TOPICS > Economy

Amid Downturn, Communities Sacrifice to Avoid Layoffs

April 3, 2009 at 6:25 PM EST
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Though the jobless rate continues to rise, workers across the country are making sacrifices to avoid more layoffs and "share the pain" of the economic slump. NewsHour business correspondent Paul Solman reports.
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JUDY WOODRUFF: On a day that brought news to hundreds of thousands of new job losses, economics correspondent Paul Solman looks at the sacrifices some people are making to avoid more layoffs. His report is part of our series on making sense of the financial crisis.

PAUL SOLMAN, NewsHour economics correspondent: At the Conn-Selmer brass instrument plant in Elkhart, Indiana, Bob Stemm was doing his best to sell us a shiny new trombone by playing the PBS siren song.

When last month’s jobless rate came out, we showed how stalled R.V. sales had ravaged Elkhart. But the town is also famous for musical instruments. And that business, too, is — like my trombone tryout — more than a little flat.

As school budgets have shrunk, so have school bands, driving down sales. The last time the company was under siege, from Chinese competition three years ago, it cut wages from about $23 to $18 an hour and eliminated piecework, by which the fastest workers earned much more.

The cuts prompted a strike that still drags on, though just a few ex-workers still man a makeshift protest shed across from the plant.

RON CZARNECKI: We’re still holding out, asking for a fair negotiated contract.

PAUL SOLMAN: But in this crisis, Conn-Selmer was making more horns than the market would bear. So it tried a new approach, what it calls pain-sharing. Instead of cuts in hourly pay or massive layoffs, CEO John Stoner suggested cutting the work week.

JOHN STONER, CEO, Conn-Selmer: We felt pretty comfortable that, with everything else going on in the Elkhart community, knowing people with neighbors who’re losing jobs, that they would say, “I’d rather have a job even four days a week than not having a job.”

PAUL SOLMAN: With layoffs and a wage freeze for higher-paid salaried workers, some 25 jobs have been saved in a factory of 125 line workers, one of whom is Ryan Porzelius, fiddling here with a flugelhorn.

RYAN PORZELIUS: This way more people get to work. You know, I’m not a selfish guy. I don’t mind giving up a little for the greater good of the whole.

PAUL SOLMAN: Stephanie Artley, who came back to work after striking for a year, makes sure the trombone slides.

STEPHANIE ARTLEY: It’s kind of like who gets in a lifeboat and who doesn’t get in a lifeboat. So I think it’s better that we all get an oar and just kind of paddle along and keep each other floating.

Flip side of gain sharing

Dr. Mark Gebhardt
Chief of Orthopedic Surgery
From the chief's group, we were able to come up with $350,000 as a donation by taking a cut in our salary to put back into the hospital, to try to save jobs.

PAUL SOLMAN: This pain-sharing is the flip side of a notable trend in American business in recent years: gain sharing. It's been on the upswing since the '70s, says economist Richard Freeman.

RICHARD FREEMAN, Harvard University: It turns out that almost 50 percent of American workers have some form of these sharing arrangements.

PAUL SOLMAN: So it's stock ownership?

RICHARD FREEMAN: Or profit-sharing. And some people will have stock options, as well.

PAUL SOLMAN: Compensation is thus a lot more flexible than it used to be, rising in the good times, falling in the bad.

Is that buffering us from the downturn?

RICHARD FREEMAN: I think, yes. And so we would see jobs going even faster if it wasn't for this kind of buffering.

PAUL SOLMAN: Buffering, because if compensation automatically shrinks whenever share prices or profits drop, the company saves money and isn't under as much pressure to slash wages or lay people off.

Boston non-profit Beth Israel Deaconess Medical Center has no stock or profits, but is going Conn-Selmer one better.

And what's the annual gross?

PAUL LEVY, CEO, Beth Israel Deaconess Medical Center: $1.4 billion.

PAUL SOLMAN: $1.4 billion?

In March, CEO Paul Levy faced a $20 million deficit, as cash-strapped patients put off care and funders pulled back, threatening 600 jobs. He convened a series of open meetings.

PAUL LEVY: I said to the staff, "I'd really like to avoid layoffs to the extent possible because it's a hard time for people to get jobs, and many people's spouses have already lost their jobs, and we don't want to put folks through that."

In addition, I said to them, "I'd like to do what we can to protect the low-wage earners in the hospital, the housekeepers, the transporters, the food service workers, who face a particularly hard time just because of their income level," and the response from people was overwhelmingly positive.

PAUL SOLMAN: In fact, meeting after meeting broke out in uproarious applause. Levy actually choked up.

PAUL LEVY: I couldn't talk for a little while because it was very moving. Remember, these are people -- I'm talking to a group of people who are worried about getting laid off themselves, who are being told that they're not going to get raises, that their benefits are going to be cut, and I'm saying to them, "Would you please give a little more so that the people at the low end of the wage scale will be held harmless by what we're about to do?"

PAUL SOLMAN: Levy received 648 employee e-mails suggesting cuts that have saved $16 million so far: a halt to 401(k) matches; no more free BlackBerries; less comp time; pay givebacks from executives like Levy and the 12 chiefs of medicine, like surgeon Mark Gebhardt.

DR. MARK GEBHARDT, chief of Orthopedic Surgery: From the chief's group, we were able to come up with $350,000 as a donation by taking a cut in our salary to put back into the hospital, to try to save jobs.

PAUL SOLMAN: Four hundred and fifty low-wage jobs have been rescued thus far, like Ella Ryan's in food services.

ELLA RYAN, Beth Israel Deaconess Medical Center: I would have been very devastated, because after I've been working here for 23 years and with the economy right now, I wouldn't know where to turn to find, you know, another job.

