Circuit City Slaughter

Columnist Bill White of the Allentown Morning Call pictures Circuit City CEO Philip J. Schoonover getting a warm welcome to hell – very warm. Satan tells him, “This place is full of overpaid, outsourcing, golden-parachuting, employee-abusing worms like you.” Schoonover’s sin? Laying off 3400 employees because they had been around for too long and needed to be replaced by minimum wage workers. His punishment? Having a choice of Dick Cheney or Nancy Grace as a roommate and spending eternity listening to Sanjaya’s Greatest Hits.

The New York Times took the Circuit City slaughter with much greater equanimity. In his economics column last week, Times columnist David Leonhardt showed some pious sympathy for the laid-off, who will, after a 10 week cooling off period, be able to re-apply for their old jobs at much reduced pay. But he goes on to explain that Circuit City’s employee abuse is just part of the larger corporate demand for “efficiency.” Wal-Mart, after all, has capped employee pay and taken the stools away from its elderly employees. Sadly, Leonhardt notes:

It's probably not possible to halt these changes. It may not even be desirable. The flexibility of the American labor force seems to be one reason that recessions have become less frequent and unemployment is less of a problem here than in Europe, notes Jason Furman, a leading Democratic economist

Furman, by the way, is a pretty flexible guy himself. An advisor to John Kerry in 04, then an NYU professor, and now a project director at the Brookings Institute, he’s made his mark as a “liberal” defender of Wal-Mart’s anti-worker policies. It’s fellows like Furman who put the “ick” in the word “Democratic.”

But from Allentown to Times Square, no one is commenting on where the new flexibility may be taking us. Time was, not so long ago, when seniority was rewarded with higher pay and other perks. But that higher pay now carries a lethal risk. As a friend who writes software for a major multinational explained to me: “If you ask for a raise, the boss is going to say, ‘Why would you want that? It would be like having a bulls-eye painted on your back.’” The more you make, the more tempting it is to fire you.

I experienced this myself a few years ago when I lost a lucrative writing contract with a major media outlet. “Why?” I asked my agent. “They said they were paying you more than any of their other outside writers,” she told me, as if that were a sufficient explanation. Foolish me, I thought the raises I had gotten meant the bosses were pleased with my work. What they meant was that I was doomed.

Once you fire the high-performers and experienced workers, the next step will be to demand that employees pay you for the privilege of working. Why not? Most workplaces provide air-conditioned environments and bathroom facilities, complete with soap and paper towels. These are things you’d expect to pay for in a hotel, so why should workers get them free? Having busted his $10-20 an hour senior employees down to $7 and change an hour, Schoonover’s bound to see that the best route to higher profit margins is negative pay.

I know what Schoonover’s defense will be when he gets to the Pearly Gates: “The market made me do it.” He’ll be confident about getting in to the Good Place, because for men like him, as well as Leonhardt and Furman, whom he’ll bring along as character witnesses, the market is in fact the deity, determining who will starve and who will eat, who will work and who will beg.

But if the deity is someone other than “the market,” if He or She turns out to be a moral entity, capable of distinguishing right from wrong, then poor Schoonover – it’ll be Sanjaya for all eternity.

Comments

[Cliff]

Barbara:

Just to be 'balanced' with the Times, please note that the following article was published by the Times as well. It's a bit more sympathetic to the workers than those icky Democratic Party hacks. (Disclosure: I'm a registered Democrat, although I'm not sure why).

I'd send you the whole thing, but the Times wants me to pony up $1.10 to do so, even though I pay them over $600 per year for a print subscription.

Gee, I'd really like to hear Obama's take on the Circuit City massacre.

THE MEDIA EQUATION; Thousands Are Laid Off. What's New?

By DAVID CARR
Published: April 2, 2007

When executives at Circuit City decided last Wednesday to cut costs by laying off 3,400 of their most experienced salesclerks, they undoubtedly went through a number of calculations: that they could save $250 million over two years; that consumers are inured to bad service; and that the layoffs would be a one-day blip in the news.

They were right about the last part. After hearing a fairly expansive report on public radio's Marketplace late Wednesday, I woke up the next morning eager to read more.

USA Today ran a short article on the front page, The Wall Street Journal ran a brief on B4, The New York Times published a wire report inside its business pages, while The Washington Post and The Los Angeles Times gave the news a bit more room. (...)

[barbsright]

A company that cuts costs to stay competitive in the end does neither. Innovation is the only survival tactic.

