Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

Posts Tagged ‘labor costs’

Why does the NYT even have a “Business” section anymore?

Posted by sanityinjection on December 22, 2008

It’s getting to the point where first-year college students have a better understanding of economics than the reporters who cover business stories for the New York Times. Witness this latest offering about measures that some companies have been taking to cut labor costs without laying off workers:

The article reads like a feel-good piece. The nice companies care about their workers, and the nice workers are willing to make sacrifices to help the company. What a crock of manure.

Sure, there are some companies and workers that fit that description. But there are two very major and obvious economic factors that are totally ignored by the article’s authors.

The first is that companies have a big incentive to avoid layoffs, in any economy, but particularly when they are hurting. The more employees you lay off, the more you have to pay in unemployment insurance in the following year, and for a few years thereafter. In the long run, it can cost you more to lay off an employee than you save, especially if they are part-time workers who aren’t costing you health benefits.

The second factor, which applies on the other side of the coin, is that not every company can implement these creative measures with regard to benefits and salaries even if they want to. Changes such as these have to be negotiated with unions and cannot be implemented unilaterally by the company. Some unions are smart and are willing to work with the company to preserve jobs. Many, however, are stubborn and cling to the smallest privileges. This forces companies to fall back on what they can do without having to get the unions to agree, which is layoff employees.

I don’t know how you write this article without mentioning either of those important aspects – unless you’re ignorant of the subject you’re being paid to cover.

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