[Senate Hearing 107-186]
[From the U.S. Government Publishing Office]
S. Hrg. 107-186
EXAMINING MINNESOTA'S ECONOMY AFTER SEPTEMBER 11TH: STRATEGIES FOR
WORKFORCE AND BUSINESS RECOVERY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON EMPLOYMENT, SAFETY, AND TRAINING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
ON
EXAMINING MINNESOTA'S ECONOMY AFTER SEPTEMBER 11TH: STRATEGIES FOR
WORKFORCE AND BUSINESS RECOVERY
__________
OCTOBER 8, 2001 (BLOOMINGTON, MN)
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
_______
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76-255 WASHINGTON : 2002
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
JAMES M. JEFFORDS, Vermont, Chairman
JUDD GREGG, New Hampshire EDWARD M. KENNEDY, Massachusetts
BILL FRIST, Tennessee CHRISTOPHER J. DODD, Connecticut
MICHAEL B. ENZI, Wyoming TOM HARKIN, Iowa
TIM HUTCHINSON, Arkansas BARBARA A. MIKULSKI, Maryland
JOHN W. WARNER, Virginia JEFF BINGAMAN, New Mexico
CHRISTOPHER S. BOND, Missouri PAUL D. WELLSTONE, Minnesota
PAT ROBERTS, Kansas PATTY MURRAY, Washington
SUSAN M. COLLINS, Maine JACK REED, Rhode Island
JEFF SESSIONS, Alabama JOHN EDWARDS, North Carolina
HILLARY RODHAM CLINTON, New York
Mark E. Powden, Staff Director
J. Michael Myers, Minority Staff Director and Chief Counsel
______
Subcommittee on Employment, Safety, and Training
MICHAEL B. ENZI, Chairman
JAMES M. JEFFORDS, Vermont PAUL D. WELLSTONE, Minnesota
JUDD GREGG, New Hampshire EDWARD M. KENNEDY, Massachusetts
JEFF SESSIONS, Alabama CHRISTOPHER J. DODD, Connecticut
(Ex Officio) TOM HARKIN, Iowa
Raissa H. Geary, Staff Director
Margery F. Baker, Minority Staff Director
(ii)
C O N T E N T S
__________
STATEMENTS
Monday, October 8, 2001
Page
Doering, Kelly, President of E-Travel Experts, Eden Prairie, MN;
Roxanne Leake, former reservation agent, Northwest Airlines,
Minneapolis, MN; George Logan III, CEO/President of G. Logan &
Sons Hauling, Inc., St. Paul, MN; Cheryl Dusek, IT project
manager, Northwest Airlines, Minneapolis, MN; and Hydra Juhor,
food production worker, LSG SkyChefs, Minneapolis, MN.......... 3
Rykunyk, Jaye, Hotel Employees and Restaurant Employees Local
Union No. 17; David Olson, President, Minnesota Chamber of
Commerce; Ray Waldron, President, Minnesota AFL-CIO; Brad
Anderson, Vice Chairman, President and Chief Operating Officer
of Best Buy Co., and Marilyn Carlson Nelson, Chair and Chief
Executive Officer of Carlson Companies, Inc., Minnetonka, MN... 17
Stinson, Thomas F., Minnesota's State Economist, and associate
professor, Department of Applied Economics, University of
Minnesota; and Sung Won Sohn, Executive Vice President and
Chief Economist, Wells Fargo Co., Minneapolis, MN.............. 29
ADDITIONAL MATERIAL
Articles, publications, letters, etc.:
Kelly Doering................................................ 41
Roxanne Leake................................................ 42
George A. Logan III.......................................... 42
Cheryl Dusek................................................. 43
Hydra Juhor.................................................. 45
Jaye Rykunyk................................................. 45
David C. Olson............................................... 47
Ray Waldron.................................................. 48
Brad Anderson................................................ 49
Marilyn Carlson Nelson....................................... 51
Thomas F. Stinson............................................ 55
Sung Won Sohn................................................ 57
Mark McClain................................................. 59
Carlson Wagonlit Travel...................................... 60
Carlson Leisure Group........................................ 60
Jim Callaghan................................................ 61
Gordon Aanerud............................................... 61
Thomas E. Parrow Jr.......................................... 62
Barbara J. Muesing........................................... 62
Lara Prieve.................................................. 63
Joseph Wellcome.............................................. 63
(iii)
EXAMINING MINNESOTA'S ECONOMY AFTER SEPTEMBER 11TH: STRATEGIES FOR
WORKFORCE AND BUSINESS RECOVERY
----------
MONDAY, OCTOBER 8, 2001
U.S. Senate,
Subcommittee on Employment, Safety, and Training,
of the Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:07 a.m., at
the Thunderbird Hotel, 2201 East 78th Street, Bloomington, MN,
Hon. Paul Wellstone presiding.
Present: Senator Wellstone and Dayton.
Senator Wellstone. The hearing will come to order. This
formal field hearing will come to order, and we will all stand
for the presentation of the Color Guard by the VFW Post 1350
from North St. Paul.
Let me first of all welcome all to this Senate Subcommittee
on Employment Safety and Training. I want to welcome my
colleagues, Senator Dayton and Congressman Ramstad and
Congressman Sabo and Congressman Oberstar.
I would like to just do a little bit of housekeeping, and
all of us are going to be very brief in our formal statements,
because this is, I think for me, perhaps the most serious
hearing I have ever had in our State of Minnesota, not only
because of the challenges in Afghanistan and abroad, and not
only because of some of the very important considerations of
the security of our own country, but because of the whole
question of economic security for Minnesotans and what we need
to do for people in our State and our country to get this
economy going.
Let me first of all introduce some elected officials that
are here. I am just going to read some people's names off.
Senator Jane Krentz, Senator Don Betzold. Senator Sheila
Kiscaden. Senator John Hottinger. Representative Mark Gleason.
Representative Karen Clark. Representative Joe Mullery,
Representative Morris Walrick, Representative Betty Folliard,
Representative Tony Sertich. Representative Wes Skoglund,
Former State Rep Todd Otis, Minneapolis Council Member Barret
Lane. Minneapolis Council Member Sandy Colvin Roy, and we are
also joined by Ed Daum, who is District Director of SBA.
Now, I would say to colleagues, there may be other
representatives and senators who are not here, and if you are,
please make sure we get your name, so we can recognize you.
Senator Twyla Ring is here, as well. I am trying to read my--
Senator Dayton's writing. [Laughter.]
But could we please give a round of applause for all of the
officials who have come a long way. [Applause.]
As I said, we will be brief, and each of us have important
roles in this hearing. This is a hearing of the Senate
Subcommittee on Employment, Safety, and Training, and I want to
welcome my colleagues, and I want to thank all Minnesotans for
being here.
I have to say this: It is with mixed emotions that I chair
this hearing. On the one hand, the civic spirit and the sense
of community that brings everybody here together--and I want to
recognize that we have high school students from Burnsville
Senior High, from Minneapolis South High, and from Bloomington
Jefferson High, as well. It really moves me. This is the best
of Minnesota. [Applause.] Why don't the students please stand
up. Thank you for being here.
On the other hand, this is beyond sad. This is really
tragic to see the economic pain of so many working families, so
many small business people in our State of Minnesota, and that
is what brings us together, as well. I have said more than once
that to me it is different now shaking hands with people. I
find so often that the handshake now in Minnesota is people
reaching out with their hand and saying, ``Please help me.''
That is why all of us are here, and I want to point out that we
want to talk about recognition. We were talking among
ourselves. This is a bipartisan hearing, we are committed to
working together, and I think all of us as Democrats would like
to give special acknowledgment to just an outstanding
Congressman, Congressman Jim Ramstad. [Applause.]
We know about the 4,500 workers that have been laid off
from Northwest Airlines. Let me just simply say that there is a
ripple effect throughout our economy. As we all well know,
Minnesota is also an important destination for the entire
world, and there is the tourism industry, and we are really
being hard hit, and we are going to hear about that, as well.
We cannot forget northern Minnesota, the timber industry
and the taconite industry. We cannot forget the farm economy.
We cannot forget Greater Minnesota, and there will be a strong
emphasis on that, as well. We will focus on larger businesses,
but we will focus on smaller businesses, and we cannot forget
the smaller businesses that create a lot of the jobs. There
will be testimony from business, and testimony from labor. We
come together as Minnesotans very unified in our determination
to find out all of the problems that we are faced with, and
also to act. From Ada to Zumbrota, Minnesota is facing a huge
economic challenge, and the whole focus of this hearing is to
hear from Minnesota, a broad section of Minnesota, to do what
is economically sound.
For my own part, I think it is critically important to put
purchasing power back in the pockets of working families. I
mean, I have been pushing hard on an economic stimulus package
in the Senate. Senator Dayton has, my colleagues have. I will
not spend a lot of time on that now because people will
testify. I want simply to say that it is time for all of us to
roll up our sleeves, and clearly, before this Congress
adjourns, we must pass an economic stimulus package that will
provide the help to people who are flat on their back, and make
sure that families are able to do all right, and make sure that
working people are able to have the purchasing power, and make
sure we give this economy the stimulus that it needs. That is
the work that we must do, and that is what this hearing is
about.
Thank you, and now I hand this over to Senator Dayton.
Rebecca Yanisch is also here, who is Commissioner of Trade and
Economic Development, and I want to give her special
recognition. She came to Washington, DC, last week, testified
before our full committee, said that conceivably Minnesota
could see as many as 20,000 men and women unemployed. It was
powerful testimony. I would like to acknowledge Rebecca
Yanisch. Thank you. [Applause.]
Senator Dayton. Thank you, Mr. Chairman. I am used to
referring to the committee conveners as--or Madam Chairman at
the Senate. But being hundredth in seniority, I am not used to
sitting next to the chairman of the committee. I am usually
down in the next time zone, down at the other end of the table.
[Laughter.] But welcome to everybody here. I want to get on to
hear from the panelists. It will be my privilege to introduce
this first panel. We have really outstanding testimony for the
time here.
I agree with everything Senator Wellstone said, and I want
to especially thank him for convening this hearing and giving
me a chance to participate. I look forward to the testimony.
Well, I am going to do them here in order of their remarks.
And our first panelist is Kelly Doering, who is the president
of E-Travel Experts. Kelly is the president of this very
profitable and privately held start-up company, founded in
1997. E-Travel Experts provide a broad range of service and
technical support functions to on-line airline web sites and
on-line travel web sites, including NWA.Com and Orbitz.Com. The
company has grown from five employees to over 200 in less than
4 years. Since September 11, 2001, however, their revenues are
down 50 percent.
Ms. Doering, welcome.
STATEMENTS OF KELLY DOERING, PRESIDENT OF E-TRAVEL EXPERTS,
EDEN PRAIRIE, MN; ROXANNE LEAKE, FORMER RESERVATION AGENT,
NORTHWEST AIRLINES, MINNEAPOLIS, MN; GEORGE LOGAN III, CEO/
PRESIDENT OF G. LOGAN & SONS HAULING, INC., ST. PAUL, MN;
CHERYL DUSEK, IT PROJECT MANAGER, NORTHWEST AIRLINES,
MINNEAPOLIS, MN; AND HYDRA JUHOR, FOOD PRODUCTION WORKER, LSG
SKYCHEFS, MINNEAPOLIS, MN.
Ms. Doering. Thank you. Thank you for allowing me to
present today. I appreciate the opportunity to come and speak
today. There are three things that I would really like to
emphasize.
Senator Wellstone. Can you hear?
Audience. No.
Ms. Doering. OK. There are three things I would like to
emphasize today since the tragedy of September 11th. Our on-
line sales, as the Senator has mentioned, have dropped 50
percent. Our revenues are tied to airline ticket volumes. We
support the Northwest Airlines web site from a technical
standpoint, and Orbitz, as well. So as the airline industry is
impacted, so are we. But one of the important things about the
airline industry is that the on-line sales are a very cost-
effective way for them to sell, service, and distribute
tickets, and it is a growing area, as people become more
Internet-savvy. And as part of that, when that is impacted,
then we are impacted as well.
The other thing is that with our company having grown so
much, we have brought jobs to Minnesota, and we intend to
continue growing and creating jobs in Minnesota. For example,
down in Mankato, southern Minnesota, we brought 130 jobs in
just this year. And we intend to double or triple in size over
the course of the next year.
However, since September 11th, the uncertainty in the
industry makes us not sure about that growth, about our ability
to grow. So with that, in trying to bring in new jobs, we have
opted to participate in some of the programs, training programs
that Minnesota has, the Minnesota Jobs Skills Partnership, and
possibly looking at Operation Green-Thumb. We wanted to be able
to train our people. However, if we cannot hire people, we
certainly cannot train them. So that is really part of the risk
that we are experiencing right now.
With that, our revenues, for example--I will give you an
example of what is going on in the industry. In August, between
Northwest and Orbitz, the on-line ticket sales were about half
a million, and it has dropped dramatically since September. We
have lost probably about half a million dollars in revenue. Our
workload, however, is still high, and our costs are still at
100 percent, so it is a direct impact to our company.
Fortunately, we have not had to lay off any people. However,
the workload is high for our existing staff, so hiring may be a
little slower.
So, in conclusion, I just want to say that we appreciate
the support that you have given to the airline industry, and we
hope that you can continue to provide some of the economic
stimulus and support of the industry. And we need to get people
back on the planes and flying again.
Thank you.
[The prepared statement of Ms. Doering may be found in
additional material.]
Senator Dayton. Thank you.
Our next presenter is Roxanne Leake, former reservations
agent from Northwest Airlines. Welcome. Roxanne is the mother
of four young boys, and joined Northwest Airlines 5 months ago,
and was on probationary status as a new employee. On September
22nd, she was laid off. And then on September 24th, she, along
with many other probationary reservations agents, was
terminated as a result of the September 11th attacks. She was
and still is very proud of working at Northwest Airlines.
Roxanne just wants to go back to work.
We are glad you are here. Thank you.
Ms. Leake. Thank you. I am honored to be here today. I
would like to tell the Burnsville students that I am very, very
proud that they are here. I used to work at Burnsville High
School and had other positions in the Burnsville School
District, so I am really impressed and very proud that you are
here.
