A Study Paper of the Lutheran Church in America by William E. Diehl, no date
The decade of the 1980s has made it abundantly clear to all
Americans that we are now part of a vast global economy. The
industrial domination of the United States and Western Europe has
been diffused and scattered to all corners of the earth. Even
Japan, which a decade ago was the primary challenger of the
industrial West, has begun phasing out some of its heavy industries
as newer, more competitive rivals such as Korea, Taiwan, Hong Kong,
Brazil, and Mexico emerge. United States corporations are
increasingly building new production facilities in nations with
lower labor rates at the same time that Japanese auto producers are
constructing their own assembly plants here.
In the 197Os, the twenty fastest -- growing economies were all
Third World nations. During this period, Singapore, Taiwan, Hong
Kong, South Korea, Mexico, and Brazil averaged 9.'I percent growth
per year. While the industrial West went through wrenching
recession in the early 1980s with the seven largest industrial
nations showing a decline in economic growth, Hong Kong, South
Korea, and Taiwan were registering gains.
There is a globalization of many industries and corporations
underway. For example, General Motors now assembles exactly the
same model car in the United States, Canada, Australia, Brazil, and
South Africa. Ford assembles its Escort model in the United States,
Britain, and West Germany. John Naisbitt, author of the popular
book Megatrends, predicts that by 1990 the 30 automotive producers
of the world today will be reduced to seven or eight -- perhaps
even only four. Ninety-five percent of all baseball mitts used in
the United States come from Japan--but they are made from U.S.
cowhide which is tanned in Brazil. The world's financial
institutions are so interrelated that investors follow the sun as
they move resources from one nation to another. The system is so
sensitive that a major bank crisis in Ohio can send the dollar
plunging on world markets.
The impact of these changing economic patterns has been felt
most severely in the more mature industries, such as the primary
metals in steel and aluminum production, automobile manufacturing,
and textiles. The Western nations have reacted to these changes in
a variety of ways. In some instances, trade barriers have been
erected to exclude lower-priced imports. In other cases, heavy
government subsidies have been the means for enabling certain
industries to compete in world markets. In most every Western
nation there has been a gradual constricting of industrial
capacity, as the least efficient producers are phased out of
The effect of these changes in the global economy has been
painful for the United States. In 1960, the United States had a 25
percent share of the entire free world market in manufactured
products. By 198'~, it had shrunk to less than 16 percent. In 1960,
U.S. auto makers had 95 percent of the domestic market; by 198k,
even with the help of voluntary restraints by Japan, the share was
less than 75 percent. The steel industry in the United States faces
import levels of 25 percent today; in 1960, it was less than 5
percent. Currently the U.S. textile industry is facing a dramatic
decline. Over 50 percent of all textiles purchased in the United
States in early 1985 were imported -- double the rate of 1980.
The natural consequence of these new economic forces has been a
phasing out of the less competitive U.S. manufacturing facilities.
There has been a substantial shift in the nature of employment in
this country. During the 1970s, of the 19 million new jobs created
in the U.S., only 5 percent were in manufacturing. While the total
labor force grew by 18 percent in the `70s, jobs in the health care
field grew by 118 percent, in computer-related activities by 83
percent, in banking by 83 percent, and in local public services by
76 percent. Moreover, these new service-oriented jobs pay
significantly less than the industrial jobs. When a steelworker who
earned about $23 per hour, including benefits, is able to find work
only in a fast food restaurant at one third the former rate, there
is real pain involved.
Using national averages for unemployment levels can be highly
misleading. While the United States was able to see its national
average for unemployment drop to 73 percent in early 1985, there
was at the same time double digit unemployment in the steel towns
of Buffalo, Youngstown, Johnstown, Gary, and the Monongahela
Valley. On the other hand, there were some cities with virtual
labor shortages. While all of these changes have been going on for
some time, the rate of change has been exacerbated by a recession
in 1981-83, and by the strong dollar in world markets. As a
consequence, we have witnessed an increasing number of plant
closings in this country. However, as we shall point out later, not
all plant closings can be attributed to forces of a global
Plant closings have a significantly greater impact on workers
than do ordinary recession-related layoffs. During a business
slump, the employee on layoff can usually expect to be recalled,
and frequently has the resources and public support systems to
bridge the unemployment gap.
