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Could the Government Limit the Number of Layoffs a Profitable Company Could Make?

Name: Steve Eppley
City & State: Pasadena, Calif.

Question: Obama and Geithner said they would act aggressively to fix the economy. So, why hasn't the administration limited the number of employees that profitable companies may lay off?

That could help significantly by keeping the unemployment rate down, partially breaking the vicious cycle in which layoffs cause more layoffs. It would also save the government some money, unlike the other actions taken to stimulate the economy. And it would be progressive in the sense that the burden of fixing the economy would be shared by the companies most able to bear it. (The more profitable the company, the fewer employees they would be permitted to lay off.)

Paul Solman: And while we're at it, why not get profitable companies to clean up the environment, treat their employees well, and serve organic food in the cafeteria?

I don't mean to mock, Steve, but within certain fairly broad parameters (laws and regulations), our sort of economy lets private enterprise figure out how to make money (profits) to build their businesses while paying back investors. The more rules you make, the harder that job can become.

Just imagine that you and I run a profitable cotton farm, employing workers to de-seed the cotton by hand. (Cotton is nothing more than nature's delivery system for the seeds, like so much of the world's fluff: Think dandelions.)

Along comes our friend Eli with a new-fangled invention: the cotton gin. It de-seeds automatically.

"Sorry, Eli, no reason to buy. Government says we can't lay off workers."

So Eli goes to China, already the world's largest cotton producer, and Chinese cotton soon costs a tiny fraction of its identical American counterpart. And soon after that, of course, American cotton firms are profitable no more.

It's just very hard to craft well-meaning industrial policies, Steve. It's why socialism seems so difficult to pull off in practice. And even the world's most successful "socialist" countries, like those in Scandinavia, allow companies, profitable or not, to lay off workers. It's just that those countries then SUPPORT the workers for long periods of time until they find new work -- in Denmark, up to 4 years, last I looked.

-- Posted June 12, 2009 | Comments (2) | Permalink