examples of it are pensions and health insurance, which became popular during the wage freeze of World War II, when employers were looking for creative ways to give raises. Today, the United States is the only major country in the world where the private sector plays such a big role in caring for the old and the sick.
But the corporate version of the welfare state is not just about retirement and health care. Another, much less obvious, piece of it is the steadily increasing pay that most workers receive over the course of their careers. All else equal, a typical worker in his early 60s makes about 50 percent more than a worker in his early 30s.
This arrangement produces some enormous benefits for society. It allows Americans to enjoy ever-rising living standards over their lives and helps them pay some big expenses, like their children’s college tuition and their parents’ elder care, that start to hit in middle age.
In strictly economic terms, however, paying people based on their age is a bit skewed. Sixty-year-olds are indeed more productive than 30-year-olds, studies have shown, but not 50 percent more productive. Experience isn’t quite as valuable as we might like to believe. In effect, most companies are underpaying their younger workers and overpaying their older ones.
This somewhat uncomfortable fact was a big part of the extraordinary layoff announcement from Circuit City Stores last week. On Wednesday, the company dismissed 3,400 people, or about 8 percent of its work force, not because they were doing a bad job and not because the company was eliminating their positions. Instead, executives said the workers were being paid too much and that the company would replace them with new employees who would earn less. It was the second such layoff at Circuit City in the last five years, and it offered an unusually clear window on the ruthlessness of corporate efficiency.
Counterpunch, April 4, 2007
The Latest Trend in Corporate America
Circuit City's Guinea Pigs
By SHARON SMITH
In January, Circuit City employee Bobby Young received a certificate of excellence for his twenty years of loyal service at the company's Roanoke, Virginia store. On March 28th, he received a pink slip.
When the 47-year old father of two arrived at work that morning, he was handed a letter inexplicably addressed "to whom it may concern," explaining that the company had terminated his employment, effective immediately. That same day, 3,400 workers at Circuit City stores across the country were greeted with the news that they had been fired before management quickly escorted them out of the building. Company spokesman Bob Cimino bluntly announced that the mass firings targeted the most experienced and highest paid in-store workers as part of a "wage management initiative" to replace them with low-wage new hires. "It had nothing to do with their skills or whether they were a good worker or not," Cimino said.
Those who were fired made up roughly 8.5 percent of the 40,000 workers at the 650 retail outlets of the nation's second-largest electronics retailer, which trails only Best Buy. But these workers, the company explained, were being paid "well above the market-based salary range for their roles."
According to Bloomberg News, however, Circuit City pay averages $10 to $11 an hour-precisely the market average. After twenty years, Young was earning $18.90 an hour, with healthcare benefits. His replacement will earn less than half that amount, without benefits. The company will graciously allow its allegedly overpaid former workers to reapply for their old jobs at starting wages after they endure 10 weeks of grueling unemployment. Fired Los Angeles worker Richard O'Neal was told he could eventually reapply for his job if he is willing to work for $7.50 per hour, California's minimum wage.