As I was introduced, my name is Roxanne Leake, and I am
married to my husband, Don, for almost 11 years. We have four
wonderful sons. The one thing I would like to share with you is
that two of my four children are children with special needs,
and so it is very important to us as a family to have a second
income, which I don't consider a second income. I consider it a
first with a first.
I would like to express to you today the commitment
required to be a Northwest Airlines employee, the enjoyment of
my job, my role during the crisis, and how Northwest Airlines
terminated my employment. I would like to say that I am here as
one voice speaking on behalf of many Northwest Airlines
employees on the effects of the September 11th attack on the
United States of America.
As with any company, qualifying for employment requires an
interviewing, screening, and training process. Because of the
unique employment position at Northwest, the process is more
in-depth than for most other entry-level employees. Each
individual must qualify for each level within the process.
Having successfully completed the interview process, I was
subject to a criminal background check and drug screening. At
this point, I was offered a position, which I accepted, and
began my training. The training was 4 weeks, very intense, that
placed a significant strain on my family's financial stability.
Our wages for training were only 60 percent of the entry-level
wage. Thus I was earning $6.36 an hour. As a family, it was
decided to commit our resources to support my training and the
cost involved, because our family supports each person when an
opportunity presents itself.
Upon completion of my training, I began my probationary
employment as a reservation sales agent. The probationary
period is 4 to 6 months, depending upon your status, whether
full time or part time. I loved going to work every day at
Northwest, something most people cannot say about their job.
The people I worked with directly tipped the scales in regards
to their service, enthusiasm, dedication to the company, each
other, and the public at large. The reservation agents took
great pride in the service we gave to our customers. It is a
wonderful feeling helping a family get the best possible fare
for a vacation or helping someone schedule a flight to get
across the country to attend a funeral of a loved one.
The events of September 11th had a dramatic effect on the
responsibilities of the probationary reservation agents at
Northwest Airlines. Northwest declared an emergency and
requested all reservation agents, including probationary
agents, to report to work as soon as possible. I would like to
say also that in this sort of emergency, the probation agents
were requested to behave and act as if they were veteran
agents, which is something that happens to a person after they
have gone through probation. I reported for work 6 hours early
that day and worked an 11-hour shift. I felt it was my
responsibility as a citizen and employee to do everything that
I could to help people through this crisis.
On September 22nd, I received a call from Northwest
Airlines informing me I was being laid off. On September 24th,
I, along with many other probationary agents, was informed that
my employment was being terminated due to my probationary
status. Later that day, I received a letter confirming that I
was terminated due to the effects on the airlines in regards to
the events of September 11th.
To say that I was shocked and disappointed is an
understatement. The financial burden placed on my family and
the stress of long hours I endured during training and
probationary period only to be terminated through no fault of
my own has left my family and me in a State of disarray. I am
diligently working at maintaining a positive attitude through
the chain of events. I came here to explain to you my
commitment to my family, my job, and Northwest Airlines. It is
my sincere hope that I have articulated this to you in this
short time. All I want is the opportunity to return to
Northwest Airlines as a reservation agent.
In conclusion, it is my goal to return to Northwest
Airlines, as stated, and I am asking that you help me and the
thousands of other displaced airline workers to get back to our
jobs. And this is my one voice.
[The prepared statement of Ms. Leake may be found in
additional material.]
Senator Dayton. Very articulate and powerful voice. Thank
you.
Ms. Leake. Thank you.
Senator Dayton. Our next witness is Mr. George Logan, who
is the owner of G. Logan & Sons Hauling, Inc. Mr. Logan is a
Minnesota native who runs this hauling business. He is 35 years
old with a wife and three boys. Mr. Logan had recently secured
a $99,000 contract with Penn Co Construction, is that correct?
Mr. Logan. Penn Co.
Senator Dayton. Penn Co. Who was working for the
Metropolitan Airports Commission. The contract was canceled on
September 15th as a direct result of the events on September
11th. This has resulted in a loss of one-third of his company's
revenue.
Mr. Logan, welcome. Thank you.
Mr. Logan. Mr. Chairman, and members of the committee, I am
pleased to be here to discuss several important issues.
Senator Wellstone. Do you want to try and get that mike
closer to you?
Mr. Logan. As I said, I am pleased to be here today to
discuss with you several important issues, but first I would
like to take the time to thank Senator Wellstone's staff for
allowing me to testify before the committee today. I am George
Logan III, as I was introduced, a small business owner here in
Minnesota. I have a roll-off company of construction
containers, and I have owned my business since 1994. I was able
to purchase my first new roll-off with the assistance of an SBA
loan in 1995. I have been very fortunate that my gross revenues
in business have risen each and every year. My gross revenue
last year was over $300,000. Unfortunately, this year will be
much different.
I started bidding on projects through the CERT program, and
I was the successful bidder of the Penn Co construction bid at
the airport. This contract would have generated almost
$100,000. The Penn Co contract was canceled 1 week after the
signing. I was told to pick up my construction containers, that
the job was canceled. And I would like to stress to the
committee that it was canceled, not postponed or delayed. This
project may or may not resume. They are not sure yet. They will
check and see if they are going to do any more expansions to
the airlines. And this cancellation of the Penn Co contract is
going to place great financial burden on my company, because in
order to bid for this job, I had to get more equipment and make
sure that I could handle the work that was set forth. And in
doing that, it ran about a $150,000. So now I have the
equipment and everything to do the work, but no contract.
So while my business is struggling to meet increased
expenses, I have less money for my family. This has directly
affected my family's well-being. Recently, I won a trip to
Jamaica from a school raffle at my youngest son's school, and I
was planning on taking my family on a trip to Jamaica. Now,
even if I had the money to go on a trip, I am not sure I would
want to take my family on a vacation where I would have to fly
to its destination.
The President said we should get back to doing things that
we normally do. This is hard in my case, since almost a third
of my income has been lost due to the direct effect of the
terrorist activity.
I am not complaining about my losses. My losses have only
been economic in nature. I have not lost family or friends to
the terrorists, and my prayers and sympathy go out to those
that have. I just have to work a little harder and make sure my
business is successful, and any help the committee can give me
is greatly appreciated.
[The prepared statement of Mr. Logan may be found in
additional material.]
Senator Dayton. Thank you, Mr. Logan.
Our next witness is Ms. Cheryl Dusek, former Northwest
Airlines information technology project leader. Cheryl is 54
years old, a mother, a wife, a cancer survivor, and a marathon
survivor, too, I am told. At Minneapolis Marathon yesterday,
and sitting here today. You are more than a survivor, you are a
thriver.
Ms. Dusek. Thank you. Better sitting than standing.
Senator Dayton. Cheryl and her family have lived in Eagan
for the last 20 years. As an IT project manager, Cheryl was
making a good wage with good benefits and was notified last
week that she was being laid off. She has one daughter in
college and has been able to finance all of her children's
education, as well as provide financial support for aging
parents, all without loan assistance. Cheryl is understandably
quite concerned about being able to pay off their family's
mortgage, health insurance, and educational costs as a result
of her being laid off. Welcome.
Ms. Dusek. Thank you. As he did just explain, I think I
have led a very comfortable life in the last--in my working
career. And when I was called and asked to testify here, I had
actually commented that I was having a hard time not looking at
my own good fortune when I had spent the last several weeks
seeing really heartwrenching stories about people who had lost
family members in the tragedy, businesses who had lost nearly
all of their employees on September 11th. And to say that--are
we still on?
Audience. No.
Ms. Dusek. OK. As I was saying, it was hard to look past
the sadness in other people's lives when looking at my own
situation. We had lived a very comfortable life. We had two
kids, we were able to pay for their education and expenses, and
my 80-year-old mother was fortunate enough to have additional
support from us. She is an 80-year-old person who lives
strictly on a $630-a-month Social Security check. She lived
through the Depression and taught me some very important
lessons about hard work and making sure that you survive, and
that you get through things, and you have other people.
As I thought about my own situation, though, I realized
that among the people that I knew at Northwest, there were a
lot of people who were not as fortunate as I am in the respect
that I still had my family intact, I have another source of
income, my husband is employed, I am not at risk of losing my
health insurance. But there are people whose lives are much
more impacted and much more disrupted than mine. So I set out
to kind of interview a few of them to find out what exactly
this meant to them. And lest I misstate anything, I am going to
read the statements that they provided to me. One of the
employees I talked to was in the aerospace engineering
department. His only work experience since college has been
with Northwest Airlines. He feels, he tells me, that in
addition to losing all of his seniority, even if he were called
back to Northwest, he has lost over a decade of seniority, he
would be starting from scratch. He has lost his ability to have
medical, dental, and life insurance. He has lost future pension
contributions, all of his accrued sick pay. He is a sole
provider for a family of five people. One of his children is in
college, and his wife is a full-time student, as well. His
degree is in a highly specialized field, which limits his
opportunities for employment to basically airline industry-
related companies. And most of those companies have not faring
well, so he is not holding out a lot of hope that he is going
to find something in the area that he is trained for. And even
if he were, most of the companies that are an option to him are
not located here in Minnesota. Relocation is something he
really doesn't want to consider, but he may have to, and
selling his home at this time is going to be difficult.
Another person that I spoke with is a 49-year-old project
analyst with 6 years of employment with Northwest Airlines. He
had told me that he had hoped to make Northwest his career home
until his retirement. He also is a sole provider. His wife just
enrolled this year in nursing school after many years as a
stay-at-home mom. He has three children, including a child in
college. And because of the education expenses that he was
incurring, his budget was already stretched very thin. Now,
unless he can find a job, a comparable position, he is faced
with the possibility that either his wife will not be able to
continue her college education or taking on a large amount of
debt, which he doesn't want to do. He has lived very frugally
in an effort to take care of his family and has done so very
well.
I also talked with a 53-year-old single woman who has been
with Northwest Airlines for 16 years. Her circumstances and her
concerns are very different. How to start over at age 53 when
you are competing with young, attractive people for jobs in a
very fast-paced society, it sort of puts a premium on beauty.
She has pension issues, which as a single person are very much
a concern. She is not expecting to find a position with
comparable pay, but she definitely needs to find a position
that she can support herself with. When you have a spouse, you
are able to fall back on someone else, someone else's income,
perhaps, to help you through a time like this. She is not in
that position, and I feel very strongly that she is one of the
many people that has been with Northwest for a long time for
whom this has a really serious impact. And whatever help can be
offered is going to be greatly appreciated by all of them.
Thank you.
[The prepared statement of Ms. Dusek may be found in
additional material.]
Senator Dayton. Thank you. We respect you taking the time
to bring this to others, as well. Thank you.
Our next expert witness is Mrs. Hydra Juhor, former food
service worker at LSG SkyChefs. Hydra is an Ethiopian refugee,
has lived here since June of 2000. As a food production worker,
she made $8.70 an hour, plus medical and dental benefits. Her
wages help support her husband and eight children. She lost her
job shortly after September 11th.
Ms. Juhor, welcome.
Ms. Juhor. Thank you, Senator Wellstone, for inviting me to
speak to you and the whole Minnesota Congressional delegation.
I feel privileged to be able to speak on the behalf of the tens
of thousands of hospitality workers in Minnesota and across the
Nation who have lost their jobs as a result of the devastating
bombing that took place September 11, 2001, at the World Trade
Center.
My name is Hydra Juhor. I emigrated to the U.S. in June of
2000 with my husband and my children. I am a refugee from
Ethiopia, and I am here with refugee status.
I worked at LSG SkyChef at the Minneapolis-St. Paul
International Airport as a food production worker. We supplied
all of the in-flight food service for Northwest Airlines and
KLM. After the attack on the World Trade Center, the in-flight
food service was drastically cut back, and as a result, I was
laid off from my job. Many co-workers have also been laid off.
As a food production worker, I was receiving $8.70 per
hour, plus medical and dental benefits, as well as life
insurance. I have lost all my benefits that were provided to me
through my union contract.
I am married and have eight children ranging from 39 years
old to 8 years old. Two of my children are still in Ethiopia. I
do not know what to do. My industry, the hospitality industry,
has been devastated. There are no jobs to go to, especially
jobs that provide the level of benefits that I had at LSG
SkyChefs. My husband works, but in order to feed and clothe my
children, pay our rent and other bills, my husband and I both
need to work to bring income into our home.
Back home, I was an accountant, and I planned to go back to
school to further my education and learn about computers. I am
trying to better myself and attain a better job and lifestyle.
Presently, my plans are on hold, as I do not know how I am
going to go to school until I can get back on my feet.
The bombing on September 11, 2001, killed 6,000 people and
put a lot of others out of work, but I feel confident that this
Nation will pull itself together. One way of doing that is to
make sure that people like me and my co-workers are not left
forgotten.
Thank you again for the opportunity and privilege to speak
to you this morning. Thank you.
[The prepared statement of Ms. Juhor may be found in
additional material.]
Senator Dayton. Thank you very much. I would like to ask
each of the panelists just briefly, we have a State program--
Commissioner Yanisch was in Washington last week asking the
Federal Government for an additional $23 million to provide
additional assistance. Congress is considering an employee
assistance package this week. What are either yourself directly
or your own employees and your experience as an owner or
worker, what is available now? Has anything kicked in for your
benefit at this point, and what is missing?
Let me start at that end, Ms. Juhor, and moving back. Are
there any benefits, State or Federal, that have been made
available to you?
Ms. Juhor. No, I do not know what will be next--I had all
of these benefits: life insurance, medical and trust----
Senator Dayton. So cut off entirely? Nothing is--no
benefits, unemployment, or health or--nothing has come forward
since you were----
Ms. Juhor. I do not know about that.
Senator Dayton. Thank you.
Ms. Dusek. I think most of the management staff that I was
part of--and that doesn't necessarily mean managers, but anyone
who is noncontract or nonunion is considered management staff.
Most of us got a certain level of severance package, which is
going to tide us for just a very short time, for some of us.
And obviously, we are eligible for unemployment benefits, but
one of the things that I think everyone is concerned about is
that it is not going to be as easy to find a job as it was a
few years ago.