In most instances, plant closings invoke permanent displacement
of the employee. He or she will not be called back; a new skill and
a new job must be found. Furthermore, plant closings do not respect
seniority or status. The 25-year veteran is affected just as much
as the apprentice; the superintendent just as much as the laborer.
Thus, the impact on senior workers can be devastating.
Many studies have been made of the social impact of
unemployment. While these studies differ in detail, the conclusions
are the same: unemployment brings a higher incidence of heart
disease, suicide, homicide, alcoholism, crime, mental disorder,
child and spouse abuse, and general decline in the health of all
These problems place a higher demand for social services on a
community at the very time that its tax base is being reduced by
the plant closing. Furthermore, the ripple effect of plant closings
on retail sales, housing, professional services, and the like can
be significant, particularly if it is a large plant in a small
WHY DO PLANTS CLOSE?
Seldom does a plant close because of a single factor. Usually a
combination of factors is present, and the importance of these
factors can vary from situation to situation. Some of the factors
are critical for survival in a global economy; others are not.
Consequently, the usually related to its profitability. An
operation which is causes listed below cannot be assumed to be in
any order of' importance. They have been grouped, however, into
those factors which tend to be related to a world economy and those
which are not.
A. Factors Related to a Global Economy
1. Wage rates. In early 1985, the average labor rate for
an American steelworker was $23 per hour, including benefits. In
Japan it was $12 per hour; in Korea, $2. However, direct
comparisons are not always valid since the workers in some nations
may receive benefits from the government which are normally
provided by the employer in other nations. Nevertheless, wage rate
differences play an important role in the competitiveness of
2. Labor productivity. Hourly wage rates alone do not
tell the full story. A work force which can turn out twice as much
product per hour as another can afford to pay its people a somewhat
higher wage rate. Productivity can be influenced by such factors as
efficiency of plant and equipment, good management, worker
attitude, and work rules. The so-called "featherbedding," which was
common in the railroad industry, is an example of work rules which
3. Plant and equipment. Not only do modern plants and
equipment help to increase productivity, but they can also result
in higher product quality and faster service. However, the ability
of a company to invest in new plants and equipment is not
profitable or only marginally so, will frequently have difficulty
raising the funds to pay for new plants and equipment.
4. National industrial policy. The degree to which a
nation's government assists its industries can influence its
competitiveness in the world market. For example, when the
government of France discovered that parts of its aging steel
industry were no longer competitive in world markets, it was faced
with the choice of either providing direct subsidies to the
unprofitable plants or paying unemployment compensation to the
steelworkers displaced by plant closings. For many years, France
elected to subsidize its weak plants and, in a sense, export its
own unemployment to other nations. More recently, however, France
has begun to shut down unprofitable plants. While Japan has not had
to subsidize its steel industry directly, the government has
provided loans for plants and equipment beyond what U.S. steel
makers could secure through normal commercial borrowing channels.
However, Japan has had a long history of erecting trade barriers
for those products in which it is not competitive. The United
States has never had a comprehensive industrial policy. Rather,
policy has been made as the result of pressure groups succeeding in
securing relief. Farm and tobacco subsidies, guaranteed loans to
Chrysler, and "voluntary restrictions" on auto imports are examples
of U.S. policy which has resulted from political pressure.
5. Taxes. Local, state, and federal tax policies may
cause plants to be less competitive in the world market.
6. Government regulations. New government regulations
may impose unusually high costs on certain industries. For example,
environmental air quality regulations imposed serious problems for
the cement and foundry industries. In many cases, the cost of
making these plants environmentally acceptable was so high that it
could never be paid back in future earnings. Occupational safety
and health regulations imposed higher operating costs on some
industries. And the sheer volume of paperwork required to comply
with government regulations adds to the cost of operation.
B. Factors Not Necessarily Relating to a Global
1. Product obsolescence. Buggy whips are the typical
example. Anthracite coal mining for home heating is another.
2. Loss of market share. A multi-plant corporation in
losing a share of its market will consolidate operations at its
more profitable locations and close the marginal ones.
3. Geographic dislocations. Older plants were built
close to consuming markets or sources of raw materials. As
populations shift or as raw materials run out, the geographic
location may become a disadvantage.