[Justin K.]

a 10 week "cooling off period" Could mean the financial death of some one. 2 & 1/2 months of no income or even unemployment is just not okay. Not to mention what it dose to a persons sole. To quote my professor : Death to the fascist insect pig that pray's on the blood of the people!"

[Nia]

There is outrage here in Spain now because an American company called Delphi has factories in Cadiz, a small town in Southern Spain, and they have tried to close it down American style, ie breaking our laws that protect employees. Here, in a few words, you cannot close down a company and fire all the employees in the process without telling the government that you're bankrupt first. The Spanish media show some surprise at how can it be that a business can close down and the person responsible for it be given a recompense.

There are 1670 workers with an average age of 50 and their level of specialization os absolute because most of them have worked for this company for 20 years.

[Gaby]

Nia, I envy you. I am a European living in the States who yearns to go back home. This is a scary trend, if a company does not show profit, just get a rid of "expensive" labor. And if in next quarter there is once again no profit? Then what?

[Maya's Granny]

It makes one glad that there is Sanjaya, just to make Hell a more just experience.

[Monica]

There are things, such as parking, that are necessary but employees pay for. And I have furnished my office, the "nap room" (where there is a small bed, where I would sleep at lunchtime or before the regular day and the extra work I do in the evening) and the kitchen with things I paid for (I even paid for the espresso machine). I have paid for a flat screen monitor and for my chair because the screen that was provided was not flat, and I wanted to have one of those "executive" armchairs (nobody here has that). So I don't see why paying is a problem. What I do see as a problem is having to pay but still not being allowed to choose the products and services used in the workplace.

Regarding air conditioning, I actually hate it and I covered the vents in my office and keep the door closed to insulate my office from air conditioning. But if I were to pay, I should have the right to simply opt out, that is, have no air conditioning, as I would rather do without (I wish there was a law to ban it). It gives me sinus headaches.

[Justin K.]

I worked in a pizza place for 3 years without air conditioning. In so-cal the temperature could clime as high as 100 to 120 degrees fearenhight. And on top of that the pizza oven was a blazing 450 F. I would make up reasons to go in the big walk in freezer. Now I sit at a desk at work in a cool 75F and have a fan blasting right at me. So if any thing I feel there should be stronger laws to promote the use of A/C. Although I can't even begin to imagine a job that allows one to furnish his or her office with such luxuries that are not even found in most homes. In fact, with an office like that I would have no need to buy or even rent a house.

[Outsourced]

"Corporate America" is becoming limited to the top dozen usually male officers; their outside lawyers, HR specialists and compensation consultants who keep them well-compensated; their stock brokers, who tell them how well they're doing; and a disposable bag of workers linked by a few computers, which they provide for themselves.

Unless of course you work on a food assembly line, where Justice Scalia's son makes sure that you'll never receive compensation for that repetitive stress injury that's all in your imagination. (Try gutting a thousand fish an hour and see how long your manicure or your golf swing holds up.)

Only the latter groups pay real taxes, which pay for the social services they no longer get, and for the foreign wars that help pretty much nobody except contractors.

"Customer service" is now "self-service". So is Corporate America.

[gordo]

I don't understand why the New York Times employs people like David Leonhardt. Surely there are people in India who can produce half-witted defenses of robber barons for a fraction of what Leonhardt gets.

[Monica]

Well, it is true that my apartment seems almost useless, and there is almost no point in going to sleep there, which very often I was simply not doing at our former location (there was a shower), and now my apartment is less than five minutes away. I'm glad to see that my job is seen as a cushy job (it is underpaid and I work long hours), but the fact is that air conditioning is making the office too cold for a sedentary job. I understand why, on the contrary, for someone who moves around more or uses a stove, it can be an advantage or a necessity.

But what exactly are the items that "are not even found in most homes" that I have mentioned? The chair is an executive chair, the monitor is for the work computer, and the espresso machine is just a different kind of coffee machine, of course, not something huge or restaurant-type (I don't have one at home bacause I don't need one, as I'm hardly ever there). The bed, well, there is a bed in a home, at least I would hope so. It also depends on where one's priorities are, as I hardly have any shoes but I have my own high-back chair and $300 Bose headphones (in fact, two sets, one at home and one at work).

The reason the New York Time won't hire people from India is that they are from another country and will write differently, not know some American facts and turns of phrase, write in a different English dialect that is closer to British English than American English, readers can point out that these people are foreigners or all have foreign names, it may be necessary for the writer to gather various facts while in the States, etc.