I have been laid off three times from technology companies
since 1997, and in each case I was able to bounce back pretty
quickly. But I know that there are going to be a lot more
people with the number of people who are out of jobs who are
looking for work, and it is not going to be as easy, and I am
not sure that the benefits are going to tide people over long
enough to find comparable kinds of employment, employment that
will help them support their families. And the reality is,
until people have money in their pockets, as you said, to spend
on the goods and services that our companies manufacture and
sell, the economy is not going to get better.
Senator Dayton. Thank you.
Mr. Logan?
Mr. Logan. Like I stated before, when I got my first work,
I had an SBA loan, so it was through the Government back then.
But now I am not laid off or anything; my business is just
slowing. Hopefully, coming up in the near future, there will be
more contracts, bigger contracts, where I can get the trust
going and pay for a new truck and containers and that.
Senator Dayton. Thank you.
Ms. Leake?
Ms. Leake. For myself, I am just learning what is out
there. I have never, ever had to seek unemployment. I just went
out right away and started applying for jobs, but a lot of them
are at or below the wage that I was making as a probationary
agent, and so I am learning a lot about the programs that are
out there.
If school is an option for me, I do have to look at the
care for my kids and the schedules that will work and things
like that, because my kids are going everywhere. They are 8, 6,
5, and 3, and at one point in the day or not, they are in
school, so I have to work with that. But I am considering
everything that is out there for me. There seems to be a lot.
Senator Dayton. Good.
Ms. Doering?
Ms. Doering. For us, our employees, we didn't have to lay
off any because we were understaffed going into September 11th.
But there really have not been programs or anything that we
have been able to take advantage of, even though our revenues
are down by 50 percent. We are hoping that things would start
bouncing back relatively quickly, but our risk is more in the
next several months as--if things do not bounce back, we could
potentially have to lay people off, and we do not want to get
to that point.
Mr. Ramstad. First I would like to thank everyone for being
here today, and particularly I want to thank the teachers and
students who are here today, because this is very much about
your future, as well as about the immediate future of the
witnesses and the other people here assembled. These are tough
times, tough times for every Minnesotan and every American. We
are in a State of war, and our economy is in recession.
And I want to also applaud my friend and colleague, Senator
Wellstone, for convening this hearing, for reaching out in a
bipartisan way, because certainly partisanship has no place
with the--as far as the issues we are talking about today. We
need to work in a bipartisan, common-sense, pragmatic way on
these serious problems affecting people's lives, as we have
just heard this very compelling testimony from these witnesses
here.
I want to thank all of the witnesses for coming, as well. I
would like to ask a more narrowly focused question of the three
of you who have lost your jobs, Ms. Leake, Ms. Dusek, and Ms.
Juhor--is it Juhor?
Ms. Juhor. Yes, Juhor.
Mr. Ramstad. Juhor. I didn't know if the J was silent or
not.
Well, first of all, everyone in this room, every American,
as we have said, has experienced trying times. And I cannot
imagine--with the problems associated with the war, I cannot
imagine those trying times being so exacerbated by losing your
job on top of everything else that is happening right now in
the world and in this country. And I would like to ask you, as
I said, a more narrowly focused question. Because certainly all
of us and everyone in this room commiserates with you and the
195,000 other Americans who have lost their job in the last
month. What form of relief--and again, I direct the question to
the three ladies who have lost their jobs. What form of relief
from the Federal Government would be most helpful to you or
your family? Would it be for us to extend unemployment
benefits, to extend health care benefits, tax relief, or
something else? If you could just prioritize what form of
relief from the Federal Government you see as being most
helpful to you and your family.
Ms. Juhor. I am a newcomer. I do not know what is.
Mr. Ramstad. OK. Ms. Dusek?
Ms. Dusek. I think I know what the question is. Actually, I
think what I heard from a lot of people that I have spoken with
is that, for example, the airline industry is a pretty specific
industry, and people who lost their jobs in the airline
industry do not really have another company to turn to. In the
work that I do, I can certainly do that. I can go to another
technology department and probably do the same kind of work I
have done. But for a lot of the airline employees, retraining
is going to be critical.
But I have heard from many of them that you can give me
money for retraining, but my first important job is to support
my family. I cannot go back to school if I cannot support my
family. And although the education expenses will be paid for, I
still have to put food on the table and take care of those
things. That is a really critical issue.
The other thing that I think people are concerned about is,
although we have access to COBRA, COBRA is very expensive. I
have been there, I know. It is a very expensive way to get your
health insurance, and so people are very concerned about those
two things for sure.
Mr. Ramstad. Thank you.
And, Ms. Leake?
Ms. Leake. Well, for myself, I agree with what Cheryl said
in regards to the COBRA issues, things like that. For myself, I
would like to say that we need the funding to be designated
specifically for the employment of the airlines' employees, so
that we can get back to our jobs, because we are the people
that sell and reserve travel plans for people. We were the
first contact that they were receiving in regards to flying.
And convincing them that now is the safest time to fly. Things
are just cooking out there in order to make things more safe.
So for myself, I would like that funding for the people who are
laid off or terminated, like myself, to be able to get back to
work.
Senator Wellstone. If you want to applaud, you can.
[Applause.]
Ms. Leake. What did I say?
Mr. Ramstad. Finally, I would like to ask the two business
people here the same question. What form of relief, either on
the economic or the small business assistance side, or the tax
side, would you prioritize as the most important thing the
Federal Government could do right now?
Mr. Logan. I would say, like, lowered interest rates on
loans, or some type of Government loan relief would really help
my situation.
Senator Wellstone. Can you hear in the back? You can. OK.
Mr. Ramstad. Thank you for that response.
Mr. Logan. Did you want me to repeat myself? I would say
lower interest rates on loans, like business loans, small
business loans or something.
Mr. Ramstad. Finally, same question of Ms. Doering, please.
Ms. Doering. I would just like to echo what George said
about the small business loans. I think that is something that
is going to be critical for our growth over the course of the
next year here in order for us to grow, and there is
uncertainty about what our access to capital will be, and so
some assistance that way. And I know there is some proposal
toward leisure tax credits out there that I have heard about,
and that is another thing that may support the industry.
Mr. Ramstad. Thank you again to all of the witnesses.
That is all I have, Mr. Chairman.
Senator Wellstone. We are going to hand this over to
Congressman Oberstar, and then our next panel. Just very
quickly, I too want to thank the panelists. I want to thank
each of you, and I want to mention just--I can do this, I
think, in 2 minutes or less. When we were talking about the
importance of the airline employees also getting the benefits,
I want to point out that when Commissioner Yanisch was in DC
doing such a superb job, she was joined by Berilyn Corcoran.
Believe me, I want you people to know that she did one heck of
a job of speaking up for Northwest employees. [Applause.]
And I also, just by way of very quick introduction, because
I just always do it, and it has been a long time we have
working together. I want to mention that Sheila--my wife Sheila
is here, as well. It does seem to me, and I won't even ask--I
just want to get this for the record. I won't ask you all to
speak on it now, but when Mr. Logan was speaking, it was
interesting to me that the contract was canceled, not
postponed. I would like to talk to you more about that. That is
an important distinction.
And then, Kelly, one of the things that you were saying, as
I understood it, is that you are still functioning at 100
percent of cost and 50 percent of revenue, and so you are doing
a yeoman job, but there is a question of how long you can
continue to function that way. I could go on and on.
Obviously, we have got to extend the unemployment benefits
and reform UI to make sure it works for people out of work.
Obviously, COBRA came up. If there is one thing that we all
hear from everybody, it is, please, Senators and Congressmen,
Democrats and Republicans, the most terrifying thing next to
losing your job is not having health care coverage. We are
going to need the help to afford COBRA, we are going to need
the help to afford health care coverage for our families.
That looms as a huge challenge before us. We have got to
meet that, and I know all of our legislators would agree, as
well. And I could go on to a lot of other things from workforce
development funding for dislocated workers, you name it. I just
want to, though, mention on the small business piece, it has
come up twice, I think above and beyond rebuilding our economy
and having the demand--as I mentioned earlier, Ed Daum is here
somewhere, and he is an incredible director. Between the 7A and
504 programs, the SBA has leveraged about a billion and a half
dollars in our State in the last 6 years or so, and I think,
Ed, the Disaster Loan Program. Let me introduce Ed Daum.
[Applause.] He is the best director in the country for the
Disaster Loan Program. It doesn't need to be based on
geography. I think we can help out in terms of Disaster Loan. I
think we can get rid of fees on the 7A. I think there are ways
to get more access to capital to small businesses, and more
access to loan money just to keep you going, as well. And I
think the small business--I have got to repeat it again. The
small business sector is critical to our State. We cannot lose
sight of it.
Congressman Oberstar--and one thing about this man over
here. He is the dean of our delegation. He also probably speaks
with as much authority as any single person in the United
States House of Representatives and the Senate when it comes to
airline safety. We are very proud that he is our Congressman
for the 8th Congressional District of the State of Minnesota.
Congressman Jim Oberstar. [Applause.]
Mr. Oberstar. Thank you very much, Senator. I appreciate
your good words, and especially appreciate the hearing that you
have called, and your deep sense of concern for our fellow
citizens. I express also a great appreciation to our colleague,
and my House colleague, Jim Ramstad, who serves on the very
important House Ways and Means Committee, and who has already
demonstrated his genuine concern and support not only by being
here, but by comments he made at the news conference we had
earlier.
I am afraid, unfortunately, the bad news is only beginning.
The ripple effect of the terrorist attack throughout our
economy is reaching into sectors people never really fully
appreciated before. Aviation is a 10 percent segment of our $10
trillion national economy. There are 1.2 million airline
workers, or were on September 11. There are another 4 to 6
million people employed at the airports served by the U.S.
airlines, the 530 commercial airports in the United States.
They have experienced severe economic distress, layoffs, but
cutbacks in sectors that we hadn't anticipated. The
Metropolitan Airport Commission is a good example of it: $400
million in construction work of improvements at the
Metropolitan Airport Commission have been put on indefinite
deferment. That means future jobs, future contracts for George
Logan and others, are on the shelf, because they cannot look
far enough into the future to see when and to what extent air
travel will resume at the level that it enjoyed prior to
September 11. Loss of that income and of that future growth
potential hits in another way. Those are the good jobs. Those
are the good-paying jobs: the construction workers, the
electrical workers, cement finishers, the heavy equipment
operators, to buy the homes, the cars, the household
appliances, and keep our economy going. Those are not going to
be fed into our economy, and as these projects are cut back,
not just Minnesota, but elsewhere across the country, billions
of dollars of investment will be pulled back, and that puts
greater pressure on the commitment of the President and the
Congress to address the needs of the people.
The President has submitted a proposal for temporary
extension of 13 weeks' unemployment compensation, $3 billion in
emergency grants for training and to pay 75 percent of health
care premiums, $11 billion to States for low-income workers
displaced from their jobs to help them receive health
insurance, but additional funding for job training and
placement. But we have to go beyond. We have to create the
jobs.
This coming week, my colleagues and I on the House
Transportation and Infrastructure Committee are going to be
announcing comprehensive investment in infrastructure security
for transportation--aviation, but also for rail, ports, inland
waterways, highways, bridges, tunnels, all of which have
security needs that have to be addressed.
In the immediate aftermath of the September 11th strike,
the air strikes, and in the midst of the airline financial
rescue legislation, Northwest Airlines took the initiative to
urge the association for airlines, the Air Transport
Association, to weigh in with the Congress on behalf of a
package of legislation to help furlough airline employees. The
Board of Directors of Northwest Airlines unanimously passed a
resolution at our meeting this morning, September 27th, in
endorsing and supporting such legislation. As a result, the Air
Transport Association has weighed in on support of the package
that the administration has announced.
But I would urge all airlines to go further. Northwest has
announced it will extend health insurance to its workers, and
other benefits through the end of this year. Delta Airlines has
made similar announcements. I would urge the airlines not to
contract out work that is being done in-house. And in exchange
for the investment that we made and the financial health of the
airlines to get them back on their feet, $5 billion in grants,
$10 billion in guaranteed loans, that they should also make the
highest priority to do all work in-house. Not contracting it
out, not contracting it out overseas, either. [Applause.] And I
look forward to their cooperation.
Senator Wellstone. We are joined by Congresswoman Betty
McCollum. [Applause.]
Ms. McCollum. Thank you, Senator Wellstone. This is
important that we all get together and speak as a community and
family and State and that we hear from you. I apologize for not
being able to be here for all of the first panel and having to
leave shortly today, but I am out in the schools talking to
school children and telling them that it is good to fly. And
hopefully, that word gets back to their parents, and we can
start bringing our economy together.
I worked in the retail sector. Boy, do I know about
volatility. It is very scary for those of you who are out there
when you hear what is going on. I have worked through several
mini-recessions where my paycheck in commission sales was
dependent upon consumer confidence. So you can count on me to
do whatever I can, including spending money, to restore
consumer confidence.
We have a strong country. We have plans put in place that
we are working on, both in the House and Senate. Bipartisan.
There will be some discussion, some different viewpoints, and
some different tactics, but we need to hear from you for what
you need to do.
When I leave here shortly, I am going out to some college
campuses. Our college students are very concerned about the
economy, having a job when they graduate, what is going on with
their loans. Their parents are very concerned about the economy
and being able to help with that. So I will continue meeting
with small businesses, as I have. I am meeting with St. Paul
companies talking about insurance later on. But we are all kind
of dividing up the tasks around here, so everyone is heard
from.
Thank you all very much for coming. And I notice a good
friend of ours, Paul, in the back, Jerry Malpinski, and there
is a person in the back with another hat on, I cannot tell if
it is Legion or VFW here today. Our thoughts and prayers are
with all of you for what you have done in our country, and I
know you will be there to support our servicemen and women in
the future.
Thank you. [Applause.]
Senator Wellstone. Keep that applause for the veterans.
Thank you so much to the veterans. [Applause.]
I would like to thank the panelists and hand this over to
Congressman Ramstad, who will be introducing our next panel.
Thank you so much for being here. [Applause.]
