
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, January 10, 1994                   TAG: 9402250014
SECTION: EDITORIAL                    PAGE: A6   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

WORKER WASTE

ECONOMIC forecasters are predicting improvement in the U.S. economy over the next couple of years. "In theory," Allan Sinai, the oft-quoted Lehman Brothers economist, told financial columnist Jane Bryant Quinn, "[the] painful retrenchment [of recent years] should lead to higher growth, higher real wages for those at work and, ultimately, more jobs."

Theory in this case derives from sound axiom. By becoming more efficient, American corporations have improved their productivity - which is ultimately the best engine for growth in living standards and the means by which America can be competitive in a global market.

But the downside has been the downsize. Must retrenchment's pain be concentrated so inequitably?

Cruel irony No. 1: People hurt most by retrenchment - those caught in layoffs, now looking for work and finding prospective employers deathly afraid of hiring on new full-timers - are apt to be the last to benefit from the retrenchment's fruits.

Cruel irony No. 2: At the same time that laid-off workers - many with advanced skills - remain involuntarily unemployed or underemployed, overtime hours for the already-employed are mushrooming.

Issues of equity and irony aside, this implies that U.S. economic efficiency - substantial as have been recent improvements - still has a long way to go. It's wasteful when valuable skills go unused and rust in forced idleness. It's wasteful when paying tired workers at premium overtime rates is preferable to hiring fresh workers

The answer for this kind of waste is not a nation of employee-bloated companies. That would be reducing one kind of waste by reintroducing another. There are, however, a couple of other places to look for answers.

One place is public policy. The current health-finance system, for example, encourages overtime over new hiring, because employer health-insurance costs are driven by number of employees rather than size of payroll. Another deterrent to hiring is how work-related legislation such as anti-discrimination laws operate: The risk to employers of various legal liabilities rises faster when the number of employees rises than when existing employees work more overtime.

Another place is the notion of corporate flexibility, which too often is interpreted simply as leeway to reduce work-force size as efficiencies are introduced or demand for the product declines. That's better than going bankrupt, but not nearly so good as a broader definition of flexibility: the ability to increase products and retain employment by finding new markets for existing products and new products for existing markets.

Nor, if reduced payroll does become necessary, are all-or-nothing layoffs the only way to do it. In periods of retrenchment, somewhat reduced hours and somewhat reduced pay for all could have the same effect on payroll (and a better effect on worker productivity) than no hours and no pay at all for the unlucky minority. And in periods of recovery, higher pay isn't the only form that the benefits of improved productivity can take. In earlier eras, the benefits often were taken in the form of a progressively shorter workweek, which was a way of sharing the blessings as well as the burdens of economic change.

by CNB