[Tom]

Corporate Amerikkka's continued abuse of labor and the environment is unsustainable and will result in no one being able to buy their products (or no longer wanting to). The world is changing in a hurry and the pampered rich will soon find out how dependent they are on everyone else. i now absolutely hate the way this country has become the worst example of humanity: greedy, self-serving, gluttonous, wasteful, pig-headed, heartless, mean-spirited and corrupt (to mention a few of the nastier traits).

[Justin K.]

I'm talking about quality of the items. such as the type of TV that you must have. I'm still using a 1985 t.v. and my family could never afford a normal coffee machine let alone one on steroids. I do recall a point in my life where I went 2 years as a kid with out a bed. I don't know what your job is or even what you get paid, so don't get me wrong. I'm not putting you down. If anything, I'm envious of you.

[Justin K.]

Monica,

Sorry, I made a mistake about the TV. I ment to say flat screen monitor

[Chris]

I know quite a few people my age (I'm 25) that taught themselves to be experts on computers and electronics, hoping to be able to make a living in the new information age. But with the massive outsourcing, I've seen lots of friends turn to big box electronics stores to try to scratch out a living with what they are good at. (Keep in mind, these are friends who come to my house to help me out- for free.)

As I graduated college and went on to grad school, I see quite a few of them now stuck, still working at Circuit City or Best Buy, wages stagnant, living with roommates they can't stand and sometimes even remaining in unhealthy relationships, just because they can't afford to make rent on their own.

And now this career path is blocked to them. I remember Circuit City being one of the decent jobs one could get if one couldn't afford a college education. One by one, America is turning decent, skilled professions into low-wage hourly jobs.

Also, don't forget that there are "certification" classes you can take, which are often prerequisites for getting jobs like that. If I remember correctly, a three-month course in computer hardware cost 4,000 dollars.

[donkeygirl]

Barbara, I usually agree with you but this time you've gone WAY too far. There is not a crime against humanity heinous enough to justify the torture of listening to Sanjaya for eternity.

[Monica]

A flat screen monitor is now standard equipment if you buy a computer and is less expensive than a flat-screen TV (at least I think so, because I don't have a flat screen TV). I used to envy store clerks who used to have a flat screen monitor while I did not have that, and I waited until the technology was no longer that new and expensive. And protecting your eyes by getting better monitors is worth the trouble. As for espresso machines, while I actually paid more for mine, my boss got a basic one for $99. I have a TV (probably 28 inch, but I'm not sure) from 1989 (yes, eighthy-nine) but I very rarely use it. I moved last June and I never even used it once since I moved. I prefer the Internet, I'm hardly ever home and when I'm not at my PC, I don't need to use another monitor. It's bad for the eyes. Also, many people without an espresso machine spend several times the price of the machine by buying coffee in restaurants, which is precisely why I got mine. And while the gadget with more buttons is not necessarily the best, sometimes, as they say, if you can't afford the most expensive, you can't afford it, period. It's also a matter of priorities because, for instance, I did not buy other things instead. I actually wear slippers at work (nobody cares, and they are black embroidered slippers from a Chinese store, therefore a little elegant). They are not a serious safety hazard, since I would just sit down at my desk or walk on a wall-to-wall carpet.

[Ray Watkins]

Dean Baker, over at CEPR, has recently produced a report relevant to these issues. He claims that both redistribution (to the wealthy) as well as slow productivity growth can explain low wages. The CC debacle makes me wonder if that low productivity might be the result of low morale generally, if not utter dispair in many cases. Here's the link:

http://www.cepr.net/index.php?option=com_content&task=view&id=1123&Itemid=8

[Justin K.]

Ha ha ha. …Your funny Monica. How ever lets set aside the flat screen monitors and habit-forming liquids and get back on point. Going back to Barbara’s blog. She said “The more you make, the more tempting it is to fire you.” In my currant job I often hear (and I am often sickened when it’s said) “They might as well be paying us in peanuts.” In fact when I ask the people that say this, what kind of jobs they worked at before working at this one. Most cases it was middle class jobs right after attending some college that there mom’s and dad’s paid for. They can’t even imagine a world where minimum wage workers spend 10 years and builds up his or her pay to $9.00 or $10.00 an hour through 60-cent increments a year. Only to lose there jobs over the smallest infraction. Where as I have seen it first hand. (I’m not talking about my self.) Perhaps the most frustrating thing about this (for me that is) is the fact that I can’t help fix this. In fact all I can do is wish them luck. And it hurt’s. I have asked many people “why do we have to work 10 times harder then our grandparents did? Just to live in the same world!” Even with in my own life time the work load has dubbed or even tripled. As a kid I had to do about 1 hour of home work a night. I remembered parents complaining about that. Now my nephew who at the same age I was has to do about 2 to 3 hours of home work a night. I’m no math major, but even I can see the numbers don’t add up.