Mr. Oberstar. Mr. Chairman, while the next panel is taking
its place, may I just add one footnote that Northwest Airlines
has already taken the initiative in modifying flight deck
doors. It was the first airline in the United States to do so,
and that modification was done at the Duluth maintenance base
of Northwest Airlines, and we hope that the whole
modification--the full replacement of all doors will also be
done in Minnesota by Northwest Airlines.
Mr. Ramstad. If we could have your attention again, please.
Before I introduce this distinguished second panel, I would
like to introduce a good friend; Hennepin County Commissioner
Peter McLaughlin is here. Peter, thank you for being here.
[Applause.]
I also do not think it is possible to overemphasize the
importance of working in a bipartisan way, and again, I want to
thank Paul Wellstone for not only convening this hearing and
inviting all of you to be here today, but for reaching out to
those of us on the other side of the aisle. Because as far as I
am concerned there are no Republicans, there are no Democrats
at this time when we are dealing with national security and
economic security issues. We are all Americans. In this room,
we are all Minnesotans and all Americans, and I do not see
political labels. [Applause.]
In fact, I am very pleased that Speaker Denny Hastert and
Democratic Leader Dick Gephart are meeting in New York with
labor leaders and corporate executives. As we meet here today,
they are holding a similar meeting. And I also want to say
that, just as the President and the Congress are focused on
national security, we must also work very diligently on
economic security, because I think it is obvious to all that
our economy needs a stimulus, and our laid-off workers need
assistance.
I am pleased that we worked in a bipartisan way in Congress
to pass an airline stabilization and an emergency supplemental
package to help New York City recover from the worst attack on
United States in our history. Now we must pass an economic
stimulus plan that puts people back to work and provides
critical aid to laid-off workers, as well as tax relief.
Also, when we go back, we will be working on an anti-
terrorism package and an airline security package, as Jim
Oberstar mentioned. Here in Minnesota, believe me, we know all
too well that Northwest Airlines was forced to eliminate 20
percent of its workforce, or 4,500 jobs. And Northwest Airlines
happens to be the largest single employer of residents in the
3rd Congressional District, which I am privileged to represent.
So these numbers, laying off 4,500 workers, 20 percent of the
workforce, even those dramatic numbers do not tell the story as
far as the layoffs and economic hardships that are placed on
businesses that rely on the airlines, such as the hospitality
industry, the travel agents across our State and country, food
services, janitorial services, taxi services. So that is why I
strongly supported the airline stabilization package, and I am
also a sponsor of Hart-Hastings, the Hart-Hastings bill, which
will provide extended assistance to workers who were laid of
during the terrorist attacks and the subsequent stoppage of
airline travel. And I am glad to also report that our Speaker
of the House, Denny Hastert, is also supportive of including
such relief for laid-off workers.
Without further ado, let me introduce the first member of
our second panel, Jaye Rykunyk--I hope I am pronouncing that
right, Jaye--the principal officer of the Hotel Employees and
Restaurant Employees Local Union 17. And Jane is also vice
president of the international union. She represents 5,000
workers in the hospitality and food service industries in the
Twin Cities area, and Jane will tell us about the members of
the hospitality industry who have been significantly impacted
as a result of the slowdown in these industries. Jaye?
STATEMENTS OF JAYE RYKUNYK, HOTEL EMPLOYEES AND RESTAURANT
EMPLOYEES LOCAL UNION NO. 17; DAVID OLSON, PRESIDENT, MINNESOTA
CHAMBER OF COMMERCE; RAY WALDRON, PRESIDENT, MINNESOTA AFL-CIO;
BRAD ANDERSON, VICE CHAIRMAN, PRESIDENT AND CHIEF OPERATING
OFFICER OF BEST BUY CO.; AND MARILYN CARLSON NELSON, CHAIR AND
CHIEF EXECUTIVE OFFICER OF CARLSON COMPANIES, INC., MINNETONKA,
MN
Ms. Rykunyk. Mr. Chairman, and members of the committee,
thank you for inviting me to testify and to address you today.
My international union represents 300,000 workers in United
States, Canada, Guam, Saipan, and the Virgin Islands. We cook
the food, serve the drinks, make the beds, we sell the beer and
popcorn at the ball games, we make 95 percent of every meal
served on every airline flight originating in the United States
and Canada. The 300,000 members that we represented were prior
to the 11th of September. Our best estimate is that more than
one-third of our workforce has been laid off since then.
The hospitality and food service industries are made up in
large part of workers who are minorities, women, and
immigrants. We have served as the gateway to the American
workforce, and indeed to the American dream, with more
immigrants than any other industry in the history of our
Nation. Our workforce is the training ground for more welfare-
to-work employees than any other industry. In our union, we
have accepted the challenge of uplifting the standard of our
industry so we too may earn a liveable wage, have medical
coverage, own our own homes, send our children to college, and
look forward to a pension which will allow us to enjoy our
retirement.
As our society has changed from a manufacturing economy to
a service-based economy, the hospitality and tourism business
has been one of the fastest-growing segments of that new
economy. More jobs have been created in the hospitality
industry than any other single industry in our country in the
last 10 years. Large public investment has been made in the
building of hotels and convention centers. It has been done
through TIF, through low-interest loans, and direct subsidy by
brown field clean-up and other mechanisms. Taxes on hotel
rooms, food and beverage sales, sports tickets and parking
surcharges have become a mainstay of the budget of the majority
of all cities who seek to attract visitors. Beyond these direct
tax revenues, there are revenues collected by local and State
governments for licensing, taxi cab fares, etc. The list is
long and diverse.
When a pebble falls in the pond, the hospitality industry
is always in the first ripple. The attack of September 11th was
not a pebble, it was a boulder, and the effect on our industry
was not a ripple, it was a tidal wave. I have distributed to
you an article from the New York Times. If a picture is a
thousand words--and I have some extra copies of this
available--then these pictures should let you clearly
understand the devastation in the hospitality industry.
The immediate impact here locally has involved the layoff
of thousands of hospitality workers in our metropolitan area.
Our union represents 1,100 workers at the Minneapolis and St.
Paul Airport. The majority of those workers were sent home
immediately following the attack. At the SkyChef facility where
the airline meals are made, the majority of the workforce is
made up of immigrant workers, one of whom testified before you
today. Most of these workers are paid below $12 per hour, and
most of them not only support their families, but they have an
obligation to send money home to support their families
overseas. HMS Host provides food and beverage and retail
services inside the airport. Sales were down more than 50
percent in the first weeks and now have been slowly rebounding.
We have permanently lost 130 jobs at SkyChef. At HMS Host, we
have lost 150 jobs. We believe that those losses are permanent.
October is the catch-up month in our industry to recover
from a slow summer. We generally expect to have close to full
occupancy in our hotels in the Twin Cities. This occupancy has
fallen to below 50 percent by the most current forecast. The
Radisson Plaza Hotel has closed its white-tablecloth
restaurant, as has the Minneapolis Hilton. These two restaurant
closings alone will throw more than 50 workers out of their
jobs.
Prior to September 11th, the workers in these restaurants
would not have given a second thought to reemployment. Now
there is literally nowhere for them to go. High-end dining has
been adversely effected throughout the city, as well as
throughout the Nation. The prospect of securing a job that
provides benefits is nonexistent to workers who were at the
high end of the income scale in our industry. There are simply
no jobs for them to have, and these are the most highly skilled
workers in the industry. A quick review of the want ads in the
Sunday paper confirms the dire statistic. The jobs are simply
gone.
By far, the large majority of the hospitality industry
workers hold down two jobs to make ends meet. Even working more
than 60 hours per week, they are barely able to make enough to
cover their basic necessities. The main meal for most hotel and
restaurant workers is the one that is provided by no charge to
them by their employer as a benefit of working in that
facility. In an area with one of the highest and most expensive
and tightest housing markets in the country, many of our
members are already making plans to move in with relatives,
because they know they will be unable to pay their rent or to
make their mortgage payment. If you rent, then you look for a
room with a family member. If you have a mortgage, then you ask
your family to come in and live with you. As much as we would
like not to believe these grim statistics, it is not uncommon
now for many of our members to already live two or three
families in a two-bedroom apartment. We have a number of
members who were full time who live in homeless shelters or in
their automobiles.
The most vital pieces of information that we put in our
union newspaper following the attack was about programs for
heat share, food share and emergency assistance. Our industry
is in free fall, and our members, who are among the poorest
workers in Minnesota, are without a parachute. The reality of
living on unemployment for our members is a reality of not
enough to eat and no place to call home.
The waiting week for unemployment benefits represents 2
weeks without enough money to buy groceries. It represents
standing in line at food banks or going through garbage cans
behind grocery stores and restaurants for what the wealthy can
afford to throw away.
While there are numerous mechanisms by which workers can be
helped, I cannot stress to you enough the need for continuation
of medical benefits for laid-off workers. Given the extremely
low wage of many sectors of our industry, the large numbers of
workers who would be eligible for public assistance for medical
benefits, the loss of health insurance will be devastating not
only to them but it will be devastating to the public health
care system as well. Our public health care system is simply
not equipped to handle the large number of workers and their
children who will suddenly become eligible if immediate action
is not taken to guarantee their benefits through COBRA
supplements.
I brought a number of the members of my union with me who
are laid off from their jobs, and I would like to introduce
them to you. If I could have them stand up, please. [Applause.]
These workers represent the very best of our country. They
are workers who have, many of them, immigrated here who have
been willing to fill so many of our jobs which help make our
cities and our country and our economy strong. They have worked
long hours, and they have been willing to serve the public for
very low wages. They cannot be overlooked in the discussion
about how the recovery from this tragedy will help them. If you
do not speak up for them, then no one else will. [Applause.]
[The prepared statement of Ms. Rykunyk may be found in
additional material.]
Mr. Ramstad. I want to thank you, Jaye, for your very
compelling testimony. And all of you members from Local 17,
thank you for being here today and giving us your input, as
well.
The next witness is a long time friend, David Olson, who is
president of the Minnesota Chamber of Commerce. He represents
more than 3,200 Minnesota employers of all types and sizes. The
Chamber is the voice for those members and their employees on
State public policy, as well as regulatory issues. As
president, David Olson also serves as co-chair of the Workers'
Compensation Advisory Council, and vice chair of the Minnesota
Chamber of Commerce executives. David is also on the National
Board of the American Chamber of Commerce.
Mr. Olson. Thank you, Congressman Ramstad, and thank you
members of the committee. I appreciate your invitation to be
here today, and I hope my comments will help you in developing
some solution to the issues that Minnesota employers and their
employees are facing. Solutions, in fact, focus on tax cuts and
regulatory expense reductions in an effort to rebuild consumer
confidence.
When I received this invitation to participate in this
hearing, we asked our members to provide input for my
testimony. I have about 500 or almost 600 surveys that were
received back within 24 hours, which is little unusual for us.
We asked them basically three questions. First is related to
workforce. Specifically we asked them how their workforce
numbers have or will change over the next few months based on
the events of September 11: 11 percent of the respondents think
their workforce will grow; 36 percent think their workforce
will shrink, and 53 percent believe their workforce numbers
will remain the same. Actually, better news than we expected.
Many manufacturing firms, unfortunately, were having a bad
year before September 11th, so they had already trimmed their
workforce. They are now hoping to hold their own. Other firms
hope to reduce their workforce through attrition and
retirements as opposed to layoffs, but some companies will not
have that option.
The second question focused on their company's
profitability in the year ahead: 19 percent of respondents
foresee higher profits; 21 percent are expecting about the
same; and, unfortunately, 60 percent are projecting lower
profits. That is a huge number, especially when you consider,
again, that many manufacturing companies had already had one
tough year and are not seeing any improvement. A manufacturer
reported that raw material costs were up, as well as labor and
energy costs, yet their customers are not willing to pay more,
putting even greater pressure on already thin profit margins.
Yet another manufacturing company said they were just starting
to see an uptick in August, and the events of September 11th
eliminated the momentum toward an improved outlook.
Retailers are reporting slow or no sales of high-ticket
items, but discount retailers believe they will hold their own.
Finally, we asked our members how they were responding to
the economy and what actions they are taking to survive. Across
the board, companies are cutting expenses. Some of the cuts
include personnel, layoffs when necessary, and cutting hours of
remaining personnel; going without raises and bonuses; delaying
capital expenditures; cutting overhead, including travel; and
asking employees to consider lower-cost health care options,
and pay more of their monthly premiums.
A number of companies expressed frustration about costs
they feel they cannot control, including energy,
transportation, particularly rail for manufacturers, and
insurance costs, namely, health care insurance. According to
one business owner, ``We are being forced to look at dropping
our coverage or just go to major medical only. We would allow
employees to upgrade family coverage at their cost, but the
cost is so high that I am sure that many cannot afford it.''
While the overall outlook of business people is one of
uncertainty and lower profits, some companies do have positive
outlook for the year ahead. In addition, firms are doing
whatever possible to boost their sales and marketing efforts.
In typical Midwestern fashion, many companies are stating they
are working harder, smarter, longer, and leaner. Our members
make it clear that Minnesota businesses do not need further
burdens and costs from any source and, for your purposes, their
prospects and those of their workers would greatly improve if
Government would continue to do its part to reduce both tax and
regulatory expenses.
Thank you. [Applause.]
[The prepared statement of Mr. Olson may be found in
additional material.]
Mr. Ramstad. Thank you, David, for that excellent
testimony.
The next witness is also a friend, Ray Waldron. Ray Waldron
is president of Minnesota AFL-CIO. In that capacity, he
represents thousands of Minnesota workers. Ray will address the
impact of the economic slowdown on workers in the airline,
hotel, restaurant, and janitorial services industries.
Ray, welcome.
Mr. Waldron. Thank you and Chairman Wellstone and committee
members. I thank you for the opportunity to speak on this issue
this morning. You have my written testimony, and I would like
to take some time to update that testimony that we provided for
you earlier.
As you know, the impact of September 11th is changing
faster than we keep track of. But there is only one constant to
that, and that is, people are hurting, both emotionally and
economically, from the results of these attacks.
