In a business climate fraught with constant change, corporate
layoffs have become a common business practice. For many
corporations, outsourcing business functions is more cost-effective
than handling them internally. At the same time, new technology is
allowing big business to replace bodies with machines, robbing
workers of their jobs. And with the bottom line often the top
priority, profit-driven job cuts are now in vogue.
As more workers continue to fall off the corporate ladder, many
displaced executives are discovering only one way to land on their
feet: become an entrepreneur. Challenger, Gray & Christmas, a
Chicago-based corporate outplacement company, estimates the number
of layoff victims who have turned to entrepreneurship has roughly
doubled in just two years, ballooning from 6 percent to 8 percent
in 1993 to 12 percent to 15 percent in 1995.
While the rate of layoffs slowed between 1993 and 1994,
economists acknowledge layoffs are still continuing at a much
higher pace than was the case a decade ago-and there's even
been a slight acceleration in layoffs in recent months. Overall,
economists believe not only is this phenomenon likely to continue,
but also that, in part, its effects will be more far-reaching than
in years past.
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"What is different about the last few years is that job
instability is creeping up the ladder," says Robert Solow,
professor of economics at Massachusetts Institute of Technology
(MIT) in Cambridge. "It's moving from blue-collar and
clerical workers to include managerial people and even some
technical people."
What's also unsettling about today's round of cutbacks,
say economists, is that unlike the series of layoffs in the 1980s,
which was largely concentrated in the automotive, steel and rubber
industries, '90s-style layoffs are occurring in industries
across the board.
"What's going on now is that it's happening more
broadly and more frequently," explains Ken Goldstein, an
economist at The Conference Board, a New York City economic
research firm. The reason? "There's more emphasis on
achieving and maintaining a competitive edge in a globally
connected and intensely competitive environment."
Economists agree cutbacks will continue in industries facing
stiff international competition or deregulation, or undergoing
rapid change. They point to such fields as telecommunications,
computers, insurance and banking as particularly vulnerable.
A spate of mergers in recent months is feeding the trend as
well. According to Challenger, Gray & Christmas, a whopping
$866 billion worth of mergers took place in the United States last
year, setting a new record; these mergers resulted in more than
72,000 layoffs. And there's no sign of any slowing: By the
first quarter of this year, there had already been $208 billion in
mergers.
Take all these factors into consideration, says Goldstein, and
this unstable business climate is here to stay well into the
foreseeable future. "The competition big business faces today
isn't going to get any better in the next five or 10
years," he contends. "If anything, it'll get even
more intense. The very factors that drove [corporations] to do what
they did in the early '90s will still be there [in the future].
Not only are things unlikely to change in the next five or 10
years; they're not likely to change in the next 50."
That's hard news to swallow for many corporate employees-but
news that must be accepted nonetheless. "I think the general
public still has the sense that once this [layoff trend] is over,
it'll all go back to normal," says Dixie Darr, editor and
publisher of The Accidental Entrepreneur, a Denver-based
newsletter for downsized-execs-turned-entrepreneurs. "But
today, this is business as usual. There's just a lot of change
going on, and it's going to continue."
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