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The headlines are ablaze this morning perpetuating a rumor that RBS (LSE:RBS) will announce next Thursday (27 February) that it will be slashing 30,000 jobs. I initially ignored the hype as a basis for a story today for three reasons:
- It’s still only a rumor
- The rumor is spreading like wildfire
- I’ve got one eye on RBS and the other on the FTSE to see if today is the day it breaks 6840 at the closing of business. It peaked at 6859 in morning trading before falling back to 6812 around 10:30 GMT. The index rebounded to 6838 at 2:25 pm before backing off a few minutes later to 6824. As at 3:15 pm it has risen again to 6832. Although it is still possible, it seems unlikely it will cross the finish line to win the gold medal today.
I decided to write about RBS, however, because
- I don’t like rumors.
- Where there is smoke there is fire.
- I don’t believe that slaughtering the innocents is the way to cure problems created by others.
- The FTSE peaked at 6859 in morning trading before falling back to 6812 around 10:30 GMT. The index rebounded to 6838 at 2:25 pm before backing off a few minutes later to 6824. As at 3:15 pm it has risen again to 6832. Although it is still possible, it seems unlikely it will cross the finish line to win the gold medal today.
Rumor Has It
The initial rumor, as it was published, did not contain any substantive information to support the claim. Essentially, the “news” was that 30,000 jobs are to be eliminated. I don’t see that figure in terms of jobs. I see it as 30,000 people unemployed in a virtually non-existent job market. I see it as 30,000 families wondering how they are going to pay the rent and feed themselves.
Regardless of the number, I contend that it is morally wrong to punish innocent people for the sins of their “fathers,” especially when those “fathers” are raking in obscene salaries and bonuses despite their, so-far, unsuccessful attempts to change their own ways or to clean up the mess left by their equally well paid predecessors.
A Dose of Reality
It is likely true that there will be a large, if not massive, work force reduction – yet another euphemism for thousands of people out of work. However, the actual number of unemployed will probably be much less. Here’s the reason why:
18,000 of those jobs will be gone as a result of the sale of its U.S. banking operation, Citizens Financial Group. Although those will be eliminated jobs as far as RBS is concerned, it will not mean a loss of jobs as far as those employees are concerned. That being true, the total number is reduced to 12,000.
There are another 4,500 employees currently working at Williams & Glynn, which RBS must spin off as an original condition of its government bailout. Again, for RBS, those are eliminated jobs, but there is no job loss as far as the employees are concerned. That reduces the total number from 12,000 to 7,500.
That leaves 7,500 people facing unemployment. While not good news for the 7,500, it is a far cry from 30,000. And there remains yet one additional factor to consider. I have yet to see a time frame for the disposition of those 7,500 jobs. I seriously doubt that it will come all at one or even begin to happen in the immediate future.
As distasteful as job cuts are, they are a bit more palatable when they are relatively minor and spread over time. Many of those can be handled by attrition.
Ultimately, the slaughter of the innocents is at best a most amoral way to enable a dysfunctional institution to continue to survive without substantial change.