Here in Minnesota, a lot of working people and family are
hurting, and they are looking to you for help and relief.
Congress responded well, very well, in fact, when the airlines
corporations called for help. And we supported that. Working
families now are calling for help, and we are here to ask for
you to respond to them.
How many working families are we talking about? As we know
now--and I am sure these numbers are changing. Congressman
Oberstar spoke very well when he said we believe that this may
be only the tip of a problem.
For Northwest Airlines, over 4,500 employees are being laid
off alone, 400 airline employees at Mesaba Airlines just alone
in Minnesota are being laid off. More than 20 percent of the
workforce at our airport--that is, retail sales, parking
attendants, restaurant employees and taxi cab drivers and
cleaners who work in the seventh busiest airport in the United
States--are being laid off. This does not include the
construction workers. Our figures, last week we were told $291
million in deferred construction will take place. We heard this
morning from Congressman Oberstar that now over $400 million in
deferred construction for the year of 2002 alone will be
deferred. These numbers add up pretty quickly, and it is a lot
of hurt for a lot of families.
So we are appealing to you and asking you to extend the
unemployment benefits for workers, to extend health care
coverage for workers. We need the Government to insist that
employers abide by their collective bargaining agreements and
contracts. [Applause.]
We need, when the economy rebounds and returns, provisions
for hiring back these employees. We need job training
allowances, and we know that the corporations have received
public assistance, and we have supported that, but we also
support the same accountability for businesses that these
employees are required to have.
Finally, I would like to thank you again for holding
this--[Applause]--hearing here, and I would like to
particularly acknowledge the students, the high school students
that are here, and in particular South High of Minneapolis, the
school that I graduated from earlier on. [Applause.]
[The prepared statement of Mr. Waldron may be found in
additional material.]
Mr. Ramstad. Thank you, Ray, for your compelling testimony
and your wonderful example of the greatness of South High. The
other two schools here today are also very great, I know, in
the 3rd District, both Burnsville and Bloomington Jefferson. We
are glad the students are here.
The next witness is president and chief operating officer
of Best Buy Company, Best Buy, Incorporated, which is the
Nation's largest volume specialty retailer of consumer
electronics, personal computers, entertainment software and
appliances. The company, Best Buy, Incorporated, is
headquartered in Eden Prairie, I am happy to say, in the heart
of the 3rd District. Best Buy currently operates retail stores
in 41 of the 50 States and is on track to have more than 550
stores nationwide by 2004.
Brad Anderson will address consumer confidence, as well as
how Best Buy is preparing to deal with the economic impact
following the September 11th attacks. Brad has been with Best
Buy since 1973 and has been president since 1991. It is a
pleasure to welcome Brad Anderson.
Mr. Anderson. Thank you. We were very, very honored to be
invited here. When the terrorist attacks of September 11th
occurred, our first and immediate concern was for the safety of
our employees. Sam Goody, which is part of the Musicland chain,
which is part of Best Buy, had a store in the World Trade
Center, and thankfully, the employees of that store were able
to get out safely. We also had 300 employees in the air at the
time of the attack, and all of those people were also safe.
But the tragedy has been personally visited to us because
we have a lot of stores in the New York metropolitan area, and
there are many employees of those stores who lost family
members or friends, so it has been a very kind of personal
tragedy that a number of people in Best Buy have felt very
directly.
From the company's--just to give you a brief backdrop in
terms of Best Buy, we are the fifth largest company in
Minnesota, with sales this year of $19 billion-plus. We also
have 7,500 employees in the State of Minnesota. So, in addition
to our headquarters, this is also our largest employee base.
And the company has been going through a very rapid growth
period over the course of the last several years. One of the
things that I think is sort of an example of what happened here
in terms of the travel industry is that immediately upon the
attack, we basically removed the requirement for travel for our
employees for the 2 weeks immediately after. And so in a little
small way, that is part of, I think, the dominoes that are
falling here in terms of revenue for the whole travel industry.
We have tried to move that back to a normal--we have moved that
back to a normal stage, and this past weekend had a large
convention for hundreds of our employees from around the
country in Florida, and so we are trying to get back on to a
normal basis.
In terms of our overall plans for the company, we are
adding 45 new stores in the quarter that we are in, and we are
continuing with that expansion plan, and we happen to be in an
industry which has great good fortune of having a lot of--part
of that growth is based on the amount of innovation that exists
in the business. Lots of new kinds of product categories are
continuing to come out in terms of digital products, etc, that
have been growing very rapidly, while we have seen some offsets
in terms of the slowdown of the computer business.
Just to give you a picture in terms of what we see going
forward, the company announced this past week the opening of a
new distribution center which we are building in the New York
area. We are also going to open 60 to 65 new Best Buy stores
next year, which was the initial plan, plus another 75 or more
Musicland stores. So our intent is to try to keep as robust an
expansion plan as we had before, and to try to keep the kind of
energy and growth that the company had before the attacks of
September 11th
Thank you. [Applause.]
[The prepared statement of Mr. Anderson may be found in
additional material.]
Mr. Ramstad. Thank you very much, Brad.
The final witness on this distinguished panel is Marilyn
Carlson Nelson. Marilyn is chair and chief executive officer of
Carlson Companies, Incorporated. Carlson Companies, as I think
most Minnesotans know, is one of the world's largest global
travel and hospitality companies, headquartered in Minnetonka.
Carlson Companies touches every facet of the travel, lodging,
and dining industries. Carlson Companies and their franchisees
employ over 9,000 people in our State, 124,000 people
throughout the United States, and 192,000 employees worldwide.
Marilyn will address the recent loss of revenue in business
as a direct result of the tragic terrorist attacks of September
11th, as well as the need for a short-term stimulus package to
keep people employed and help dislocated workers.
Thank you very much, Marilyn, for being here today.
Ms. Carlson Nelson. Thank you. Good morning, Mr. Chairman,
and members of the Minnesota delegation and fellow Minnesotans.
As was mentioned, I am Marilyn Carlson Nelson, chief executive
officer of Carlson Companies. We do indeed employ nearly 10,000
people in Minnesota, 125,000 people throughout the United
States, and over 190,000 people worldwide, forming one of the
world's largest travel and hospitality companies. We embrace
just about every aspect of travel, lodging, and dining
industries, with the exception of air transportation and ground
transportation services. As such, we are very proud that our
businesses also fuel so many related businesses and help to
provide jobs outside of those that we create. We are very proud
that we are located right here in Minnetonka, MN, and I think
many of you know how seriously we take our corporate
citizenship in this great State.
We have always been especially proud of the fact that since
our inception, we create jobs. Indeed, my father used to say
that the greatest kind of philanthropy is the creation of jobs.
You cannot imagine how we feel at this moment. Suddenly we
realize as never before the inner dependence that we all feel--
the inner dependence with our employees and their lives, with
our franchisees and their employees, and with the employees and
owners of businesses that are dependent on us. Together we all
sink or swim.
I think, Jaye, the tidal wave was a very interesting
analogy. Right now, we, all of us together, are at a tremendous
risk of drowning because of a result of what occurred on
September 11th and the subsequent shutdown of air travel and
resultant consumer inertia. Entire travel-based businesses are
off 35 percent. The entire service industry has suffered
similar, if not greater, declines. This industry is number one,
two, or three largest employer in 28 States across the Nation.
Statewide, as you heard, there are 170,000 jobs directly
related to travel and tourism. In short, our travel-based
economy is not unlike our agricultural economy here. It
constitutes the lifeblood of our State.
We are confident that this disastrous 35 percent fallout is
not going to continue. But unless some immediate stimulus is
taken, and immediate action, travel and tourism businesses are
projecting to suffer a decline of 20 percent, and if we do not
act quickly, they will downsize now to accommodate that
decline. That would put 34,000 Minnesotans and over 1.5 million
Americans out of work. It would bankrupt up to half of 30,000
travel agencies, who, by the way, right now ticket 80 percent
of the air travel. So that is the sales force. That could put
70,000 travel agents out of business, and, in fact, this has
been estimated to potentially reduce the GDP by 3.6 percent. We
have to all work together to avoid this.
So what we and our franchisees and our employees are
suggesting is a short-term stimulus package to keep people
employed, to help the industries' displaced workers and
liquidity. I am going to take one second, because it is time
for me to finish, but I do want to reference the stimulus,
because it is the only discussion that hasn't been held here
today, so if I may have permission just for a moment.
We are asking not for a bailout. It is not our company or
Minnesota's style to ask for a bailout, but we are asking for a
stimulus that will treat the problem, not just the symptoms.
That will help us to anticipate a better time and to keep as
many people employed as possible, to be a benefit to the
consumers, to reduce costs for business, and enable travel
agents, restaurants, hotels, resorts and all of the workers
that we have referenced to survive.
Fortunately, Senators Jon Kyl and Zell Miller and
Representatives John Shadegg, Neil Abercrombie, and Heather
Wilson have introduced bipartisan legislation which would
include three important tax proposals that would provide
travelers with incentive to travel and would help provide
liquidity to this industry at this absolutely crucial time. We
urge all of you to co-sponsor, to work with those bills, to
work with your colleagues and have them included in the
economic stimulus package being written in Washington.
This legislation is interesting. It is unprecedented, but
it provides a $500 tax credit to people who travel or book
travel by the end of this year. Economists are debating tax
reduction versus the stimulus of Government spending. We know
that each has its advantages, and each has its protractors, but
this accomplishes both objectives. In this proposal, there is
no relief unless there is the desired consumer spending. It
works within the existing infrastructure, so it doesn't disrupt
the generation of tax that we all heard is so important for the
States across this country. It will release enormous market
forces. If everyone in private industry knows that there is
$500 for every adult, $1,000 a family that is going to be spent
on travel, we will advertise a market like crazy. It will
stimulate the economy, it will release those forces. It can be
immediately effective, and it is so easily communicated.
Without this kind of legislation, I am convinced that a
deep recession is a certainty, and that the Government costs
will increase as tax revenues at Federal, State, and local
levels decline by far more than the long-term or near-term
costs of this stimulus.
Thank you for giving me the opportunity to discuss with you
something that is so important to all of us. One of the things
that Carlson has always done is to incentivize people. It began
with a simple gold bond stamp, and it has created literally
hundreds of thousands of jobs since. We believe that a stimulus
to the consumer, consumer demand, consumer poll, in a very
short, controllable time frame, can actually turn the mentality
of the consumer around, help us to have more optimism about
next year and retain some of those jobs.
At the same time, we couldn't support more strongly the
extended COBRA and the unemployment benefits that are so
critical to the people that inevitably have already had to be
let go.
Thank you so much. [Applause.]
[The prepared statement of Ms. Carlson Nelson may be found
in additional material.]
Mr. Ramstad. Thank you, Marilyn, for that excellent
testimony. I know in my lifetime there has not been a better
corporate citizen than Carlson Companies, and we appreciate all
you do for our communities and our State, as well.
I am going to ask the first question, and Marilyn, you have
already answered this. As I think everyone knows, the President
has called on Congress to pass a $75 billion stimulus package
to get this economy going, grow the economy, and create jobs at
this time. Because I am on the Ways and Means Committee and we
have jurisdiction, original jurisdiction, over tax legislation,
I would like to ask each witness which one of the various tax
proposals on the table would be your priority. Again, Marilyn,
you have answered the question. Would it be to provide the most
stimulus to the economy and help create the most jobs? Would it
be accelerated depreciation, would it be expensing, would it be
capital gains reductions, payroll tax deduction, or something
else? Why don't we start with you--start at that end this time.
Brad, do you want to go first?
Mr. Anderson. No.
Mr. Ramstad. OK. Jaye, are you ready?
Ms. Rykunyk. No.
Mr. Ramstad. Which tax equation, which would provide the
most help for the people you represent, Jaye?
Ms. Rykunyk. I think that a tax deduction or a 100 percent
reduction for business travel is a stimulus for workers and for
travelers in our industry. The largest amount of revenue spent
in hotels is business travel. And when business travel was very
soft prior to the 11th of September, and business travel has
taken a very, very serious decline, and has been very, very
damaging to the industry. Business supports our industry by
travel during the week and also by high-end usage of hotels and
convention facilities.
Mr. Ramstad. David?
Mr. Olson. Congressman Ramstad, whatever tax cut you pick--
I am not going to pick one, but we would look for the broadest
tax cut. I think you have to keep in mind that prior to
September 11th, as I mentioned, the manufacturers were hurting,
the small businesses that support manufacturers were hurting,
and so we would look to the broadest base tax cuts that would
help all of these industries.
Mr. Ramstad. Ray?
Mr. Waldron. Mr. Chairman, this is a--earlier it was told
me to me, in a crisis, Congress works the best. And in a
crisis, it appears that the chamber on labor is working well on
that. So I would support the efforts of a broad-base tax cut on
that.
Mr. Anderson. And I think--we do not have a formal plan as
a company, but as an individual, I would also concur.
Ms. Carlson Nelson. If I could just comment, please, do we
have to choose? I know I heard--this is about choices.
Mr. Ramstad. Well, let me just ask, Marilyn, in addition to
the--and certainly we are not going to limit the tax relief
side of the stimulus package to one revision or one element of
tax relief, but in addition to what you mentioned--by the way,
I am a co-sponsor of that important legislation.
Ms. Carlson Nelson. Oh, I am thrilled.
Mr. Ramstad. Which tax relief, one or several, would do the
most to help your industry and your laid-off workers right now?
Ms. Carlson Nelson. Well, I think it is really twofold,
because in that package, there is both this sense of the
corporate traveler--Jaye, I agree. We have to look for levers.
How can we move the most people in the shortest amount of time?
And getting corporations to move their business travelers is a
huge piece of getting the economy going again. At the same
time, I think that the employees are also citizens, and to the
extent that in combination with an individualized tax credit
would have all of us have the perception of moving again. And
it has to do with freedom, it has to do with healing, as well
as having to do with economics. So I think a broad-based
package that said the Federal Government stepped in when
necessary and did something that we never, ever contemplated,
had to protect us all, stop business for some period of time,
and now we just need to jump-start it, or prime the pump,
however you want to describe it.
