On the eve of Labor Day in 1936, President Franklin Delano Roosevelt warned in his “Fireside Chat” of a potentially dangerous surge in class divisions if more was not done to support ordinary workers.
For FDR, providing the opportunity to labor for a “decent and constantly rising standard of living” was fundamental to a healthy democracy.
“The Fourth of July commemorates our political freedom,” he said. “Labor Day symbolizes our determination to achieve an economic freedom for the average man which will give his political freedom reality.”
This year, our economy is similar to 1936 in at least one way. A rebound from crisis is evident in many indicators — except those most important to working families. When FDR delivered that radio address, unemployment was down from the peak of the Great Depression but still a painful 17 percent.
Our current jobless recovery is even more unfair by one particular measure: paychecks for the guys at the top of the corporate ladder. After adjusting for inflation, CEO pay at the top 50 U.S. companies was eight times higher in 2009 than it was in 1936.
What’s even more outrageous is that the executives who are cutting the most jobs are also getting the biggest payouts. According to a new report by my organization, the Institute for Policy Studies, CEOs of the 50 firms that have laid off the most workers since the onset of the crisis took home nearly $12 million on average in 2009. That’s 42 percent more than the average for CEOs of S&P 500 firms as a whole.
Each of the 50 firms surveyed cut at least 3,000 jobs between November 2008 and April 2010. Seventy-two percent of the companies announced mass layoffs at a time when they were earning profits.
These numbers all reflect a broader trend in Great Recession-era Corporate America: CEOs are squeezing workers to boost short-term profits and fatten their own paychecks.
William Weldon of Johnson & Johnson, for example, announced 8,900 job cuts in 2009. His compensation package that year was so large — $25.6 million — that it could have covered the cost of nine weeks of average unemployment benefits for all the workers he fired.
Many investors would point to the pharmaceutical company’s $12.3 billion in profits last year as proof that Weldon is worth every penny. But such mass layoffs tend to have serious long-term costs, not just for workers who lose their jobs, but also for the corporations that fire them.
Beyond the immediate blow to morale for remaining employees, companies that slash their workforces often face higher costs down the road related to hiring and training new employees. A University of Colorado survey of S&P 500 firms over nearly two decades found no evidence that downsizing leads to increased returns on assets.
Seventy-four years ago, Roosevelt ended his Labor Day address by declaring that the needs of all American workers “are one in building an orderly economic democracy in which all can profit and in which all can be secure from the kind of faulty economic direction which brought us to the brink of common ruin.”
Roosevelt’s pro-worker policies helped lay the foundation for several stable decades with relatively narrow income gaps during the post-World War II period. As we struggle to recover from the worst crisis since FDR’s day, let’s put the focus back on what’s good for working families. The Great Recession will only be over when the nation is back to work.