Monday, April 09, 2007

Why the outcry?

Shawn asked a great question that deserves a better response; more or less, why is there such an outcry about Circuit City's firing of 3400 workers because they're earning (!!!) about 50 cents more per hour than others? Shouldn't the company be free to hire the cheapest labor possible?

While we can't ignore class envy and populism, I think it goes deeper. First of all, the action is a kick in the teeth of the American dream--work hard, do well, get promoted, get fired. Second, it's likely that Circuit City negotiated--I mean "extorted"--tax breaks from cities to get stores based on the promise of good jobs. If you pay taxes in part so your neighbors can be gainfully employed, the broken promise is another kick in the teeth. (my libertarian tendencies don't support such giveaways, but I can certainly understand why people would be ticked when promises made to get tax breaks aren't kept)

Third, Circuit City's numbers don't add up. They're claiming that the fired earned at least $0.50/hour more than the industry average--multiply that by 3400 employees replaced at lower wages and 2000 hours per year, and you're talking about only about $3 million, not $110-140 million as claimed by the company. Probably the actual number is somewhat higher than $3 million, but the total wages of 3400 employees in this field are less than $110 million, so it's duplicitous (and worthy of outrage) that they chose to misrepresent this.

And finally, all of these incompetent kicks in the teeth from Circuit City executives are more than sufficient evidence that there's a better way to save a few million bucks; fire the executives that developed a business model that didn't work.


Shawn said...

you forgot my expletive, but I'll let it go.

exhibit 1: Circuit City is, I believe, getting its clock cleaned by Best Buy. I don't even think they sell clocks, but they're all spic and span.

exhibit 2: ya gotta do what ya gotta do.

exhibit 3: they're not beholden to keep these people on.

Now...I realize that I'm arguing more against the guy who first told me about this story, who was so mad that CC would do this that he was going to boycott them than I am arguing against your point that this was a bad business decision. It may well be. I don't know enough to determine whether it is or not, but I certainly don't think we have enough of the numbers to do the math to determine wrongdoing. I agree that your display of the numbers doesn't constitute a balanced equation...I'm sure there were more trickerations employed to get that 110-140 number to such alarming heights--but it isn't necessarily duplicitous-fun word by the way-nor worthy of outrage, rather study and question by the stockholders...of which I am not, so I don't really give a damn. Now, I would rather have a competitor to BB than not have one, so if this is a poor business decision, fire the execs, but let's not make this about moral right or wrong. It's not a kick in the teeth to the American dream, it's an unfortunate but necessary part of business.

pentamom said...

But I think it becomes a moral wrong precisely at the point that the numbers don't add up. If you're going to do something that constitutes harm to another person, you need a good reason to do it. "In order to save my business" is a morally legitimate reason. But if you don't have that reason because you're being economically stupid, your morality gets called into question. Sure, "we all make mistakes," but if a bunch of people sitting around writing on a blog can figure it out, then Circuit City has moral culpability if they fail to "figure it out."

Bike Bubba said...

I'm glad for your forgiveness of the expurging of the expletive. :^)

And what "mom of five" says about the duplicity; if actual wage savings are in the $10-20 million range, but they quote a number that exceeds the total wages of all employees affected, that is duplicitous as a bait & switch.

Shawn said...

"a bunch of people sitting around writing on a blog can figure it out" be fair, is that *really* what we've done? Figured it out?

Bike Bubba said...

You bet we can, and it's a simple exercise of arithmetic and logic.

Logic first; if the stated amount is not representative of the actual cost savings, then we must assume a bait & switch deception is in play.

Arithmetic; stated wage differentials are as low as 50 cents per hour, and overall wages are in the $10-15/hour range. Multiply these out, and we find that the savings amount claimed (even before severance is accounted for) far exceeds the overall wages of those fired.

Hence, there is a bait & switch going on.