4. Change in product mix. A large multi-product
corporation may find that as demands for some of its products
change, there is no further use for the plants in which these
products were made. Or the cost of refitting the plant for new
products may exceed the cost of building a new plant elsewhere. The
US. automotive industry faced this problem in switching to small
5. Change in manufacturing technology. When steel mills
used iron ore as a raw material, they located along the Great Lakes
in order to receive ore by boat from the Minnesota Iron Range. As
newer steel-making technology shifts to electric furnace operation,
it becomes desirable to locate closer to sources of scrap metal and
lower electric rates.
6. Changes in product design. The 1973 energy crisis
provided a good example of this. Fuel-efficient cars had to be
smaller and lighter. The switch in design quickly had an impact on
the steel and rubber industry.
7. Mismanagement. Some plants, especially in smaller
one-location companies, may close simply due to mismanagement. A
family-owned plant which loses its chief executive may not be able
to survive if the family tries to take over. Of course,
mismanagement can exist within any company, regardless of size.
8. Maximizing profit. High rates of return on various
types of financial investments have put pressure on corporate
management to maximize short-term returns. Careerism among managers
may cause them to do what will show the best immediate return on
investment. It may look better to close a moderately profitable
plant and transfer those resources to bolster a more profitable
9. Takeovers, mergers, and acquisitions. The
consolidating of two or more corporations can result in plant
closings, and sometimes for no other reason than the taking of
profits in the stock market. In recent years, conglomerate or
multi-plant corporations whose stock was undervalued due to poor
performance of certain component operations, became the target for
outside takeovers. If the takeover was successful, the new owner
frequently closed those facilities which were not earning a high
enough profit. Likewise, those companies which wanted to protect
themselves from unfriendly takeovers frequently closed down those
operations which were not making a strong enough contribution to
corporate profits. Even in the case of "friendly" mergers or
acquisitions, plant closings may result as production is
consolidated in the most efficient facilities. Plant closings
resulting from takeovers, mergers, or acquisitions are frequently
the most difficult for workers and the community to accept. In
these situations, plants which are admittedly profitable are closed
down--simply because they were not profitable enough.
SOME WORDS ABOUT PROFITS
The matter of profits usually enters the picture whenever plant
closings are discussed. At times members of management, the unions,
and public interest groups are drawn into philosophical debates
about the capitalist system itself. While these debates do give
people the opportunity to vent their ideological biases, they
seldom help resolve the problem of a specific plant closing.
Whether one likes it or not, the U.S. economic system operates
under a form of capitalistic market system. To deal with the
unfortunate consequences of plant closings, one must focus on the
ways in which this system causes companies to cease operating.
A basic element of the capitalistic market system is the need
for profit. There is either profit or loss. If there is sustained
loss, a company goes bankrupt. If there is adequate sustained
profit, the company has the wherewithal to maintain plant and
equipment in competitive condition.
The question is, what is "adequate" profit? Many people are
uninformed about how much profit American corporations generate.
Part of the blame for their ignorance can be placed with the
management of American corporations themselves, due to the way they
report profits. Frequently corporations will introduce their news
reports with such headlines as "XYZ corporation reports a 25
percent increase in profits." Only in the body of the report does
one learn that the 25 percent increase means that net profits rose
from k percent to 5 percent. Yet the casual reader of business
headlines reads the words "profits" and "25 percent" and
incorrectly concludes the company has earned a 25 percent profit
return. Companies also mislead the public by announcing profits in
terms of dollars. To say that XYZ corporation reported third
quarter profits of $5 million is, in itself, not very meaningful.
Five million dollars profit on 50 million dollars of sales is quite
good; it is not very good, however if sales were 500 million. Yet,
the public reads 5 million and assumes high profitability.
There are two generally recognized ways of reporting
profitability. One is to report profits as a percent of total
sales, either before or after deducting taxes. The other is to
report profits as a percent of investment. Most companies report
both ways in their annual financial reports.
The average profit as a percent of sales for American heavy
industry and manufacturing has tended to range between k and 6
percent in the last ten years. The general public tends to perceive
significantly higher levels, say from 10 to 20 percent.
