Phase out the 401K

There is a post in the NY Times today about the way companies that layoff their workers and replace them with H1B visa holders also require those workers to keep their mouths shut about what is going on.

The non-disparagement clauses might be partially responsible for the conventional wisdom that we need more STEM graduates when clearly we don’t. Long time readers of this blog know that I and my colleagues were laid off in NJ when our site closed. In fact, New Jersey, Connecticut, New York, Maryland, Delaware and Pennsylvania, the Northeast Corridor, laid off hundreds of thousands of invaluable researchers and replaced them with… nothing. In some cases, brand new research facilities, some built for very specific studies that cost millions of dollars to build, were mothballed or even destroyed.

That’s right, it made more sense to the bottom line to destroy valuable lab space than keep the facilities with the upkeep, maintenance and taxes on the books. The people? What about them? It’s interesting to me that the braintrusts who decided to lay off all those scientists and planned to rent out the buildings to new start ups had a hard time finding renters. Who did they think they were going to rent to? The same scientists who were laid off didn’t have the funds for the start ups that were meant to replace the large corporate labs. They were too stressed trying to find any work in any state while keeping their families in the expensive northeast and mortgaged houses out of foreclosure. So, the “rent the labspace to the old labrats” scheme turned out to be a bust and now the buildings have to come down.

There are a couple of states that benefitted from the destruction of the research industry. Those would be Massachusetts and California. The business models were changed from small molecule research to biologicals. But number of jobs created is small. Only a tiny fraction of those laid off were invited to go to Cambridge. Medicinal chemistry in this country is decimated. Compounds can be made very cheaply in India. There’s still research in graduate school labs but it does not begin to make up for what has been lost.

It’s not like there’s not enough biology to research and anyone in the research industry knows that training is not the problem. These are some of the most highly trained people in the world who have to continue reading the latest papers to keep up. Soooo, that’s not it.

What could be driving the frenzy to dismantle the country’s research industry? Hmmm, what could it be, what could it be.

Well, in some companies, the decision to close the site was followed a few days later by an email to all employees from the finance department that congratulated itself on reducing costs and creating a nice quarterly profit. Sort of a “You who are about to die, we salute you!” email.

When they say it’s not about money, it’s about money.

Working Americans have been forced to participate in their own destruction through the 401K. We invest in funds that are rewarded when companies merge, consolidate and layoff. Companies are sold like baseball cards, drained of their assets and left as hollow shells of what they used to be. Research is expensive. Paying for experience is expensive. Better to ship that out if you can, hire only short term contractors, buy up companies with a promising drug lead and lay off their early research staff.

In the meantime, the portfolios will grow and now the masters of the financial universe have brought us into the game, some of us unwillingly. We are now complicit, watching the quarterly earnings reports and demanding more shareholder value. Because there are no pensions in our old age. This is how we make our money- on the backs of our fellow Americans.

And let us now turn our attention to the H1B visa holders who unfortunately have no rights here. If they lose their jobs, they can be sent back to their home countries. It doesn’t matter if they have lives, relationships or property here. Those are risky luxuries. And it doesn’t help that these people may eventually get green cards. Some green cards are so narrowly tailored so as to make getting a new job after a layoff very difficult for the bearer.

It’s all because of the vast amounts of money that used to be tied up in safe, boring but reliable pensions that are now splashing around the world like colored scrip in a global game of Life. The greed of the financiers and titans of industry is gargantuan. The analysts who work for them on Wall Street are incentivized to accumulate as much wealth as possible, with as much risk as possible in as short a time as possible. If they lose money, the government will cover it or some stupid firefighter will take the hit. It’s their fault if they didn’t go to Harvard and make the right connections.

The 401K is at the heart of everything that is wrong with the current economic system. It encourages risk taking, it incentivizes avarice, it propels the short term investment cycle, it causes the outsourcing, it destroys industries and it is now starting to affect productivity. Because when you sacrifice your talent for youth and low wages, and then force everyone to account for every billable minute, you force the workforce to reinvent the wheel and cause anxiety and distraction in the offices with endless paperwork and minute swapping.

Phase it out. Get rid of the pyramid scheme. Disincentivize short term investment and greed. If we don’t tackle the 401K, all the unions in the world won’t make a dent. There will be no need for them when we are all independent contractors in the gig economy looking over our shoulders for the next layoff and becoming more angry by the minute.

This is the legacy of the last eight years when no bankers were held responsible and no hearings were conducted to ferret out the root causes of so much risk and destruction while the companies held revolvers to the heads of their laid off staff and told them to not say a word about what was happening to them. Funny, the CEOs don’t have any problem telling the researchers what they think of them and how expendable and exploitable they are.

It’s about the money. The 401K fuels the Gig Economy. It’s the Gig Economy, Stupid that’s undermining the middle class, causing income instability, family instability and a drag on spending. Get rid of it.