Sunday, December 16, 2007

Who Fires or Lays you Off?

Tibor R. Machan

During economic downturns many people become hostile toward their employers, thinking whatever hardship they suffer is their fault. In fact, however, the responsibility lies with customers, consumers, and a host of other economic agents, rarely if ever with one’s employers.

I work for a university and have indeed done so for most of my career after I left graduate school, having earned my entry ticket, the PhD degree, which is what one usually needs to go on the market for a teaching position at colleges and universities. Much of this industry, of course, is bizarre. People are paid in most places from funds extorted from citizens via taxes, so there is hardly a genuine free market in play.

I did, however, work outside of the academy for nearly a decade, prior to entering college, where I was subject to market forces. Which is to say, when I lost my job a Carrier Air Conditioning, for example, or at the architectural drafting firm where I worked afterwards, I was let go because the number of those directly or indirectly seeking to buy my skills significantly diminished.

Yes, my pink slips were given to me by my bosses but they were only telling me what they were told by their own potential customers: “We do not want what you and Machan and the rest in your company would like to sell us. Or we want much less of it than before. Or we want to buy it from some other provider. Or we found something else we want to spend our money on instead of what you have to offer us. And so forth.”

Sometimes, as seems to be the situation now in my region of the world, many potential customers are in a belt-tightening frame of mind. For a while they may have extended themselves, gone out to buy what they wanted even beyond their means, and now it has downed on them that this could have severe consequences. So they decided to withdraw from the market place, or to go there more infrequently than before.

In the case of the housing market, for example, many people went in over the heads big time. They and their lenders took big risks, borrowed and lent much more than was reasonable given their economic circumstances. And this has resulted in widespread defaults and unless some kind of successful restructure could be arranged, it may even have led to having to give up one’s home. When such things happen with great numbers of people, then the economy undergoes a recession, at least if this happens over a prolonged period of time. But, except for when the government muscles in and causes all kinds of distortions instead of leaving people in the marketplace to sort things out, this is all nothing more mysterious than folks, as economic agents, acting somewhat wildly and then trying to take steps to rectify matters.

Yes, and there can be some malfeasance in play throughout the market which contributes to such situations, just as when the market is doing extraordinarily well. People hustle and others are all too willing to play along, take advantage. Who wouldn’t jump at the chance of selling something for much more than it was bought for even if doing so could be quite unreasonable? Much of what is called “the economy” is you and me and the rest of us, sadly often unthinking, human beings. It is not all a matter of malice but it is often plain old negligence. And there are consequences. Among those are widespread layoffs and firings.

But don’t blame the managers of firms for this. Sure, they can be more or less sensitive to the situation, handle it crassly or with consideration. But those are relatively minor matters when the major issues is the fact that one’s job is no longer wanted by the potential customers.

Unfortunately, as in so many cases, people blame the messenger, the one who hands out the pink slips, and forget that it is mostly due to potential buyers, like you and me, deciding to withdraw from the market for a while. Such, in some cases rather unfortunately, is economics.

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