However, for those who have money to invest in new plants and
equipment, a more important indicator is the profit rate as a
percent of investment. Here the range of profitability is very
wide. Investors are much more likely to put money into a company
which is generating profits at a rate of 25 percent return on
investments than one which is running at a rate of 2 percent. It is
precisely because corporate management want to attract investment
capital that they tend to focus on short-term results and report
profits as favorably as possible.
A fairly recent example of the investment dilemmas facing
corporate management was presented when U.S. Steel Corporation
purchased Marathon Oil Company. At the time of purchase, U.S. Steel
had enough capital and borrowing capacity to go ahead with the
construction of an entirely new steel mill in northeastern Ohio. At
the same time, energy-related industries were returning very
attractive profits to their owners. As U.S. Steel management looked
at their options, they were faced with the choice of investing in
the equipment must be moth-balled or moved, property taxes must
still be steel industry, which was projecting low returns on
investment -- or in the petroleum industry, which was projecting
much higher returns. They decided to move into the energy
Critics of U.S. Steel claim that the company had an obligation
to invest in its own industry simply from a moral standpoint. They
say the company owed at least that much to its own steelworkers.
Critics further claim that a modern U.S. Steel plant in Ohio could
have been more profitable than the older ones which the corporation
Defenders of the company decision argue that because of the
cyclical nature of the steel industry, corporate diversification
provides greater chances for survival. They point to the fact that
while the steel maker segment of U.S. Steel lost money in 1982, the
Marathon Oil division made money. They argue, therefore, that a
lesser percent of steelworkers was laid off in their plants than in
other steel-making companies because of the profit contribution of
Marathon Oil. The United Steelworkers Union disputes this
Should U.S. Steel have invested in new plants and equipment in
the steel industry, or did it do the right thing in diversifying
into the energy field? Different people answer that question in
different ways. Did the company have a moral obligation to its
steelworkers? If so, how well did the company do in fulfilling its
obligations? Let the reader decide.
Another reality which escapes much of the public is that
profitability is not necessarily improved by closing a plant. To
shut down a plant on a temporary or permanent basis involves costs
-- productivity goes down as the plant nears the closing date, is
difficult to assess the degree to which a particular problem paid,
and so on. Furthermore, the company runs a high risk of not being
able to capitalize on the opportunities of a turn-around in its
market. After an extended plant closing, new workers have to be
trained and equipment must be reconditioned. Meanwhile, the company
has missed months of profitable operation. It is necessary to
remember this reality in dealing with plant closings. For it may
well be that forces or organizations outside the company may be
able to provide short-term relief to enable the company to "bridge"
the recessionary period, if that is the problem. Temporary tax
forgiveness or labor concessions may be enough to tip the scales in
favor of keeping the plant going.
In dealing with companies involved in plant closings, public
Interest groups are in a much stronger position if they have an
accurate knowledge of the company's profit picture, both in terms
of return on sales and return on investment. Such information can
be obtained on a consolidated basis from the company's annual
report or in a more detailed form in the company's 10-K report,
which can be secured from the company upon request.
ADDRESSING THE PROBLEM OF PLANT CLOSINGS
As one looks at the problem of plant closings, two issues
immediately surface: 1) What can be done to prevent plants from
closing? 2) What can be done to minimize the effect of plant
closings on workers and the community?
A. Keeping Plants Open. Many of the factors listed in
this paper as reasons for plant closings can be reduced or
eliminated if action is taken soon enough. But if a number of
factors are involved, it is difficult to assess the degree to which
a particular problem contributes to a plant's demise. Will local
government consider tax relief, or will labor consider reduced
wages if they are only one part of the problem? How do they know
that management is not simply trying to increase profits? Who is to
say that an upswing in the business cycle will not remove the
threat of a plant closing? Why not press the federal government for
tariff protection or federal loans if foreign competition is part
of the problem? Up to now, there have been very few instances in
which parties concerned about a plant's closing came together early
enough to make a difference. The frequency of plant closings during
the 1981-1983 recession may have awakened everyone to the threat.
The time may be ripe for interested parties to respond to plant
closing alerts sooner and with greater effectiveness.
B. Minimizing the Effect of Plant Closings. There are a
number of policies which a company could adopt to minimize the
effect of plant closings on its workers.
