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Lean May Not Be So Mean


Economic Trends

LEAN MAY NOT BE SO MEAN

Ultimately, restructuring adds jobs

Companies intent on creating value for their shareholders can be tough on their workers. But in the long run, the interests of owners and workers are closer than they might seem, says McKinsey & Co., the New York-based management consultancy. A new study of more than 1,000 companies in six countries by McKinsey argues that over time, a focus on shareholder value actually leads to more jobs. Says Thomas E. Copeland, a director of corporate financial services in New York who is co-author with Brussels-based McKinsey associate Jacques Bughin: "Stronger, leaner companies are able to compete in the world market more effectively, and that ultimately draws jobs back to those companies."

McKinsey contrasted companies in the U.S. and Canada with ones in Continental Europe, which are slower to shed jobs in the name of profits. The authors found that from 1970 to 1990, European companies lost jobs even as their return on investment fell short of their cost of capital. By contrast, the U.S. and Canadian companies increased their worldwide employment while also creating shareholder value.By Peter CoyReturn to top

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SPEAK UP, CENTRAL BANKS

A study says goals should be public

Secrecy is becoming less de rigueur in central-banking circles. A new study published by the Federal Reserve Bank of New York says countries can increase support for fighting inflation by publicizing their targets--something the Federal Reserve itself doesn't do. An announced target for the inflation rate or a related measure "serves as a vehicle to communicate often and clearly with the public and to promote an understanding of what the central bank is trying to achieve," says the study by Frederic S. Mishkin, the New York Fed's outgoing research director, and Adam S. Posen, a research associate at the Institute for International Economics.

The researchers studied Germany, whose central bank has been announcing money-supply and inflation targets for the past two decades, as well as New Zealand, Canada, and Britain, which in recent years have begun announcing multiyear targets for inflation. They concluded that missing a target because of some shock--say, a surge in oil prices--doesn't cause a problem as long as the central bank keeps the public's faith by credibly explaining why it missed.By Peter CoyReturn to top

WHO'S WORKING TWO JOBS?

College grads moonlight a lot

Moonlighting isn't just for lunch-bucket-luggers who need to work extra jobs to make ends meet. Far from it, according to a study in the Labor Dept.'s Monthly Labor Review. Multiple jobholding actually gets more and more common as you move up the education scale, from high school dropouts (3.3%) to PhDs (9.4%). The only major exception to the pattern is people with professional degrees, such as lawyers and physicians. Their rate, 6.5% in 1995, was just above that of high school graduates.

The people with more education probably work extra jobs because their schedule allows it, because their expertise is in demand, or because of financial reasons beyond meeting basic living expenses and paying off debts, says the study's author, Thomas Amirault, who recently left his job as a Labor Dept. economist to enter the private sector. Example: a programmer who designs Web sites at night. Of course, not all of those brainy moonlighters are rich. Some, undoubtedly, are adjunct professors who drive taxis at night. Cutting the data another way--by income level rather than education--shows that the rate of multiple jobholding does decline as income rises. But the difference is slight--from 6.4% in the lowest-income fifth of the population to 5.9% in the highest.By Peter CoyReturn to top


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