In mid-December I wrote about ArcelorMittal’s mass redundancy. Some of the points are worth restating at length, because the same issues have resurfaced, and others have come to the fore.
“Was ArcelorMittal heartless to send home hundreds of workers just before Christmas? The families of the workers unsure about their jobs may not like to hear this, but the company made, what was in business terms, a rational decision. The plant was idle, the wage bill was active, and the steel industry is in trouble worldwide. ArcelorMittal shareholders would have seen it as malpractice to have done otherwise.
“That said, the human cost of their big decision ought to come out too. We should always remember to strike the balance between that, and a business acting rationally.” That was in the Sunday Guardian of December 13, 2015. Today, the questions are as relevant as ever.
Even in developed markets, reports of this nature often see big business as being inherently uncaring actors. We can and do empathise with workers out of jobs in a recession— it could be us, it could be our families similarly affected, and we’d find it very hard. However, it is also instructive to examine whether a business is acting rationally, and making sound financial decisions. ArcelorMittal did, and did. Reference their recent annual reports, and global trends in the market for steel.
Seven hundred jobs is big and consequential in an economy the size of T&T’s. Worse, it’s concentrated. The fallout from hardship in the energy and steel sectors are being felt most keenly in the south.
How bad is the north/south skew? How are other business that rely on the custom of these workers coping? We should keep a big part of the focus on the people behind the statistics, which we have begun to do. How are they going to cope? Besides one month’s pay, are there other elements in their package? What role can the state play, should the state play? How strong is T&T’s social safety net?
We also have to ask tough questions of a government that came into office determined to downplay the effects on jobs of a significant contraction of the economy. The Prime Minister’s address to the nation just before the New Year sought to convince us, for example, that we can cut the fat in our public sector simply though spending efficiencies.
It is unlikely that the economic and financial re-calibration of the economy that we need to undertake can be accomplished without painful—and politically courageous—job cuts. The private sector doesn’t have to make political calculations. It’s why the apparent surprise at ArcelorMittal’s actions is surprising. It’s not as if they didn’t telegraph their intentions in December.
The Government’s reaction to ArcelorMittal’s actions was that it was disrespectful, and they had not been properly consulted. There are some obvious questions and inconsistencies about why the level of engagement between the Government and a key investor wasn’t better, which we’ll be exploring.
Rational business decision or not Arcelor Mittal has corporate social responsibilities, and questions to answer. Besides those asked by the Government and the unions, did all the jobs have to go at once? Could they have better prepared their workforce for the bad news? And what budgetary provisions were made for financial mitigation of the effects on the workers? More broadly, shouldn’t our economic modelling be identifying the vulnerabilities and getting ahead of key actors?
In time-tested business practice, they are always going to act in their financial best interests.