When plants close
BUSINESS and jobs -- the two are inextricably tied together in a democratic society based on capitalism. Jobs in the United States depend, of course, on viable, productive businesses. Plant closings and the resulting job losses translate into pressure on Congress for solutions which, though well intentioned, may be faulty.
Most of these solutions are aimed at preventing joblessness, not at encouraging business survival or creating a climate that encourages new businesses and generates new jobs. In fact, most legislation works against business by imposing rigidity and delay where speed and flexibility are essential. Legislation pending in the US House of Representatives is no exception. It calls for an arbitrary time frame for advance notification of employees and consultation in ``good faith'' -- with employees or their u nion, if one exists -- on alternatives to plant closings. It sounds good, but it poses serious problems.
A plant closing or layoff may be delayed if allegations of ``bad faith'' consultation are made. Such allegations are common, if only for the purpose of keeping an operation running. As the dispute rages, the business continues to wane and investors become reluctant to buy the company's stock. In the long term, such a shortsighted policy will actually lead to fewer jobs, as this costly barrier to flexibility discourages businesses from opening.
The competitive challenge from abroad, which has caused some US plant closures and layoffs, is not going to disappear. Industry is struggling to meet that challenge, and sometimes closures and layoffs at some locations are needed to preserve enough profit margin to keep the company operating elsewhere. Does it make sense to jeopardize competitiveness and the employees of a California plant because an Illinois plant is no longer viable?
To compete, business must be able to respond to economic realities. If a product line is no longer profitable, it must be dropped. If the source of a raw material shifts to another locality, it may be necessary to change location to keep the price of the consumer product down. No amount of negotiation with employees can stop changes in consumer demand or shifts in material supplies.
If a plant is no longer efficient, changes such as automation or streamlining are necessary. Inefficiency results in increased prices but no increased quality, and consumers won't stand for that. If an order is suddenly canceled for a company already hanging on by its finger tips, it can't waste money running that particular production line. It has to get out fast.
This country's trade deficit could reach $150 billion this year. Our competitiveness is already threatened daily by the federal budget deficit and the overvalued dollar. Enacting a domestic policy to thwart or slow the ability of companies to respond to new forces in a changing business environment can only lead to even more permanent plant closures and even fewer jobs. Worse still, it will lead to fewer plant openings and fewer new jobs.
The forces of change require dynamic responses. This country's high standard of living wasn't built on resistance to change, but on the freedom and willingness to change. If the state of Massachusetts had resisted the closing of some of its textile and shoe plants, the well-known high-tech corridor on Route 128 might not have emerged. Rigid business policies adopted in the European nations should be a lesson to us. Between 1965 and 1984, America's work-age population increased by 38 percent, but jobs du ring that period grew by 45 percent, to 103 million from 71 million, despite oil shocks, recessions, and the decline of some traditional industries. Western Europe, on the other hand, has experienced job shrinkage, with 3 million fewer than there were in 1974. Do we really want to follow that example?
Most businesses strive to keep their operations running. Most businesses try hard to give their employees advance notice when their businesses fail. Basing rigid legislation for advance notice on the horror stories of those businesses that haven't acted responsibly won't help the country in the long run. Business is policing itself, and much is being done to educate companies on how to handle a difficult situation well. That same education effort is creating innovative business approaches to helping dis located workers train for new jobs, and to find them. Let's give that effort a chance.
Jobs are the real answer to helping people. Putting roadblocks in the way of business won't create jobs or keep them -- it will only help destroy them.
Jerry J. Jasinowski is executive vice-president and chief economist at the National Association of Manufacturers.