[Anarcissie]

Justin: '... I have asked many people “why do we have to work 10 times harder then our grandparents did? Just to live in the same world! ..."

It seems to me people have become much more passive in the last two or three generations. I am not sure why that is, although I like to blame television. In any case, they won't join unions or coops, they don't know how the laws and the government work, and they even vote directly against their own interests. Naturally, if you have people who will not defend their interests and rights and spend all their time looking at Fox News with their mouths hanging open, you're going to wind up with a lot of serfs. And serfs work very, very hard because there is nobody and nothing to stop their bosses from working them very hard.

If you give it away, you don't have it any more.

[Monica]

Modern employment is worse than serfdom in some respects. At least, in the past, some masters took an interest in their serfs' lives and in any case, serfs could not be fired. Also, the notion that one should be busy every day for a certain number of hours was simply not there. There were periods, such as in summer, when there was more work, and other periods when there was less and serfs still got their food and housing, and they were probably less productive (for instance, a shoemaker making or repairing a few pairs of shoes may work less than in a factory).

Modern serfs actually have to convince their masters to keep them in their employ. Nobody cares if they end up unable to even put a roof over their heads, although they certainly get some advantages while working, such as a better diet (if they can pay for it). But then, knowing that the boss does not use a whip must be very motivating. What's better today, it's a few advantages like that, but then, they are not worth wasting our lives working harder. We work hard, but at least we get hot running water instead of having to fetch water.

[Gaby]

Interesting comparison, past and present. Slavery has never been really abolished, it just looks different today. "In America you are free....free to starve, that is" is a common European observation. Yes, we no longer have to toil the fields but are cubicles any better? Yes, we no longer have "masters", but are CEOs any better? Or the ever demanding shareholders?

[chris]

Barbara wrote:

"But from Allentown to Times Square, no one is commenting on where the new flexibility may be taking us."

Here'e the answer -- to the same old place. Businesses and industries have always had a life cycle. In the case of Circuit City, it is, in effect, doing nothing more than cutting the wages of 3,400 employees.

The company employs about 43,000 workers. Thus, the wage reduction will affect about 7% of its workforce.

Why is this happening? Because the company is losing money. Critics can complain, but profits are not guaranteed. Companies cannot remain in business long if they lose money. Is this news? It appears to be among many on this site.

Circuit City has a number of strategic options open to it. It can close some stores entirely. I think this is happening. There's always an outcry when clueless citizens think WalMart has driven a competitor into the ground and forced it to close. WalMart feels the heat.

Yet when Circuit City loses money because its competitors are winning the battle for customers, it is Circuit City that's criticized. What about Best Buy? Isn't Best Buy part of this equation? How about Dell? How about the online sellers of electronics?

Online sellers have no stores and no sales people. For a large segment of this market, sales people are unnecessary. Many teenagers know more than enough about the newest TVs and other hot electronics to guide their parents or others. In other words, a sales job at Circuit City is not a position that requires knowledge unavailable to the average citizen. Meanwhile, these sales people only serve walk-in customers. Thus, the valued added by the presence of the salesperson is minimal.

Barbara wrote:

"Time was, not so long ago, when seniority was rewarded with higher pay and other perks."

Depends. If the employee, his pay and his knowledge added up to a package with evident value, then yes. But paying people more simply for hanging around is a common problem.

If a company were recording higher revenue and profits, then pay would rise. But that's hardly the case with stores selling electronics. Their profits have fallen over the last few years because competition has increased.

WalMart, for instance, does not sell TVs for the lowest prices. Its prices are good, but Best Buy's and Circuit City's are better. However, WalMart sells the service plans for those expensive TVs for much less than the other two. Thus, the TOTAL COST of buying one of those fabulous, flat, wall-mounted TVs is less at WalMart than at the other two.

Is anyone going to complain that WalMart is driving down the cost of those service plans? No. Then again. Probably yes, because hating WalMart is a reflexive exercise for many.

Barbara wrote:

"But that higher pay now carries a lethal risk. As a friend who writes software for a major multinational explained to me: “If you ask for a raise, the boss is going to say, ‘Why would you want that? It would be like having a bulls-eye painted on your back.’” The more you make, the more tempting it is to fire you."

