With the economy weakening, chief executives want Wall Street to see them as tough cost-cutters who are not afraid to lay off workers. But plenty of job cuts are not trumpeted in news releases.
Big companies also routinely carry out scattered layoffs that are small enough to stay under the radar, contributing to an unemployment rate that keeps climbing, as Friday’s monthly jobs report is likely to show.
IBM is one such company. It reported surprisingly strong quarterly profits in January, and in an e-mail message to employees, Samuel J. Palmisano, the chief executive, said that while other companies were cutting back, his would not. “Most importantly, we will invest in our people,” he wrote.
But the next day, more than 1,400 employees in IBM’s sales and distribution division in the United States and Canada were told their jobs would be eliminated in a month. More cuts followed, and overall, IBM has told about 4,600 North American employees in recent weeks that their jobs are vanishing.
J. Randall MacDonald, IBM’s senior vice president for human resources, said it was routine for the company to lay off some employees while hiring elsewhere.
“This business is in a constant state of transformation,” MacDonald said. “I think of this as business as usual for us.”
These unannounced cuts, labor experts say, raise issues of disclosure and the treatment of workers. They argue that the federal law requiring warning of certain kinds of layoffs should be overhauled, so that it covers smaller job cuts. That would give people more time to seek new jobs, career counseling and retraining.
“The twin goals are transparency and decency,” said Harley Shaiken, a labor economist at the University of California, Berkeley. “The issue becomes all the more pressing in this downward economic spiral.”
The notification law, known as the WARN Act, is a legacy of an era when the economy was more dependent on manufacturers, and legislators were concerned about blue-collar workers suddenly locked out of their factory. That kind of shutdown is hard to hide, while white-collar layoffs spread across many locations are not.
The WARN Act requires 60 days’ notice, but the events that require notification are specific — a plant closing, a layoff of 500 or more people at one location, or a cut of at least one-third of the work force at a site.