In 1996, Rep. Bernie Sanders (I-Vt.) teamed up with Republican Rep. Chris Smith of New Jersey to stop the Pentagon from reimbursing defense contractors for merger expenses. Writing in the Los Angeles Times at the time, Sanders warned that these tax-payer financed mergers would add to the more than 2.2 million defense industry workers who had already lost their jobs in the preceding eight years.
Sanders wrote:
[G]overnment should play an important role in our economy and in the creation of decent-paying jobs. However, government money should not be used to eliminate jobs. De facto, taxpayers are unwittingly providing “payoffs for layoffs” via the Pentagon.
Today we need new “No Payoffs for Layoffs” legislation designed to end Wall Street’s incessant war on the working class, a conflict that has destroyed more than 30 million jobs since President Bill Clinton’s re-election in 1996.
Three types of job-killing payoffs go to Wall Street and corporate CEOs.
1. Anti-worker trade deals. Largely designed by corporate elites, these trade agreements allow corporations to shift jobs easily to low-wage areas around the world. The North American Free Trade Agreement (NAFTA) and China’s entry into the World Trade Organization (WTO) made it profitable to eliminate decent paying U.S. jobs, especially unionized manufacturing jobs. It is estimated that more than 5 million manufacturing jobs were lost between 1998 and 2021.
2. Stock buybacks. When companies use their revenues to buy back their own stock, they increase the share price without increasing the value of the company. Before stock buybacks were deregulated in 1982, they were considered a blatant form of stock manipulation—only 2 percent of corporate profits were permitted to go to stock buybacks. In recent years nearly 70 percent of all corporate profits have been used to buy back shares and increase their price.
The payoff from these higher share prices goes primarily to Wall Street financial institutions, especially hedge funds, that buy up shares, demand stock buybacks, and then dump the shares for a quick profit. CEOs, who currently receive nearly 85 percent of their compensation from stock incentives, also benefit directly. The more corporate stock buybacks, the more private wealth for Wall Street and CEOs.
These stock buybacks come at a massive cost for workers. In almost every case a corporate stock buyback is paid for by eliminating jobs. In the third quarter of 2022, Facebook, Google, and Microsoft conducted $28 billion in stock buybacks. The next year, with business booming, they announced 43,000 layoffs.
In almost every case a corporate stock buyback is paid for by eliminating jobs.
3. Leveraged buyouts. The third job killer with a big Wall Street payoff comes from leveraged buyouts. Investment groups, like private equity companies, buy up companies using massive amounts of borrowed money, often 90 percent of the purchase price. They place that debt on the purchased company, not the investment group’s books, dramatically increasing that company’s debt service payments. To raise money to make those payments, mass layoffs inevitably follow. A classic example is Elon Musk’s purchase of Twitter using billions in borrowed funds. Twitter’s debt service increased twenty-fold, from $50 million per year to $1 billion. Nearly half the Twitter staff was let go to make ends meet.
No Taxpayer Money to Corporations That Lay Off Taxpayers
Back in 1996, Sanders was correct in focusing on federal contracts to prevent mass layoffs. Today, we taxpayers fund nearly $700 billion a year in federal contracts. Our money should not be used to lay us off. The following simple clause should be added to every federal contract involving 50 or more employees:
“During the life of this contract, there will be no compulsory layoffs and no stock buybacks. Any layoff must be voluntary.”
If a corporation believes this stipulation violates their freedom to hire and fire workers at will, they are free to not bid on the contract. Other corporations surely will abide by this simple clause. If they want to lay off workers, they will have to entice them to leave voluntarily with ample severance and benefit packages. Corporations will have plenty of cash to make these settlements because they won’t be permitted to squander it on stock buybacks.
Put It in the Democratic Party Platform
The Democrats are rightfully concerned about losing working-class voters. My new book, Wall Street’s War on Workers, conclusively shows that as the mass layoff rate goes up, the Democratic presidential vote goes down, especially in the rural counties of Michigan, Pennsylvania, and Wisconsin. The Democrats could begin to rectify this vexing problem by putting the “No Payoffs for Mass Layoffs” plank in their 2024 platform. This would help Senator Sanders, and others like Ohio Senator Sherrod Brown and Massachusetts Senator Elizabeth Warren, to move the federal contract rule forward.
Build a New Labor Formation
While I’m tossing out unsolicited advice, here’s some for the labor movement. Right now, there’s an upsurge in support for labor unions. Leaders like Shawn Fain, president of the United Auto Workers, and Sara Nelson, international president of the Association of Flight Attendants-CWA, are speaking out on behalf of the working class with loud clear voices. When Fain says, “Billionaires shouldn’t exist,” workers are listening.
The Democrats could begin to rectify this vexing problem by putting the “No Payoffs for Mass Layoffs” plank in their 2024 platform.
Given the state of our weakened labor laws, however, only six percent of the private sector is unionized, down from more than 30 percent in 1960. To reach the 94 percent of non-unionized private workers we can’t only rely on traditional one-workplace-at-a-time organizing, especially under current time-consuming, corporate-oriented labor laws. We need a new kind of political organization, one that focuses directly on mass layoffs. How about Nelson and Fain coming together with others to form Workers United Against Mass Layoffs?
Let’s imagine for a moment that such an organization offered membership to anyone concerned about mass layoffs and job security. Funded by labor unions and a small membership dues, it could do the following:
- Investigate the origins of layoffs and expose the role that stock buybacks and private equity/hedge fund machinations play.
- Determine whether companies that are receiving public funds, either through state/federal subsidies or contracts, are laying off workers and demanding that they stop.
- Organize pickets and publicize how a mass layoff is likely to cause great harm to workers, their families, and their communities.
- Form a legal team to file headline-grabbing motions to enjoin companies receiving public subsidies from conducting mass layoffs.
- Use the publicity from these interventions to get a plank in the Democratic Party platform calling for “No Payoffs for Layoffs.”
There’s a very good chance that unorganized workers would come running. They need a voice. They need advocates. They need a way to connect with organized labor and with political leaders like Sanders, Brown, and Warren.
Now is the time to help working people fight for decent and stable jobs. No Payoffs for Layoffs was a fair and just demand when Sanders first introduced it in 1996. It is even more so today.