An employee who is not responsible for bringing in revenue is always at risk. An employee who brings in sales can always earn more.

Ask a fair question. For what reason should an employer give raises to employees over many years if the employees are merely repeating the same tasks?

Some jobs have learning curves that last a few years. How long is the learning curve for the Circuit City sales job? A few days? A month?

In the past -- let's say the 1950s -- US companies simply declared bankruptcy when competition drove them into the ground.

Today, companies have strategies to stretch their lives. One strategy is to employ workers in other countries who perform quality work for wages below US levels.

In the 1950s US car companies built entire vehicles in Detroit (that includes nearby Canadian facilities). Today, the parts for US cars are made all over the globe. Had US carmakers kept all manufacturing in Detroit, US carmakers would have disappeared 20 years ago.

Barbara wrote:

"I experienced this myself a few years ago when I lost a lucrative writing contract with a major media outlet. “Why?” I asked my agent. “They said they were paying you more than any of their other outside writers,” she told me, as if that were a sufficient explanation."

In other words, the idea of competition is anathema to Barbara. When getting bids for anything, it's always a good idea to get at least three. Painting your house? Get three estimates. Adding a room? Get three estimates.

Some craftsmen come with a good reputation that leads to demands for higher pay. Do these artisans always get the job and the higher pay? No. Does it matter? Maybe. With writers, well, some are capable, some are good and some are great. But their level of quality is partially in the minds of the readers.

Meanwhile, there has been an explosion of magazines and other publications over the last decade or two. The Internet has made writers of every person with an opinion and the willingness to pound the keyboard. Many Internet pundits are good writers. Most labor for FREE.

That's the reality of writing. Paid gigs are hard to get. High pay, well, all I can say is anyone who earns a good living from writing has all my admiration and respect. Therefore, if so much talent is available for so little, why would employers shell out increasing amounts of money to keep replaceable people in the stable? Makes no sense.

Barbara wrote:

"Foolish me, I thought the raises I had gotten meant the bosses were pleased with my work. What they meant was that I was doomed."

The bosses may well be pleased with the quality of one's work. But whether that quality has reached the top- and bottom-lines of the publication is another matter. It is a matter that management cannot ignore. The writer might choose to ignore the flow of money. But that's a luxury not available to the publication itself, which must remain solvent if it hopes to keep paying its crew.

[Justin K.]

It is true that every store has a life line. In fact we almost got to see the death of K-Mart. As we speak Comp-USA is getting ready to pack up and move out of so-cal for no other reason then the popularity of Best Buy. I feel that Best Buy might also be in danger. As Wal-mart casts it's shadow over the retail industry. I would love to see ALL box stores go under due to there own greed. And the uprising of mom and pop stores. Even stores such as Food for less Albertsons and other such grocery stores Should meet there doom. How ever this is never going to happen. First, people don't like to go to five different stores to get there shopping done. Even if the did want to go to five stores, they don't have the time. Second, Box stores are like gray hairs. You pull one and two takes it's place. Lets not forget that corporations are for ever hiding in the shadows. Some might even be posting comments on this very page in hope to change the minds of the people, and get us to like them. Who knows Chris (who seems to have a solid understanding of the world of retail) Could be some C.E.O. of Wal-mart, Target, K-mart, or even Circuit City.

[chris]

Justin, you wrote:

"I would love to see ALL box stores go under due to there own greed."

In other words, you want everyone to pay higher prices for everything.

Putting it another way, you'd rather see fewer people buying more expensive goods. How generous of you.

Justin, another point. You should improve your spelling.

That aside, discount retailers won't go away because millions of shoppers patronize them. Why? Because they really do offer lower prices.

By the way, here in New York City, we have a food company known as Fresh Direct. It has no supermarkets to visit. It's an online supermarket. You order online and schedule your delivery. Prices are good but not rock-bottom. However, customers don't have to hassle with shopping. As far as I can tell, Fresh Direct is a big hit.

In NYC Home Depot is a hit, as is Costco and Target, and Best Buy and Circuit City. WalMart would attract huge numbers of shoppers -- if it were allowed into town. Local politicians have been co-opted by certain unions that are threatened by WalMart. Thus, only determined shoppers enjoy the WalMart pricing advantage. But they have to travel outside the city limits to shop at WalMart.

Of course that means the money spent at non-NYC venues is gone from the NYC economy. However, the savings enjoyed by WalMart shoppers probably appears in the city economy. People are left with more in their wallets after they buy their necessities at WalMart.

That leaves them more money for purchases of electronics at Circuit City.