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What The Media Tell Americans About Free Enterprise

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January 1996


Lamenting Layoffs, Ignoring Job Rise
Focus on Fortune 500 misses real trends

The current wave of layoffs at several large companies seems to confirm in many reporters' minds their view of how the business world works: Corporate America racks up record profits for wealthy shareholders while laying off millions of workers.

That's how the networks have reported the layoffs. But with a little digging these reporters could have found that corporate profits are not unusually high, that shareholders are not just rich people, and that more jobs are being created than destroyed.

Anchor John Roberts set the tone of the layoff coverage on the December 26 CBS Evening News: "The market has been hitting one record high after another. But as Economics Correspondent Ray Brady reports, many workers have paid a heavy price." Brady then interviewed "ex-Wall Streeter" Michael Thomas, who told viewers what he seemed to think was shocking: "Executives are running companies exclusively for their stockholders."

This focus on the interests of stockholders, Brady explained, has meant layoffs at such established companies as 3M and AT&T, which caused their stock prices to jump. "Who pays the price for this stock market prosperity?" Brady asked. "Come to any job center, where laid off middle managers scramble desperately for work. Corporate America announced more than 41,000 layoffs last month alone, up 45 percent over the same month a year ago."

Martha Teichner, Brady's colleague at CBS, joined the chorus on the January 7 Sunday Morning. "For all of 1995, the figure was nearly 450,000, but, hey, that's the good news. In 1993 it was 615,000," Teichner reported. "Here's a statistic for our leaner and meaner times. Since 1980, Fortune 500 companies, America's biggest and most profitable corporations, announced layoffs of more than eight million people. That's like laying off the entire population of New York City."

Over at NBC, on the January 4 Nightly News, Mike Jensen agreed. After saying that some companies had to downsize in order to survive, he said, "Some companies simply decided to make more money by firing people. Corporate profits totalled about $400 billion last year, up 25 percent. What all those companies did was obliterate one of the keystones of the American Dream, the security of a job for life. They created anxiety for everyone, even those who didn't get fired."

But just how high are corporate profits? According to the January 4 Investor's Business Daily, which quoted a study by the Employment Policy Foundation, corporate "profits have dropped from an average of 12 percent of national output in the 1960s, 1970s, and 1980s to about 9 percent currently -- a decline of about 25 percent in profits' share of total output."

About those supposedly greedy stockholders, the newspaper pointed out that they may not be who viewers were led to believe they were: "With more than half of all Americans now owning stocks through retirement, mutual, and individual shareholder accounts, it is the average American who benefits most from corporate profits -- not some fat cat on Wall Street."

And here's a statistic for Teichner: "Little noticed among the repeated headlines of Fortune 500 firms cutting jobs are the literally thousands of small and medium-sized firms that are adding new workers at a frenetic pace. Since the start of 1994, more than five million new jobs have been created in the U.S. economy -- more than enough to sop up all the new entrants in the work force."

Reporters seem to think the entire business world begins and ends with the Fortune 500. Until they start looking at the entire economy, they won't be able to tell the entire story.


Rich Noyes


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