1. Advance notice. If the company can notify workers of
a closing date 12 to 18 months in advance, they would have time to
prepare for it. Many companies argue that this request presents two
problems: (a) In many cases, company management does not know for
certain that a plant will close in 12 to 18 months. A change in
business demand or a change in some critical factor facing the
company can turn a bad situation into a good one or vice-versa. (b)
Management is concerned that once an early announcement of a plant
closing is made, all the best workers will quickly get jobs
elsewhere and the plant's quality, delivery, and costs will turn
sour. Everyone concedes, however, that one day's notice of closing
2. Severance pay. A commonly suggested formula is for
each worker to receive severance pay equal to one week's earnings
for every year of service. The practice of granting severance is
fairly common in industry today. Severance pay should not be
forfeited if an employee secures another job prior to the actual
closing. Otherwise, employees might not begin to look for other
work for fear of losing the severance pay.
3. Health benefits. Workers' health benefits should be
covered by the company for at least one additional year after the
employee is dismissed.
4. Early retirement. Workers who are within three years
of normal retirement should be retired on full pension, with years
of service computed as if they had worked until age 65.
5. Transfer. In the case of a multi-plant corporation,
all workers at the facility should have the opportunity to transfer
to an equally paying job at another plant, with full moving
expenses covered by the employer.
6. Job retraining. Company-sponsored training programs
should be established to train and place workers in other jobs in
the local community. These programs should also include family
counseling for all employees.
7. Employee purchase. Workers and the local community
should be given the opportunity to purchase the plant and operate
it under an Employee Stock Ownership Plan (ESOP). This may not be
practical if, for example, the plant makes a specialized part for
the larger corporation and would have little or no outside market
for such a product (auto bumpers, for example, for General Motors).
Or, if the plant lends itself to independent operations, the parent
company would be unwilling to help establish another competitor in
the field. Of course, unless there is a change in those factors
which caused the plant to close in the first place, there is no
assurance that employee ownership will be any more viable than
8. Phasing out of local taxes. Since the closing of a
large plant in a small town may have a severe impact on local tax
receipts, companies should phase out their local taxes over a five
year period. This may involve a voluntary contribution to the local
taxing authority if the plant and equipment are disposed of in a
way that will severely reduce property taxes.
All of the above practices cost the company money. Very few
companies have adopted all of them. Some companies do none of them.
In the case of single-plant companies which go bankrupt, there may
be no assets left to do any of the above things for workers after
all the creditors have been paid. But society should do everything
possible to reduce the impact of plant closings on both workers and
Is it possible to pass laws which could mandate some or
all of the eight policies listed? A look at plant closing laws in
Sweden, West Germany, and Great Britain suggests some
Sweden's national labor market board is a tripartite committee
made up of labor, business, and government representatives.
Employers are required to notify the county branch of the board, as
well as the union and individual workers, of any decision to close
plants or permanently reduce the level of employment at a
Typically, the local board calls a meeting of all interested
parties if the employment cut is significant. Under Sweden's
co-determination law, the implementation of the closing or cutback
must be negotiated with the union. The union has full legal rights
to financial and other information about the company. Every aspect
of the decision must be negotiated, and the company must await the
outcome of the negotiations before it proceeds with its plan. These
negotiations introduce greater flexibility into plant closing
policy, as strategies can take into account specific firm and
industry conditions. Furthermore, a wide range of government
programs including vocational training, placement services, and
in-plant training allowances for firms, are aimed at improving
In West Germany, every enterprise with five or more employees
must have a "works council" elected by workers in the plant. In
addition, any company with more than 2,000 employees must have 50
percent employee representation on its supervisory board.
Management must give the supervisory board one year's advance
notice of impending decisions that could have an adverse impact on
the workers. The company must give the works council its reasons
and provide full access to corporate data. All aspects of the
decision are subject to negotiation. Employers usually must make
very high severance payments.
British workers between the ages of 21 and 64, with two or more
years of service, are entitled to lump-sum severance compensation
of one-and-a-half weeks' pay per year, in addition to regular
unemployment benefits. The financial obligation rests entirely with
the employer. The government has a variety of programs to promote
alternative employment and job mobility. In addition, the
government regulates the location of industry, and can deny a
license for new industrial floor space if the new production
capacity displaces plants in other communities. Advance notice of
plant closings (60 days if 10 to 99 workers are affected, and 90
days if 100 or more workers are affected) must be provided.
