This is how the middle class shrinks, not with a bang but a series of whimpers. Jobs that paid a living wage are dropping like dominoes, outsourced to low-wage contractors, forcing workers to do the same tasks for less money or lose their jobs altogether.
The list of companies employing this tactic could fill a phone book, and there's no mystery as to why: Lower costs along the food chain are supposed to increase a firm's competitive edge -- or so the executives say, even as they collect their multimillion-dollar compensation packages. Somehow they never see their own top-heavy salaries as a drag on the bottom line. Too often, their idea of spreading the wealth is squeezing it upward.
As a matter of principle, one can hardly blame any company for pursuing cost-efficiency. But the big question is: To what end? Do the savings translate into better or lower-cost goods and services for consumers? Or do they just make the already rich even richer?
It's a pertinent point in the case of the "nonprofit" medical giant UPMC, which is eliminating its entire department of medical transcriptionists.
There are roughly 130 of them, all women but one. They earn an estimated $12 to $20 an hour depending on speed, accuracy and seniority. The majority work at home, many are in their 50s and 60s with decades of service and no job protection.
On May 15, they were given the news. It was a cost-cutting measure, they were told; expenses were up and reimbursements down. As of July 1, their work was being outsourced to Nuance Transcription Services, an Internet-based provider based in Burlington, Mass.
The good news: Nuance stood ready to hire all of them for the same jobs with the same pool of doctors. The bad news: The pay would be significantly lower. One worker with two dependents said her hourly income would drop from $15 to about $8 at Nuance -- and she's already working another job to meet expenses.
By way of comparison, the living wage in Allegheny County for a family of three is $22 an hour, according to a calculator devised by MIT. (See livingwage.mit.edu.)
Worse, her medical insurance would go from $160 a month to more than $1,000. There would be no severance, because all of them were being offered jobs. The new jobs would begin July 1, but Nuance would pay the higher UPMC rate for the first 90 days. After that, the lower rates would kick in. And they would be "at-will" employees, subject to termination any time for any reason.
The workers had nine days to sign with Nuance. They could apply for unemployment, but with a job on the table they probably wouldn't get it.
Workers said they were blindsided.
"People just sat there and cried," said one. "It was like we didn't matter."
UPMC seems to have lined up its ducks very carefully here. It gets to unload 130 employees with no severance pay and probably no unemployment. True, the deal could keep the jobs local instead of shipping them off to India. But that's to UPMC's advantage -- it gets skilled, experienced workers at half the price.
So it's a win-win for the health giant, which trims its payroll, and Nuance, which gets a new contract. Only the workers get screwed, just as countless others have been across the country. They are the casualties of new technology that makes cheap labor more accessible than ever. It's the way of the world we live in now.
Some people are trying to stanch the bleeding. The Service Employees International Union, for example, is trying to organize workers at UPMC to collectively bargain pay scales, benefits, layoff schedules and severance packages. The health system is doing everything it can to block the effort.
Several transcriptionists spoke to the Post-Gazette but didn't want to be named for fear of hurting their job prospects. Many have signed up with Nuance but are still hoping to find other jobs inside UPMC or elsewhere.
"It just seems there were more employee-friendly ways of eliminating jobs," one said. "When you look at the age group and how long they've been good performers, 90-days notice would have been nice. They could have phased us out to give us time to look for other jobs."
Nobody is saying that UPMC shouldn't look to its bottom line. Its status as a "public charity" is being challenged by the city, but even a public charity -- maybe especially a public charity -- has to run efficiently or its mission will suffer.
Yet we still must ask the big question: To what end is all this cost-cutting?
Lower hospital and doctor bills and more free care for the indigent would at least be a worthy goal. But buying more property and taking it off the tax rolls, running another ad campaign, countersuing the city for alleged violation of the health system's "civil rights" or giving Jeffrey Romoff another raise -- 130 women and one man had to lose their jobs for that?
UPMC does a lot of good in this region but its corporate side is widely disliked. The health system made $948 million in the last fiscal year, according to CBS News, and paid Mr. Romoff almost $6 million, plus $1 million each for about a dozen top execs. Meanwhile, it spends only about 2 percent of its budget on charity care. Next to all that, the transcriptionists are small potatoes.
Multiply this one small instance by a few hundred thousand and you'll know why the middle class is eroding like beachfront in a hurricane. Squeezing people out of work comes at a high cost. Is it really worth it?
Correction/Clarification: (Published June 2, 2013) An earlier version of this column incorrectly stated that UPMC "pays no taxes." Although 86 percent of UPMC's $1.6 billion in real estate holdings in Allegheny County is tax-exempt, UPMC pays taxes on the rest along with business, parking and other taxes. The hospital network says its annual taxes total $200 million.
Also, the column used a figure from a May 30 CBS News report, which said UPMC made $948 million in profit from 2011-2012. UPMC says that its profit was $221 million in the last fiscal year. The Post-Gazette reported last August that UPMC's profit was $351 million.
Sally Kalson is a columnist for the Post-Gazette (firstname.lastname@example.org, 412-263-1610). First Published June 2, 2013 12:00 AM