Mr. Ramstad. Thank you, Marilyn, and thank you to all of
the witnesses on this panel.
Who has got the next question? I will yield back to our
distinguished chairman.
Senator Wellstone. Thanks, Jim. I wanted to--there are a
couple of things I need to do. First of all, I do not think--
Mr. McLaughlin, who is here--Hennepin County Commissioner, we
recognize you. I want to thank--you did already? Oh, okay.
Mr. Ramstad. He got a standing ovation. [Laughter.]
Senator Wellstone. And, others, we introduced you earlier,
but thank you for being here. One thing that I was going to
say, Mr. Anderson, is that--and I shared this note with
Congressman Ramstad, that we are certainly absolutely impressed
with your business decisions and what you are trying to do for
the country. In some ways, your testimony makes it kind of
clear how fluid the economy is. And actually,--there are a
number of people here that represent workforce development--I
think it also shows the importance of job training to enable
people to move into those emerging sectors where there is going
to be job creation. I think that has to be an important piece
of what we do, and I may want to get your response. And then I
guess I would ask--I am not going to ask all of you, but
Marilyn, your testimony was very powerful.
Maybe, David, I would ask you to speak briefly to your
priority for the small business sector. I have tried to make
sure that that is a key focus of our hearing today. And then
Jaye and Ray, if you do not mind, would you be willing to lay
out, based upon what you are hearing from so many of the
workers, employees and panelists, the priority in terms of
things that need to be done. That is, here are the two or three
top priorities, ASAP. If we could go that direction. And,
Marilyn, any way you want to chime in, go ahead.
Let's start with Mr. Anderson.
Mr. Anderson. The first comment is that I agree thoroughly
that since we are creating thousands of new jobs every year,
and we probably have this kind of skill set that was talked
about here, we will need a balance of the kind of skills that
are also used in the travel industry, etc, for our
organizations to grow. But I think that one of the things we
appreciate in terms of what you are doing from a short-term
basis is that a likely displacement in our own travel that
existed, hopefully on a very temporary basis. In some of those
places, we hope to see that part of the economy recover,
because we certainly use travel--I spend most of my time
traveling, and we certainly need the direct communication that
we get by moving from place to place. So we would hope to
create as many jobs as we possibly can, but we would also look
for recovery in this portion of the business.
Ms. Carlson Nelson. I know that many of you think of us as
a large corporation, and we are. But what we forget sometimes
is that because we started on some borrowed money and were
entrepreneurs at heart, we have a huge franchise network. We
own about half our restaurants, and the other half are owned by
individuals, and many cases family. We do not--we own a very
small number of our country's Embassy Suites hotels. They are
owned by families. The travel agencies tend to be very small
businesses, and in many cases, they only employ three or four
people. There are 30,000 of them, and about half of them are
very close to going under. So, Paul, I could not sit here if I
didn't help to advocate, Senator Wellstone, some help for small
business. And I understand that there is discussion of
extending the definition of the disaster loan in the Small
Business Association to give some sort of very low-interest or
no-interest loans to some of those small businesses for some
short period of time. I think it is an extremely important
piece of legislation, and Carlson also favors the concept of
some kind of training incentive to retrain travel and
hospitality workers. We think that that would be, again, very
thoughtful and appreciated, and also have a lever in terms of
both retraining them ourselves and helping to have others
retrain them for other jobs that emerge in the economy.
Mr. Ramstad. David?
Mr. Olson. Senator, just two quick things. When we talk to
small businesses, the number one issue they bring up is helping
them reduce health care costs. So anything we could do on the
health care front would be very important. And then overall,
again, anything we can do to stimulate consumer confidence, we
think that would help all different types and sizes in
businesses.
Mr. Waldron. Senator, that is a choice that a lot of
families make between health care, which is unreachable in some
cases to a lot of families in Minnesota. But I would have to
say, in order to rank them, I would rank probably health care
and then unemployment benefits very close to that, and then
retraining, as in the Dislocated Worker Program.
Ms. Rykunyk. Senator Wellstone, I would agree that I think
that subsidizing COBRA payments for either unemployed or
underemployed workers is a key piece. I think elimination of
the waiting week for unemployment benefits, and I also think
giving some consideration to looking at unemployment benefits,
which are sort of a pass-through, using the Swedish model, so
that employers can keep workers on the jobs, and allow a higher
unemployment benefit if their wages are reduced below 50
percent, so that unemployed workers or underemployed workers
are allowed to have a full salary by increasing the amount of
wages that they are allowed to make. That way, employers can
have their workforce working on shorter hours, and people who
are working on short hours then can have enough subsidy coming
from their unemployment benefit to allow them to really
maintain the lifestyle that they have.
Senator Wellstone. Well, we are going to go to the final
panel, and we are going to hear from two economists that the
State of Minnesota has always relied on for their good
judgment. I will tell you, along with the first panel, this was
just powerful--Jim used the word ``compelling''--testimony, not
just for us, but for our State in terms of what you had to say,
and we really thank each and every one of you for being here
with us. Thank you so much. [Applause.]
Why don't we have everybody stand up for just a quick
break. [Pause.]
OK. I am going to call everybody, if I could. I know some
of the students--thank you for being here, you guys. And thank
you so much. I am going to call the hearing back to order, if
we could get everybody to sit down. OK. We are going to--if we
could get everybody's attention, we are going to bring the
hearing back to order. For those of you who are in
conversation, it is fine, but if could you move out into the
hall, that would help, or just come back in and join us.
Let me just say to all that are here, and I know that we
have many Minnesota journalists, as well. I would like to thank
the journalists for being here.
This is the last panel, but this is one of our most
important panels. So we want to be very serious in purpose as
we listen to Tom Stinson, who is Minnesota's State economist
and a University of Minnesota professor, Associate Professor of
the Department of Applied Economics at the University of
Minnesota, and he served as our State's economist since 1987.
Tom is widely regarded as an expert on Minnesota's economy, and
he will address Minnesota's economic status and outlook, as
well as the need for additional stimuli to boost the economy.
And Sung Won Sohn--who I will introduce now, but we will go
to each one of you separately--is Wells Fargo Executive Vice
President and Chief Economist. Dr. Sohn is a prominent
economist from Minnesota, and he will address the corporate
earnings growth in the coming quarters, investment spending,
productivity and production growth. He will also highlight
prospects for consumer spending, unemployment, as well as
Minnesota's loosening labor market. Dr. Sohn will discuss the
employment and consumer spending conditions he expects to see
over the next 6 months, as well as the possibilities for
recovery in the year 2002.
And we start out with Dr. Stinson. Thank you so much for
being here, Tom.
STATEMENTS OF THOMAS F. STINSON, MINNESOTA'S STATE ECONOMIST,
AND ASSOCIATE PROFESSOR, DEPARTMENT OF APPLIED ECONOMICS,
UNIVERSITY OF MINNESOTA; AND SUNG WON SOHN, EXECUTIVE VICE
PRESIDENT AND CHIEF ECONOMIST, WELLS FARGO CO., MINNEAPOLIS, MN
Mr. Stinson. Mr. Chairman, members of the committee, thank
you for allowing me this privilege to speak with you here
today. My name is Tom Stinson, as the Senator said. I am a
professor at the University of Minnesota and also the State
economist. I want to make sure that you understand that my
opinions today are those of an economist, and not the
University of Minnesota or the Ventura administration.
Economists face a problem when asked to submit remarks
several days in advance. There is always the risk that
intervening data releases will reshape their economic outlook.
When that happens, our previously prepared remarks do not fully
reflect our current perceptions of the economy's health.
Friday's payroll employment numbers was such an event. U.S.
jobs were shown to fall by 199,000 during September, and that
measured only the decline in jobs prior to the attack on the
Trade Center. The U.S. economy is now clearly weakening, was
weakening in early September, and it was not stabilizing as
some had projected. Looking forward, company announcements,
some of which were reiterated for you today, make it likely
that a further large decline in payroll employment can be
expected in October. We may find that the U.S. has lost a total
of more than a half a million in jobs on a seasonally adjusted
basis in August, September, and October.
This is a serious problem for an economy which needs to add
an average of more than 125,000 jobs each month just to keep up
with normal labor force growth. Any remaining doubt about the
likelihood of a recession is gone. Now the only question is how
deep and how long. The employment report didn't change my
belief that the current recession is likely to extend beyond
the first of the year, and that it could last a year or more,
but it did strengthen my belief that substantial immediate
fiscal stimulus is needed. Even though Minnesota's unemployment
rate was a full 1.3 percent below the U.S. average in August,
signs of softening were also visible in Minnesota prior to the
attacks.
In recent months, our unemployment rate has hovered around
3.5 percent, but payroll employment has actually fallen about
9,000 jobs since May on a seasonally adjusted basis in
Minnesota. The State withholding tax collections are falling
below forecast. In 1998, Minnesota's unemployment rate was 2.5
percent, the lowest in the Nation, and in recent years, we have
added an average of 10,000 jobs over the May-August period, and
instead now we are declining. Since the start of the year,
manufacturing employment in Minnesota has fallen by 12,000
jobs. That is a particularly disturbing statistic, since
Minnesota has had the propensity to increase manufacturing
employment counter to the national trends.
The problems facing certain sectors of the Minnesota
economy, particularly the airline, transportation, and the
tourism and hospitality sectors, have received considerable
visibility and were demonstrated graphically for you this
morning. There is no doubt that firms in those sectors and
employees in those firms face difficult times in the weeks
ahead. But this State's economic problems extend well beyond
those sectors, important as they are. Increasing airport
security, relieving cash flow problems of the airline industry,
and increasing air travel and tourism will not be enough by
themselves to turn the U.S. economy or the Minnesota economy
around. This economic slowdown was already being widely felt
across Minnesota prior to September 11th. The post-September
11th impacts will be even more widely spread.
Two forecasting services have attempted to forecast the
State's economic impact of the terrorist attacks in recent
weeks. One expects Minnesota's economy to be among the hardest
hit, placing us in the bottom quartile of the States. The other
ranks us just about average in growth after the shock, although
they find that Minnesota's economy would be relatively less
damaged by the reaction to September 11th than the U.S.
average. It is really much too early to gauge the extent of the
weakness brought on by September 11th attack in Minnesota, but
my own preliminary analysis leads me to believe that the
State's economy will perform at about the U.S. average over the
next 12 to 18 months. Again, though, let me emphasize that this
recession will be more severe in Minnesota than the last
recession that we went through, and it is likely to be felt by
all sectors of our economy.
Now, people who have worked in and around government for as
long as I have know that proponents for a wide variety of
spending programs and advocates of an equally wide set of tax
cuts often argue their proposal will be good for the economy.
And in the long-term, many of those claims can be justified.
But this is a time when a short-term focus is important. What
is needed is immediate stimulus. That means we need additional
money in consumers' pockets in January, February, and March.
And if we are to limit the recession to two or three quarters,
we need a significant amount of stimulus in 2002--in early
2002; 50 billion or perhaps even more. That need for immediate
stimulus eliminates the use of most spending programs. Those
programs, while they may be worthy on their own merit, simply
cannot tool up fast enough so additional funds reach the
household level of the first quarter of 2002. Most tax
proposals also fail to provide the consumer with a quick
infusion of buying power; $50 billion in tax cuts spread over
an entire year provides at best $12.5 billion in stimulus in
the first quarter, an amount well below what I believe is
important to be provided at that time. Corporate tax cuts,
changes in depreciation rules, may be a good idea in their own
right, but they also fail to meet the test of giving the
economy a jump-start 3 months from now.
Two tax changes which meet the immediate and substantial
test are a cut in the payroll taxes effective only during the
first quarter of 2002, or a second tax rebate, possibly one
based on payroll taxes paid in the third quarter or the fourth
quarter of 2001. Either of these actions would provide the
needed fiscal stimulus on a timely basis. Congress will need to
act quickly, though, for the administrative machinery needed to
implement these changes will need to be up and ready by the end
of the year if the stimulus is to arrive in time to affect the
first quarter of 2002.
Let me conclude by encouraging you as you evaluate
potential stimulus alternatives to draw a sharp distinction
between tax cuts and spending programs which may be worthy on
their own merit and those which will quickly stimulate the
economy. Tax cuts or spending programs which dribble out a
little money each week for a year or for more than a year are
unlikely to provide sufficient boost to economic activity next
January when the jump-start is needed. And let me remind you
that a spending program which authorizes new money which will
not actually be spent until late in 2002 or 2003, or tax cuts
which largely have their impact in late 2002 or beyond, even
have the possibility of being counterproductive, creating
inflationary pressures by adding stimulus after the economy has
already begun to recover. What the economy needs now is a
quick, controlled injection of additional spending power into
the economy, not the long-term infusion promised by most tax
spending initiatives that I hear.
Thank you for the opportunity to appear here today.
[Applause.]
[The prepared statement of Mr. Stinson may be found in
additional material.]
Senator Wellstone. Tom, we are indebted to you for, I
think, just extremely important testimony. Thank you.
Mr. Sohn?
Mr. Sohn. I am pleased to be here today to talk about the
economic and financial conditions related to the economic
stimulus program. Again, I am Sung Won Sohn, an Executive Vice
President of Wells Fargo Banks. And as Tom pointed out, again,
the opinion here is mine, not that of Wells Fargo & Company.
Minnesota is not immune to the national manufacturing and
economic downturn. After enjoying a decade of above-average
employment growth, many of Minnesota's top industries face
tough times ahead. As a result, employment has not grown in
Minnesota compared to a year ago very much. The Iron Range of
Northern Minnesota has seen a decline in demand for taconite
pellets, as well as the auto parts industry sees a flat or
weakening demand. Intense competition from foreign steel
manufacturers is also behind much of the decline in demand for
taconite. Employment in metal mining is down 24 percent, or
1,300 jobs from a year ago. Manufacturers in industries such as
computers and telecommunications equipment, printing,
publishing, paper, lumber and wood products, rubber and
plastics have all seen significant employment declines. We also
know that many of Minnesota's largest employers have announced
massive layoffs, including Honeywell, Qwest Communications,
Northwest Airlines, and the list goes on. As a result,
Minnesota's labor market is beginning to lose.
