The stock prices of 17 of the 22 firms rose or stayed the same the day of the announced layoffs. In only five cases did the stock price fall and, in two of these cases, Wall Street analysts stated that the fall was because the announced job cuts were les s than desired. The CEOs of the 22 top job-cutting firms in 1995 held a combined total of over 22 million stock options in their firms. A careful study of the relationship between corporate layoffs and the enrichment of corporate executives offers another insight into the growing disconnect between the interests of Wall Street and those of ordinary Americans. As corporate profits skyrock et in an age of global economic opportunities for firms, real wages of U.S. workers stagnate, inequality rises and an alarming number of large firms continue to lay off full-time workers.
Layoffs are a plague to communities and workers alike.
Communities find their tax base destroyed, and local businesses suffer from the diminished purchasing power of u nemployed workers. A survey by the American Management Association indicates that layoffs can be harmful to corporations as well. Of firms that downsized during the 1989-1994 period, only about half reported an increase in profits, while 86 percent saw a decline in employee morale. Nevertheless, Wall Street's reaction is invariably gleeful. Downsizing is seen as a bold move to reduce costs and enhance competitiveness.