More on Job Destruction

Last July, I wrote about the nuttiness of the American Jobs Creation Act, a one-time tax break for companies bringing overseas profits back to the U.S. (the tax rate on such earnings drops from about 38% to about 5%). Michelle Leder at Slate just wrote about the subject, calling it an “absurd provision of a law designed to create jobs.”

It’s a good piece, but she makes a “numbers in a vacuum” argument about Pfizer, which leads me to wonder if she’s not being fair toward the other companies, which are in fields that I don’t cover. She writes,

At Pfizer, the pharmaceutical giant that announced the single largest repatriation—$37 billion—the one-time windfall works out to approximately $11 billion. That kind of tax savings buys a lot of $600-an-hour lobbyists, though not, apparently, many scientists and salespeople. In its annual report, Pfizer doesn’t list employees by region. But the company’s total head count dropped to 106,000 at the end of 2005, about 8 percent fewer jobs than at the end of 2004.

Thing is, those layoffs weren’t at all related to Pfizer’s overseas profits. They were a result of Pfizer acquiring Pharmacia and Warner-Lambert, along with a raft of smaller companies. Those acquisitions basically guaranteed layoffs in the thousands; this is what’s known as “generating efficiencies by combining operations.” So those layoffs were in the works long before the AJCA was passed in 2004.

Now, you can argue that the acquisitions were foolhardy or unlucky (especially the Pharmacia one, which pivoted on the Celebrex/Bextra franchise), but complaining that the company should have kept ‘redundant’ employees on because it had this one-time tax refund coming is flat-out stupid.

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