Since the first of the year, Minnesota's employment rate
has spiked 60 basis points to 3.6 percent, though still well
under the national average. Unemployment is expected to become
an even larger problem over the next two quarters, as Minnesota
continues to enter the labor force, continues to--Minnesotans
continue to enter the labor force, even as employment growth
grinds to a halt. It is important to realize that the
challenges facing the Minnesota economy over the next year are
cyclical in nature and do not reflect any fundamental or
structural defect in the State's economy. In fact, in the long
run, Minnesota's economy is well positioned to continue to
perform well. The State benefits from strong native migration
from Wisconsin, California, North Dakota, Illinois, and Iowa in
a notoriously slow-growth Midwest region. This positive
migration drives State population growth and boosts demand for
consumer goods, housing and services, while also allowing
above-average employment growth. In addition, Minnesota has
well-diversified industries that--industrial base that keeps
economic employment volatility to a minimum.
During the last national recession in 1991, Minnesota's
economy never really contracted, allowing economic growth to
rebound more--much more quickly, and even with more--bigger
than other regions of the country. Minnesota did not experience
the real estate boom and bust that hit the rest of the country
or experience the dislocations that the real estate bubble
caused.
The current downturn is likely to hit closer to home,
however. With many of Minnesota's major industries facing
deteriorating business conditions, the economic decline is
likely to be more abrupt and broadly based this time around. To
date, the aggressive and rapid response of the Federal policy
makers, including the Federal Reserve, provides a flow to
Minnesota's economy, setting the stage for an economic rebound
hopefully sometime around mid-year 2002.
Congress's swift action to make enact stimulatory tax cuts
aimed at boosting consumer spending, as well as recent
initiatives to provide additional spending on airlines, defense
security, and disaster relief, should go a long way toward
getting the national and Minnesota's economy back on track.
On balance, we believe that the next 6 months will entail
worsening employment conditions and continued hesitance of
consumers and businesses to commit to long-term purchases and
investments. However, we expect an economic recovery sometime
in the year 2002, returning the State of Minnesota to its pre-
slowdown expansion path.
I agree with Tom that at this point, the Nation needs an
economic stimulus program. We want to make sure that this does
not become a prolonged, deep economic recession. Consumers,
businesses, the rest of the economy in the Nation--in Minnesota
do need help, and to some extent we have seen Congress and the
Federal Reserve act to support the economy of the United
States.
But there also is a danger of overdoing it. The best place
to see that is through the bond market. If you look at the bond
yields, bond yields are today actually higher than it was on
September 10th. We call the bond market a vigilante. They worry
about inflation. They do not worry about overstimulation. They
are saying that with all of the liquidity in the economy from
the Federal Reserve and existing and additional economic
stimulus coming from Congress, could we be setting the stage
for more inflation later down the road? Of course, it has
happened in the past, and that is one of the reasons why bond
yields are higher. Not only have some of the long-term treasury
bonds gone up, but if you are trying to borrow money in the
corporate bond market, the yields are significantly higher,
adversely affecting small, medium and large businesses. So I
think that we need to again take into consideration as to what
the market is saying. Not you, not me, but what the market
tells you. The market is saying that we need a stimulus, but
let's not overdo it.
To some extent also, the economy depends importantly on not
only consumer spending, what the government does, but also I
say to some extent right now, the chief economic policy makers
are Donald Rumsfeld and Colin Powell.
Depending on how the war on terrorism unfolds, we may find
that the economic contraction that we are probably experiencing
is not as bad as we anticipated. In an optimistic scenario that
I put together, let's say the war on terrorism goes pretty
well, we can put some kind of a reasonable definitive end to
that, and we can get our friends overseas to take care of their
own terrorists, so we do not have to commit our ground troops.
In that case, I could see the repetition of what happened
during the Gulf War. Back on January 17th of 1991 when the U.S.
entered Kuwait, consumer confidence jumped, the stock market
went up. Why? Because uncertainties of the period, not knowing
what to expect. That, to some extent, diminished and even
ended. As a result, the economy performed quite well, and I
think we should not rule out the possibility that something
like that could happen again.
Thank you, Mr. Chairman, and members of the committee.
[The prepared statement of Mr. Sohn may be found in
additional material.]
Senator Wellstone. Thank you Dr. Sohn. [Applause.]
We are going to start out questioning with Congressman
Sabo. I want to recognize Jim Koppel, and the reason I want to
do that is Jim is the director of the Children's Defense Fund
in Minnesota. And frankly, I think this whole discussion today,
which has been just incredible--all of the panelists, I think,
have been very great. Some of the most important issues we face
are those involving children. I would like to thank you for
your fine work and the Children's Defense Fund for their fine
work. Thank you, Jim. And I--and let's do--[Applause.]
The truth of the matter is, if I mention names, so many
people in our office have been working on this, and it would be
about ten people, and so I won't do that. But I am really
blessed to have a lot of good people to work with, and I want
to thank everybody in our office for their work. Marge Baker
came out from Washington, DC, and it is great that she is here.
She is quite a pro, but we have just as good of pros at the
Minnesota office, but they are ten people to recognize, with
Connie Lewis directing the office, and I would like to thank
you all for your help. Thanks so much. [Applause.]
Mr. Sabo. Thank you, Paul, and thank you to the two
panelists for their excellent testimony. I think you have good
advice.
To Dr. Sohn, I think there is danger that we may for--if
the impact of what we do raises long-term rates, that can be a
negative for us. And all of the political pressures in the
Congress to do something of what everyone wants in the package,
somehow we need to maintain some discipline.
But I also agree very much with Mr. Stinson. We have to do
something in a fashion that has immediate impact. And clearly,
a rebate of some kind is a very appropriate response. My
judgment has been that in our earlier action, we were probably
too small in our immediate reaction, and too generous in the
long-term tax cuts that would pass. So hopefully, we can find--
and it is a little complicated administratively, I understand,
to get benefits to the people who simply pay payroll taxes, and
maybe not income taxes, but they clearly should be a major
benefactor of our next tax bill.
But let me ask--but the other way we get money to people
quickly is through the ongoing safety net. And from all I
gather, we had more and more holes in it. And one of the things
I am curious about as you look at Minnesota is the degree of
the people who have moved from employed to unemployed are not
eligible for unemployment compensation. Because nationally,
there is a significant number of people today who, because they
are in and out of the labor market, often are the first laid
off. They become ineligible for benefits. And I am curious if
that is our pattern in Minnesota.
And let me go beyond the concern I have in how we structure
whatever additional benefits we may be able to do on health
benefits. Much of the focus here are people impacted by
September 11th and related to the airline industry. I, frankly,
have concern that the political impetus may be to deal simply
with those people. And I do not know how in equity we do not
also deal with people who were unemployed earlier because of
the slowdown in the economy. And it just strikes me, to be
fair, whatever we do must have impact not only for people
directly impacted by the events of September 11th, but people
who were laid off because of the economic slowdown earlier.
And, again, I am curious to what degree people in Minnesota
fall out of the traditional safety net of unemployment
compensation and some of the other benefits we have.
Mr. Sohn. Let me just--you can get into the details; you
have got more data than I do, probably. But the labor
participation rate in the State of Minnesota was and still is
one of the highest in the Nation. It is not only because we
like to work, good work ethic, but also during the booming
economic times, we were able to attract mothers, retirees,
students, and others to join the labor force.
Now that the labor market is not as healthy as it used to
be, many of those people work part-time. They were laid off,
and they decided to just drop out of the labor force. They
disappeared from the radar screen. And they are not probably
eligible for the kind of benefits that we are talking about.
And I believe in Minnesota, especially in Minnesota, because,
again, so many people joined the labor force, given the very
tight labor markets, the kind of people that you are talking
about that were not eligible for benefits is probably pretty
substantial. And so I will certainly, you know, support that
argument. That is, we really need to look beyond what is on the
radar screen and then see who has disappeared.
Mr. Stinson. Mr. Chairman, Representative Sabo, expanding
the coverage of unemployment benefits, adding an additional 13
weeks, expanding into providing better health care subsidies
and things like that, those all fall in the list of things to
me that are important to do because they are good things to do.
But in terms of having an actual impact at the time that we
need to have an impact, which is January, February, March, I
think an awful lot of the people that are affected by the
current slowdown are not going to have exhausted their
unemployment----
Mr. Sabo. Excuse me. I guess my question does not relate to
the persons who are initially eligible for benefits. It relates
to the question of the people who, because of how we
constructed unemployment comp, are ineligible for--not for
extended, but for initial benefits. If we have any handle of
that.
Mr. Stinson. OK. In terms of the number of people that are
denied claims or out of the labor market, I don't think we have
a good handle on that at all. I will say, though, that
Minnesota, as Dr. Sohn has pointed out, has a very high labor
force participation rate, and this high labor force
participation rate--in fact, we had a very tight job market,
really, up until the first of the year, and maybe beyond that,
has given us some protection against a deterioration of a kind
that you are talking about. Now, there are certainly people
that are going to be affected, but in terms of a widespread
impact on Minnesota, I just don't think that is going to occur.
Mr. Sabo. OK. Thank you.
Mr. Ramstad. We are very fortunate. This is an excellent
hearing, Senator Wellstone, and the staff deserves a great deal
of credit. And also because we had three outstanding panels and
we have two of our most distinguished economists here in
Minnesota for many years before us, so I thank you both for
your time.
And I guess my question goes back--I read, Dr. Stinson,
before and you repeated the prediction here today that
Minnesota's recession this time would be greater than it was
the last time. What are the reason or reasons for that? And,
Dr. Sohn, you too. Maybe you could each comment.
Mr. Stinson. Mr. Chairman, Senator Dayton, the 1990-91
recession really pretty much overflew Minnesota. In the period
1989, 1990 and 1991, Minnesota added 100,000 jobs over that
period, and that is the period that spans the recession. We
were the--Minnesota ranked third in the number of jobs created
during that period. Texas created a couple hundred thousand,
the State of Washington about a hundred thousand again, and
then Minnesota. All of the rest of the States, the big States,
California, New York, Pennsylvania, Ohio, something like that,
all lost population during that time. They lost income during
that time.
Now, the reason for that is a couple of things. One is that
Minnesota is a well-diversified economy. We have a wide spread
of jobs across a number of different industries. We aren't
particularly reliant on one particular industry for employment,
like the State of Washington is right now, and some things like
that.
Two, we didn't have an overconcentration of defense
industry in the State. Part of what contributed to the national
economic slowdown was a coincident cutback in defense spending
that was going on at the same time. And so we didn't have the
problems of the defense cutbacks that California, for example,
had, and some of the Southern States and so on like that.
Three, while Minnesota is a regional financial center, we
didn't have the same kind of employment impact and economic
impact from cutbacks of the financial industry, which went on
again in the 1990-91 period. And so those three things helped
us go through a little bit better.
The other thing that helped in Minnesota clearly is that
Minnesota workers have a reputation as being a very productive
group of workers. And so when you were going to cut back
someplace, you did not choose to cut back the most productive
plant that you had, you cut back a plant that was less
productive. So that helped us.
Mr. Sohn. Back in the 1990-91 recession--some people call
that the banking recession or the real estate recession--we had
the savings and loan crisis across the country, and
unfortunately many of those institutions had shoveled out money
to the construction industry. And therefore, we had a crash,
basically, in Texas, Arizona, and other parts of the country.
Well, fortunately, back in 1990 and 1991, that didn't
happen in Minnesota, because we have much better banks here in
Minnesota than they do in Texas and elsewhere. [Laughter.] And
so that was one of the reasons.
Senator Wellstone. Much better than Texas. [Laughter.]
Mr. Sohn. And so that was one of the reasons. The other
reason, as Tom pointed out, is we are a lot more diversified.
In fact, you can measure diversity of a State. If 1 is most
diversified and 0 is least diversified, our diversity quotient
is a 0.75, which means we are much better than the average.
And, in fact, our diversity has been improving.
And, again, I am not going to go into industries that Tom
has already mentioned, but we are a lot more diversified than
we have been and that can actually be measured. In addition,
agriculture has been a source of economic stability. We
recognize that prices are lousy, they are not good. But
unfortunately, farmers are able to get help from the Federal
Government, and that has been a very good, important economic
stabilizer.
We also have increasing emphasis on health, not only to
hospitals, but also obviously the medical technologies such as
Medtronic, etc.
Education has been another important growing source of our
economic pie. And so I say, you know, these are some of the
reasons why. I guess I am willing to say that we may actually
end up being somewhat more stable than the U.S. economy. So I
am probably a bit more optimistic than Tom is that I think if
we do get into a recession--we could be in one already in the
U.S.--Minnesota will probably come out a bit better because of
the diversity that I have talked about.
Senator Wellstone. For everyone, what we are going to do
is, Congressman Ramstad will go with questions, and then I will
ask each of my colleagues just for a final minute conclusion on
your part, okay?
Mr. Ramstad. Thank you, Mr. Chairman.
Thank you, Dr. Stinson, Dr. Sohn, for sharing your comments
with us here. I will be very brief.
Chairman Greenspan has counseled us on the Ways and Means
Committee that in order to provide a stimulative effect to a
$10 trillion economy, that any package we craft must be at
least $100 billion. Do you share that judgment? And he also
said it should be compressed, which you testified to, to
provide a true stimulus.
The first question is: Do you agree it should be $100
billion to stimulate a $10 trillion economy? And the second
question is: What time frame would you recommend that we limit
any tax relief to?
Mr. Stinson. Mr. Chairman, Congressman Ramstad, I think
Chairman Greenspan is right on, and former Secretary Rubin has
also made that point as well. I think that the $100 billion
amount that he is talking about includes some of the action
that has already been passed by Congress.
Mr. Ramstad. The $38 billion rebates. I think that is
right.
Mr. Stinson. Yes. And so I think somewhere on the order of
$50 or $60 or $70 billion. It is, you know, just money, I guess
is the way to put it. [Laughter.] But we do not really know.
But $50, $60, $70 billion. And for it to be quick--January,
February, March. That is when we need it. And in order to do
that, we need to do something very quickly.