Detailed information on reasons for the cutback must be provided to
the government and the unions. The employer is obligated to consult
with the government and the unions. During the period of notice,
affected workers are entitled to time off with pay to look for new
While Canada has no laws which mandate certain company policies
during plant closings, it does provide a Manpower Consultive
Service (MCS) which assists workers and companies in order to
minimize the impact of closings. If the union, workers, or the
company request it, an MCS advisor will endeavor to create a
Manpower Adjustment Committee consisting of representatives of all
interested parties. This committee will interview employees who
will be displaced, determine their interests and talents, and
assist them in preparing job resumes. It will also coordinate job
search activities of the union, the company, and local government
agencies. The committee's operations are funded jointly by the
company, the union, and local and national government.
Participation in the program is voluntary, but where it has been
used, MCS has demonstrated high success in placing people in new
In the U.S., at least three states have laws affecting plant
closings. In 1971, Maine enacted legislation requiring companies to
give 60 days' notice of a plant closing or relocation, and to pay
the affected workers a lump sum equal to a week's wages for each
year of service. Four years later, the Wisconsin legislature
approved a bill requiring 60 days' notice of closings, mergers, or
relocations. Michigan has an old law that requires any corporation
leaving the state to repay all money, bonds, land, and other
inducements it received to locate there. Local groups are pushing
to strengthen the law. Supporters of plant closings legislation
consider that these existing laws have been ineffective in
deterring the closing of plants.
In 1982, Philadelphia became the first city to require firms
with more than 50 employees to provide 60 days' advance notice of a
shutdown to workers and government. The law followed years of
lobbying by more than 50 of the city's churches, unions, and
Legislation relating to plant closings has been proposed in a
number of other states and in Washington, D.C. Most bills provide
for advance notice of closings, severance pay and continued health
insurance for employees, and some form of payment to local
government. Opposition to state legislation comes from chambers of
commerce, economic development organizations, and other groups
seeking to attract new industry into the state. Opposition to
federal plant closing laws comes primarily from those who think the
federal government should not be meddling in the normal flow of
However, even where laws exist, as in Europe, Maine, Wisconsin,
and Michigan, workers and communities are not provided for to the
extent suggested in this paper. In the absence of comprehensive
legislation, individual corporations must decide how much help they
should provide for workers and communities affected by their plant
There is a variety of ways in which Christians can serve as
advocates on behalf of those affected by plant closings. These will
be examined in light of the two issues discussed earlier: 1) ways
to keep plants from closing, and 2) ways to help those who are
displaced by plant closings.
A. Keeping Plants Open
As mentioned earlier in this paper, plants close for a variety of
reasons. In some cases, factories close due to a temporary slump in
the economy. In some cases, they shut down due to a basic
structural change in the economy. Some closings are the result of
management's drive for short term profitability. At other times,
the mercantilistic policies of other nations may force plants to
close here. Therefore, there can be no general advocacy strategy
which would apply in all situations. They must be considered
individually, or at least by types of situations.
As Christians we should consider the global implications of
economic activity. If, as General Motors has stated, U.S.
automobile producers cannot produce subcompact cars as efficiently
as the Japanese, should we not concede that segment of the market
to the bona fide low-cost producer? Is it fair to the Japanese
worker for us to advocate restrictive trade laws designed to
protect noncompetitive American industries? On the other hand, if
American jobs are being lost due to heavy government subsidies in
other nations, such as the steel industry in Western Europe,
fairness would suggest that trade laws and trade negotiations
recognize that fact and respond accordingly in the short term while
still pressing for free world trade in the long term. In this
light, efforts to enact "domestic content" laws for the American
automotive industry are probably ill-advised.
As a general rule, if an American plant is closing as the result
of a structural shift in the world economy due to the ability of
another nation to produce the product more efficiently in a free
and open market system, should one advocate for legislation,
boycotts, or other means of preserving the life of the plant?
If, however, plants are closing solely as the result of a
depressed economy, then actions taken to help such plants bridge
the slump can indeed serve a useful purpose. Changes in
depreciation rules, union "givebacks," revision in work rules, pay
cuts for salaried workers, and improved worker productivity are
examples of steps which have enabled some companies to survive the
steep recession of 1981-83.
