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What The Media Tell Americans About Free Enterprise

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December 1998


Laying Off the New Jobs Story
Reporters Focus on Downside of Corporate Downsizing, Ignore Growth

Reporters just donít know what to make of it: The unemployment rate falls at the same time that big companies are laying off thousands of workers. These must be contradictory signals about the health of the economy, right?

Not necessarily, but most reporters at the networks assumed so. For them, layoffs can only be a bad sign. ABCís Kevin Newman, on the December 3 Good Morning America, announced that "big companies [are] shedding employees as if there is a recession, but of course there isnít," which led him to wonder: "Can our economy really absorb these layoffs, or is it just a question of too much greed among corporate America?"

According to Timeís Frank Gibney Jr., in the December 14 edition of that magazine, "Last week the Dow Jones stock average slipped on confusing news of megamergers by some companies and thousands of layoffs at others. It then recovered slightly after the Department of Labor announced that the November unemployment rate dipped to 4.4 percent." Layoffs, however, caused him to wonder if "todayís economic boom will give way to a brutal post-holiday hangover."

And on the November 18 World News Tonight, ABCís Betsy Stark reported on how big American steel companies are threatened by inexpensive imported steel, noting that the price of steel has dropped from $330 per ton last year to $230 this year. This may be good for manufacturers who use steel, but "the global economy is not a wonderful thing if youíre an American steel worker. Prices for foreign steel are so low that even the most efficient American steel companies say they cannot match them and still make a profit," causing the industry to lose 6,000 jobs this year.

All of these stories missed an important point: If big companies themselves, or foreign competitors, can produce the same products more efficiently with less labor, then that will free up workers to produce other products or services, making the economy as a whole wealthier. "Most of the layoffs are happening at big firms," notes a report in the December 8 Investorís Business Daily. "But thatís not where the action is. Small- to mid-sized companies are hiring at a stupendous clip." While behemoth companies have cut jobs, "new jobs are being created faster than the government can count in sectors of the economy that barely existed two decades ago ó personal computers, software, the Internet, fast-growing discount retailers, and so on."

This is a sign of a healthy economy, IBD argues: "Jobs that are shed in older, less vital industries are replaced with new jobs in younger, faster-growing industries." This contrasts with Europe, where regulations preventing layoffs stifle the "creative destruction" of the free marketplace. This leads to slower growth, less innovation, and, paradoxically, higher unemployment, as companies cease to hire because of the regulatory and tax burden.

If reporters looked below the bad news on the surface, they would see that the dynamic, changing nature of the American labor force is one of this countryís great strengths.

ó Rich Noyes


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