Pain sharing from the top

Detlev Suderow
Brandeis University
If it starts at the top, and if the executive level and below take dramatic action to role model that, yes, I believe that people will respond with loyalty.

PAUL SOLMAN: Detlev Suderow, who teaches human resource management at Brandeis University, says pain-sharing from the top isn't just humane, but smart.

DETLEV SUDEROW, Brandeis University: If it starts at the top, and if the executive level and below take dramatic action to role model that, yes, I believe that people will respond with loyalty, people will respond with greater work efforts, and people will adjust their own personal economic needs to help the company survive.

PAUL SOLMAN: At Brandeis itself, in fact, several lower-wage staff jobs were saved by a 1 percent salary cut volunteered by the faculty. As it happens, I meet regularly with a group of Brandeis professors to study poetry.

ROBIN MILLER, Brandeis University: The face I carry with me last, when I go out of time...

PAUL SOLMAN: Robin Miller is reading an Emily Dickenson poem about the poet's secret love.

ROBIN MILLER: ... that face will just be thine.

PROFESSOR: This has got to be a poem that's addressed to the guy she wrote the master letters to.

PAUL SOLMAN: The guy she was supposedly in love with and that the erotic or passionate poems are written to?

PROFESSOR: Yes.

PAUL SOLMAN: But this is the guy...

PROFESSOR: But whoever he is, he's the demon lover, not the real man any way, yes.

PAUL SOLMAN: The real man behind the Brandeis share initiative was Billy Flesch, president of the faculty senate.

WILLIAM FLESCH, president, Brandeis Faculty Senate: The university decided that they didn't want to do salary cuts across the board for various reasons, including what a bad signal it sends to possible future faculty, to faculty who are here now and who might therefore want to leave, but I suggested that we could volunteer cuts.

PAUL SOLMAN: Volunteer anonymously, only to take effect if more than 30 percent of the faculty signed on; 36 percent did.

LAURA QUINNEY, English professor: And it's meaningful, because it's actually saved jobs. There is something very tangible.

PAUL SOLMAN: English Professor Laura Quinney.

LAURA QUINNEY: And the sacrifice is a visible and real one. It's a no-brainer, as far as I'm concerned.

JOHN BURT, English professor: It would have been...

PAUL SOLMAN: John Burt is also an English professor.

JOHN BURT: ... very uncomfortable to lay people off when you were sitting there quite safe...

PAUL SOLMAN: With tenure?

JOHN BURT: With tenure, you bet.

PAUL SOLMAN: But even here at famously progressive Brandeis, barely a third of the faculty volunteered. Some of those who declined, like biologist Michael Rosbash, said they would have contributed, but distrust the managers who run the school.

MICHAEL ROSBASH, Biology professor, Brandeis University: It's not for lack of social conscience, it's for, who got us in these problems? And who's going to get us out of them?

Sharing depends on trust

Jim Allen
New Bedford Firefighters Union
It was a very tough vote for me. Being the union head and having the years of union philosophy of never give back anything and knowing the people that would lose their job.

PAUL SOLMAN: So sharing, it seems, depends on trust. In fact, at the strike shed outside Conn-Selmer, the militants think pain-sharing is a euphemism for business as usual, with the workers sharing all the pain.

DAVID KISH: We're going to fight to the end, if it's death.

PAUL SOLMAN: David Kish's distrust is so deep, you can't imagine him accepting any management proposals, to share or not to share.

DAVID KISH: My opinion would be to inflict as much damage on this company as they have inflicted on the workers.

PAUL SOLMAN: Our last stop, a fire station in New Bedford, an hour south of Boston, suggests just how difficult pain-sharing can be.

PAUL GALLANT, New Bedford firefighter: We work 24-hour shifts here, so we basically live together for the entire day.

PAUL SOLMAN: Workers here rejected, 157-39, a 10 percent wage cut offered as an alternative to layoffs. When the workers refused, those with the least seniority were axed, Brian Gallant among them.

BRIAN GALLANT: My dream job, not just to be a firefighter, but to be a New Bedford firefighter. My father, he's been a firefighter for about 31 years, and his father before him was a firefighter for 31 years, so that was my goal.

PAUL SOLMAN: Sure to be among the first fired, Gallant voted to accept the pay cut.

BRIAN GALLANT: I guess all the guys at the bottom of the seniority list who felt that they were going to get laid off kind of cling to, you know, some hope and voted yes.

PAUL SOLMAN: Gallant's father, the station captain, voted yes, as well.

PAUL GALLANT: I voted to take the pay cut myself, because I'm in my last year and I felt, you know, the future of the department rested with these 35 individuals and, you know, I can take the hit for a year.

PAUL SOLMAN: But like most, Jim Allen, head of the local firefighters union, voted no to givebacks.

JIM ALLEN, president, New Bedford Firefighters Union: It was a very tough vote for me. Being the union head and having the years of union philosophy of never give back anything and knowing the people that would lose their job. Brian's a friend of my daughter's. Brian comes over my house and has dinner with us and comes to parties, and so it's difficult, and a lot of those guys are in the same boat.

PAUL SOLMAN: And yet, says Allen, in a place where the top of the pay scale, with overtime, is roughly $60,000 a year, you ask...

JIM ALLEN: How much can I afford to give up? And in this case, the members felt it was too much that they were being asked to give up.

PAUL SOLMAN: In the end, then, even in a place dedicated to the protection of others, there's a struggle between self-interest and sharing. On the other hand, in tough times like these, though we know of no hard numbers, the anecdata certainly suggest there's more sharing than there used to be.