Legislation designed to reduce the frequency of corporate
takeovers has been proposed, but the phenomenon of these unfriendly
takeovers is so new that their ultimate effects cannot yet be seen.
Some argue that the pruning process, which frequently involves
plant closings, ultimately makes the core organization a stronger
competitor in the world market. Others say that the primary
objective of such takeovers is the attaining of short-term profits.
These critics argue that since long term effects are not being
considered by the takeover organizations, legislation should
control the activity.
Because of the historic adversarial relationship between labor
and management and, to a lesser extent, between management and
government, efforts to forestall plant closings have frequently
been clouded by distrust among the various parties. Labor has
sometimes charged that management is using threats of plant
closings to extort reduced wage arrangements from the workers.
Similarly, local government has often ignored calls for help from a
plant which is truly on the brink of failure.
It is in this area that the church has perhaps the greatest
potential for effective advocacy. Church leaders, with no personal
self-interest at stake, can play an important intermediary role in
the communities faced with potential plant closings. Pastors and
lay people can form mediating structures to bring together
management, labor, and government to determine what needs to be
done to keep a plant operating until economic recovery returns.
There have been a number of examples of church coalitions swinging
into action only after a plant has closed. Too little attention has
been paid to such groups' potential for helping to prevent certain
types of plant closings.
Since our nation has no well-planned, comprehensive industrial
policy, one wonders if the church could also play a mediating role
in bringing together labor and management to begin working toward a
national industrial policy.
While most so-called plant closing legislation is aimed at
relieving the plight of the displaced worker, there is also a
deterrent factor present in that the financial obligations imposed
on companies which shut down plants may cause management to find
other solutions to their problems. However, the likelihood of
enacting comprehensive plant closing laws on a state-by-state basis
is slight. Those states which are most threatened with more plant
closings are the very states which most want to attract new
business and industry. Strict plant closing laws will only make a
state less attractive for new industry. Comprehensive plant closing
legislation should be undertaken at the national level, in the
absence of industry-wide voluntary programs.
B. Minimizing the Effects of Plant
A comprehensive federal plant closing bill providing for the eight
policies mentioned earlier would undoubtedly be a major step
forward in easing the impact of plant closings. Yet, even such
legislation would be of little help to workers who lose their jobs
due to a company's bankruptcy. Some people have suggested that it
would be better to set up a national plant closing insurance fund,
similar to our present unemployment insurance fund. All companies
would be required to pay into the fund and, at the time of a plant
closing, resources would be drawn from the fund to help the
Canada's experience with its Manpower Consultive Service, as
described earlier, can serve as another model of how government can
aid in minimizing the effect of plant closings. Such services could
be established at a state level, and would not deter new industry
from entering the state. Advocacy for such an agency of government
should be encouraged.
A number of unions have negotiated certain plant closing
provisions into their contracts over recent years. Certainly this
is another point for advocacy. It must be remembered, however, that
this strategy overlooks the white collar workers and others who are
not members of unions.
Another channel for advocacy is the direct appeal to
corporations to establish well-defined policies for plant closings.
In recent years, religious and public interest groups who hold
stocks in American corporations have exercised their rights as
shareholders to discuss the issue with management, and to file
shareholder resolutions requesting that specific policies be
established for plant closings. There is evidence that some
companies have changed their policies as a result of such efforts.
Certainly this type of advocacy should be encouraged.
Finally, local churches or coalitions of churches can be the
means for bringing labor, management, volunteer agencies, and
government together in a coordinated program to help the displaced
workers. In too many cases it has been up to the displaced worker
to discover which resources are available from the union, the
company, the United Way agencies, and governmental agencies. While
local congregations can provide some emergency needs, counseling,
and support for displaced workers, they should also advocate a
broad community-wide response to the needs of the workers.
As can be seen, there are many potential routes for advocacy on
behalf of those displaced by plant closings. Depending upon
individual circumstances, some may be better than others.
There is no doubt that plant closings impose a high social cost on
the affected workers and communities. Furthermore, since we are
members of a global community and since the church is a
transnational organization, it is shortsighted to consider plant
closings to be a purely domestic phenomenon. Global economics are
highly complex. Yet, as a world-wide community of faith, the
Christian church must do its best to understand what is going on,
to minister to the needs of those who have been hurt by economic
forces, and to be an advocate for economic justice on their