Image: Steve Rhodes via Flickr (CC-BY-NC-SA-2.0)

by Jiwook Jung

In February, 1993, IBM, the world’s largest computer maker, announced that it would order the first layoffs in its then 80-year history. In the face of tougher international and domestic competition, the company had suffered from a steady decline in profitability and slow growth throughout the 1980s; workforce adjustment and cost reduction seemed warranted. Nevertheless, IBM’s decision marked a drastic departure from its acclaimed tradition of lifetime employment. Throughout its history, it had prided itself on caring for its employees. Seen in a broader context, however, what was truly remarkable was the fact that the company had managed to avoid layoffs for so long; most of its peers had already accepted the practice as necessary.

Indeed, corporate America had experienced waves of downsizing since the 1980s. And even before the 1980s, firms made layoffs during economic downturns. But the 1980s marked a sea change in the layoff policy of large US companies. Whereas layoff had previously meant temporary suspension of employment with an explicit or implicit agreement that laid-off workers would be called back when economic situations improved, it has recently come to mean permanent termination (see Figure 1 below). Moreover, unlike in the past, even healthy, profitable companies have begun to engage in downsizing. For instance, in 1993 Xerox announced its plan to cut 10,000 jobs or nearly 10 percent of its work force, although the company had been consistently profitable before the announcement. Its CEO explained that in order to compete effectively, the company would have to be lean and flexible.

Read More

Image: mSeattle via Flickr (CC-BY-2.0)

by Matthew Wright

Recent studies highlight a growing class gap, in terms of prosperity and opportunity, between present-day Americans and the cohort that came of age in the 1950s. The root causes of this trend, however, have yet to be fully understood. In new research, I present systematic evidence confirming a growing class polarization in ‘social capital’ among American youth tracing back to the mid-1970s, and tie this trend explicitly to growth in economic inequality over that period.

Read More

Image: photologue_np via Flickr (CC-BY-2.0)

by Louis-Philippe Beland

Politicians and political parties play a crucial role in the US economy. The common perception is that Democrats favor pro-labor policies and are more averse to income inequality than Republicans. In recent research, I evaluate the impact of political party affiliation of governors (Republican versus Democratic) by looking at the following labor market outcomes: hours worked, weeks worked, employment, labor-force participation, and earnings. Given that there is an important and well-documented earnings gap between black and white workers, I investigate whether the party affiliation of governors affects this gap.  This is an important issue given that a large proportion of black workers vote for Democrats.

I find that under Democratic governors, blacks are more likely to work, participate in the labor market, and work more intensively. This leads to an increase in the annual hours worked by blacks relative to whites, which decreases the earnings gap between blacks and whites.

Read More