Friday, January 6, 1995 - Page updated at 12:00 AM

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Letters To The Editor

Profits And Layoffs -- Retaining Unneeded Workers Is Fiscal Folly For Businesses

Richard Reeves, in his Dec. 29 column, sings another verse in a tired song: fat cat CEOs screw John Q. Public when workers get laid off from companies enjoying record profits while top executives get huge raises.

His implied point is, apparently, that some or all of the record profits and executive raises should instead be used to retain the laid-off workers. Such behavior would be neither wise nor kind. Workers are laid off because they are no longer needed. Retaining unneeded workers is fiscal folly, a subsidy that comes at the expense of the remaining workers, company stockholders, and all who buy its products.

Like most of the economically untrained, Reeves fails to see the big picture. He fails to see the laid-off workers as a freed resource that can be used for more productive endeavors. He fails to see the goods and services produced by them. He fails to see the companies able to exist or expand because there is affordable labor for hire. He fails to see the greater efficiency of the companies that laid off the surplus workers, and the greater efficiency of our whole economy that results when people are employed because their work is valuable, not because a manager would feel bad about laying them off.

Companies do not exist to give people paychecks. They do not exist to give CEOs unearned bonuses. They exist to provide goods and services to people as efficiently as possible. They exist only as long as they do so.

I've been laid off, and I'll grant you it's no day at the beach. But like leaving a warm bed on a cold morning, it is a temporary discomfort that must be endured to achieve a better world. Liquid labor and liquid capital are necessary for a dynamic economy. The alternative, socialist stagnation, is much less appealing than occasional unemployment.

As for those huge executive bonuses, there is no point in questioning the pay of people working for private enterprises. Apparently the people signing the checks think they're getting their money's worth. I don't happen to think Ken Griffey Jr. is worth what he makes, but as long as his employers do, that's all that matters. It's not my money and it's not yours. Companies that spend unwisely cease to exist; irresponsibility is self-correcting.

Mr. Reeves wrote that the average American CEO makes 149 times what the average American factory worker makes. Reeves assumes this is self-evidently bad. All it means is that the average American CEO is WORTH 149 times as much as the average American factory worker, hence the pay discrepancy.

If a factory worker wants a CEO salary, he's free to try to become one. If Reeves or anyone else thinks he can offer a better value to American companies, they should submit their resumes. Judging from the market price, CEOs who can lead companies to record profits are in demand. William E. Muse Seattle

Copyright (c) 1995 Seattle Times Company, All Rights Reserved.


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