One of the things that we learned in Minnesota, looking at
changes in tax rates how it affects withholding, is that even
though you change the withholding tax rate and publish new
withholding tax schedules, all firms do not pick those up
immediately. The big national accounting firms or big national
payroll firms pick them up, but the smaller firms that buy
their own accounting packages once a year wait until the start
of the next year before they pick it up. Well, that limits the
effectiveness of something if it is not in place so it is
included in the accounting packages and the payroll packages at
the start of the year. And so that is why I think we have a
wonderful opportunity here to actually use the fiscal policy
tool and in a quick and convenient manner.
Mr. Ramstad. Just so I am clear, any stimulus package we
come up with should be limited to--all of the elements should
be limited to the 3-month duration?
Mr. Stinson. Any additional stimulus should be limited to 3
months, I think.
Mr. Ramstad. Dr. Sohn?
Mr. Sohn. Well, I think we probably need a more longer-term
horizon. I was looking at the Wall Street Journal last week,
and it had a wish list of all of the amount of money that we
can spend, and I added it up, and it was $426 billion. And
clearly, that is too much.
I look at it this way. We have a $10 trillion economy, and
let's assume that the economic decline will be about one full
percentage point over the 1-year period. It could be one, it
could be two, but to offset that, we do not need economic
stimulus of $100 billion because of the multiplying effect.
If we had about a $40 billion economic stimulus program,
and then we multiplied that by the multiplier effect that the
economists talk about of, let's say, 2.5, then we are talking
about a $100 billion. That is assuming that economic decline is
1 percent.
When Chairman Greenspan talked about an economic stimulus
program of at least $100 billion, I assume that he is thinking
that economic declines could be more than one full percentage
point.
The point I am making, I guess, is that I think in these
discussions, everyone wants to get help from, you know,
airlines to bus drivers to probably banks. But we are
approaching really to the outer limit of overdoing, what I
talked about earlier. And so I think we really need to be much
more cautious.
I also recognize that we need economic stimulus now to make
sure that our economy does not slide into a prolonged economic
recession, but also to present an opportunity to provide some
incentives to make sure that cash flow is improving in the long
run. And so I would not necessarily limit it to what would
affect the economy in the next 3 months. I think, you know,
there was room to improve productivity and economic growth in
the long run, as well.
Mr. Ramstad. Let me pin you down. Would 1 year be adequate?
Mr. Sohn. No, I would actually go beyond that. For
instance, investment tax credits could go beyond 1 year. You
know, some people have talked about, for instance, COBRA tax
cuts. And some might say, why would you need COBRA tax cuts?
Well, today 85 percent of all businesses in America, they are
service-related businesses, and they do not necessarily benefit
from capital equipment, such as machines. And so one of the
ways to help them produce more jobs in the future is to improve
their cash flows. And we can improve cash flows by giving them,
let's say, a corporate income tax cut.
You know, if I am going to hire people as a business
person, it could be a small job share, it could be a computer
software company, I have to have some understanding that, you
know, cash flow will stay with me in the long run, not just the
next 3 months. I am not going to hire people based on
additional cash flow for the next 3 months.
Mr. Ramstad. Well, I have never heard Congress agree on a
solution, so today is no exception. Thank you both for being
here. You are great Minnesotans and great economists. Thank you
both. [Applause.]
Senator Wellstone. We will just take 1 minute to conclude,
and I also want to announce that the record is going to be kept
open for an additional 10 days for additional testimony.
Anybody here that has anything you want to put in writing to
the committee, please do so.
Congressman Sabo, we will start out with you.
Mr. Sabo. Thank you, Mr. Chairman, for holding this
hearing, and thank you to all of the panelists. I am sorry I
missed some, but it was a good hearing. We have important work
to do as we head back to Washington, and I hope we have some
wisdom and some compassion in putting a package together in the
next several weeks.
Thank you.
Senator Wellstone. Congressman Ramstad?
Mr. Ramstad. Thank you for sharing, once again, and I just
want to say that being here today makes me both proud and
grateful to be a Minnesotan. To see labor and business
employees, management, educators, economists, all Minnesotans
assembled here to provide us with input is very, very important
and very special. And all of you here today certainly represent
not only the greatness of Minnesota people, but also the
goodness of Minnesota people, so I want to thank you again,
Paul, all of the colleagues here today, thank all of the
witnesses, all of the people, the audience, those of you who
are here, the high school students, the teachers, public
officials, and even the media. Thanks for covering this so we
can educate and let more Minnesotans know about this
important----
Senator Wellstone. Jim, and we are willing to give
interviews to the media? [Laughter.] We will. Let's give a hand
for the media. [Applause.]
Mr. Ramstad. I believe they all know, whenever they are
hard up for an interview, they have got my phone number.
[Laughter.]
But bottom line, I think Congress clearly needs to pass an
economic stimulus package that not only provides tax relief,
but also economic assistance for laid off workers. And believe
me, I pledge to continue to work in a bipartisan, collaborative
way with you, Paul and Marty all of the other colleagues, and
with the Congress and with the President to do just that. So
thank you very much. [Applause.]
Senator Wellstone. I think I pretty much ditto what Jim
just said. You know, it is odd, but in an ironic way, but not
in a bitterly ironic way, given all of the uncertainty in our
world, and all of the uncertainty in our country, this has been
some of the best time that I have spent with Minnesotans. I
think all of the testimony was very substantive. It was very
important to have all of you here representing I think a good
part of the diversity and richness of Minnesota. I really feel
good about this gathering. Because I don't think anybody is
doing this for symbolic reasons. I think everybody that is here
is very serious in purpose, and I think we all know what this
means.
And just to summarize what I heard, which really went
through all of the panelists, we are talking about an economic
downturn, we are talking about a recession, we are talking
about hard times. We do understand that this has cut across a
broad section of the population. Whatever we do needs to be
large enough to make a difference.
There are some key principles we must adhere to. We have to
be prudent about how we do this, but large enough to make a
difference. It has to be short-term. We need to get the money
in the hands of consumers who will spend it. And I think that
we also agree that the focus on the private sector is
critically important in terms of how we rebuild this economy,
and where the growth is and where the jobs are, and people
being able to work and being able to consume.
And the other piece of it--and Congressman Oberstar did
this earlier, but, you know, it is true that Mr. Anderson from
Northwest Airlines, did come out with a strong statement saying
the employees have to get the help, too. And we have to make
sure that the working families in our State fit in and are a
central part of this economic recovery package.
I would like to thank everybody for being here, and this
hearing is adjourned. [Applause.]
[Additional material follows:]
ADDITIONAL MATERIAL
Prepared Statement of Kelly Doering
Thank you for inviting me to present today. My name is Kelly
Doering. I am the President of E-Travel Experts. We provide services to
online Airline websites and online travel websites. We provide a board
range of service and technical support functions to the travel
industry. We are a profitable and privately held start-up company
founded in late 1997. We focus on operational excellence and offer high
quality and low cost services. We operate as strategic partners with
our clients and we share the risks, Our clients include Northwest
Airlines and Orbitz. Between these two clients they issued over 500,000
Airline tickets in the month of August. This is a high growth area; we
have grown from 5 employees to over 200 in less than four years. We
have aggressive plans to grow our travel technology services to where
we will double or triple in size over the next year.
There are three things I would like to emphasize today: First
online travel sales offers a cost effective way to sell, service and
distribution Airlines tickets. Second is that we are bringing new jobs
to both metro and out-state Minnesota. Third since September 11th we
have both short-term financial risks, and long-term uncertainty that
will affect our access to capital and therefore affects our growth.
DISTRIBUTION
Why is E-Travel Expert's emergence important? Online sales offer
the model for the Airlines to succeed. Distribution is usually the
third highest cost of an Airline behind labor and fuel. Airline and
travel websites are critical to the recovery and success of any Airline
today because online sales offer a cost effective way to sell and
service distribution channel. Travel websites and E-Tickets promote
economies of scale that are critical to Airlines success. Internet
ticket sales offer an ease of use and convenience for an increasingly
technology savvy customer base. Travel websites also offer and promote
many ancillary services such as Internet Check-in and Airport
Electronic Services Centers.
JOBS
So what does E-Travel bring to the Minnesota economy? Through the
services we provide we create the necessary bridge from service jobs to
light technical and online functional expert positions that support the
online sales process. We bring new jobs that provide alternative and
expanded career options for new and experienced travel people and
customer service representatives. These jobs offer experience in
Internet technology and E-Commerce and what we call `technology with a
touch' as with e-commerce customer service agents. We have been able to
bring these jobs to both the Eden Prairie and Mankato, Minnesota.
The Mankato community is very active in attracting and growing
technical jobs. As part of bringing new jobs, training, has been and
will continue to be a critical part of our growth. We are currently
involved in a grant with MN Job Skills Partnership and Rasmussen
Business College in Mankato to build our training program. We are also
looking at the Operation Green-Thumb initiative along with the
Technology Plus Center in Mankato. This program will promote technology
training in Minnesota.
FINANCIAL IMPLICATIONS OF THE SEPT. 11TH TRAGEDY
The travel industry crisis creates both short and long-term
implications for E-Travel Experts. We have a proven, profitable
business model and we have not had to do layoffs. We take a strategic
partner approach to our client relationship. However, our revenues are
tied to Airline ticket volumes. In this way we share the risks with our
clients so commensurate, with Airline revenues our revenues are down
50% from pre-911 revenues. However, our workload remains at high levels
so we are functioning at 100% costs.
The long-term economic uncertainty puts us at risk in our ability
to grow and meet the needs of our clients. In order for ETX to be
competitive we need to be able to ramp up to accommodate our existing
and potential clients. To date we funded our growth through retained
earnings rather than through venture capital. While we realize that
this would not always have been possible even without the September
11th tragedy we believe that now funding will be more difficult to
obtain.
In conclusion, we have efficient and operationally excellent
support to offer our clients as they expand their online sales as a
cost effective distribution channel. We intend to continue to offer new
Internet travel technology jobs to MN and we ask for your continued
support of the travel industry, as well as support for retraining
displaced workers in Minnesota right now so we can continue to be there
for our clients and to help build on their sales technology and
distribution strengths.
Prepared Statement of Roxanne Leake
Mr. Chairman, and Members of the Committee:
I am here as one voice speaking on behalf of many Northwest
Airlines employees on the effects of the September 11th attack on the
United States of America. My name is Roxanne Leake. I am married and
have four wonderful sons, Jacob(8), Joshua(6), Jarrod(5) and Jordan(3).
We live in Lakeville, Minnesota, which is about ten miles south of
here. I would like to express to you today the commitment required to
be a Northwest Airlines employee, the enjoyment of my job, my role
during the crisis, and how Northwest Airlines terminated my employment.
As with any company, qualifying for employment requires interviewing,
screening, and a training process. Because of the unique employment
positions at Northwest, this process is more in depth than for most
other entry-level positions. Each individual must qualify for each
level within the process. Having successfully completed the interview
process, I was subject to a criminal background check and drug
screening. At this point, I was offered a position, which I accepted,
and began my training. The training was four intense weeks that placed
a significant strain on my family's financial stability. Our wages for
training were only sixty percent of the entry-level wage; thus I was
earning $6.36 per hour. As a family, it was decided to commit our
resources to support my training and the costs involved, because our
family supports each person when an opportunity presents itself. Upon
completion of my training, I began my probationary employment as a
reservation/sales agent. The probationary period is four to six months,
depending on the status as a full time or part time agent.
I loved going to work at Northwest everyday, something most people
cannot say about their job. The people I worked with directly tipped
the scales in regards to their service, enthusiasm, and dedication to
the company, each other, and the public at large. The reservation
agents took great pride in the service we gave to our customers. It is
a wonderful feeling to help families get the best possible fare for a
vacation or help someone to get across the country to attend the
funeral of a loved one.
The events of September 11th had a dramatic effect on the
responsibilities of the probationary reservation agents at Northwest
Airlines. Northwest Airlines declared an emergency and requested all
reservation agents, including probationary agents, to report to work as
soon as possible. I reported for work six hours early that day and
worked an eleven-hour shift. I felt it was my responsibility as a
citizen and employee to do everything I could to help people through
this crisis.
On September 22nd I received a call from Northwest Airlines
informing me that I was being laid-off. On September 24th, I, along
with many other probationary agents, was informed that my employment
was being terminated due to my probationary status. Later that day, I
received a letter confirming that I was terminated due to the effects
on the airline by the events of September 11th. To say that I was
shocked and disappointed is an understatement. The financial burden
placed on my family and the stress of long hours I endured during the
training and probationary period only to be terminated through no fault
of my own has left my family and me in a state of disarray.
I am diligently working at maintaining a positive attitude through
this chain of events. I came here to explain to you my commitment to my
family, my job, and Northwest Airlines. It is my sincere hope that I
have articulated this to you in this short time. All I want is the
opportunity to return to Northwest Airlines as a reservation agent.
Thank you for allowing me the time to share with you these words. In
conclusion, it is my goal to return to Northwest Airlines and I am
asking that you help me and.the thousands of other displaced airline
workers get back to our jobs.
Prepared Statement of George A. Logan III
Mr. Chairman, and Members of the Committee:
I am pleased to be here today to discuss with you several important
issues, but first I would like to take the time to thank Senator
Wellstone's staff for allowing me the opportunity to testify before
this committee today. I am a small business owner and the terrorist
attack on the United States on September 11, 2001, has greatly affected
my business, and my family's well being.
I have owned my own business since 1994. 1 was able to purchase my
first new roll off truck with the assistance of the S.B.A. in 1995. 1
have been very fortunate that my gross revenues for the business have
risen each and every year. My gross revenues for last year were over
$300,000.00 dollars. Unfortunately, this year will be much different.
The economy was slowing down, and my construction roll off revenue
was at it's lowest level in three years. I started bidding on projects
through the CERT program, and I was the successful bidder on the Penn
Co contract. This contract involved removing the construction waste
from Minneapolis/St. Paul International Air Port. This contract would
have generated almost $100,000.00 dollars of new revenue for my
business. Not only would I have had the increased revenue, but I feel
that if I was able to successfully complete the contract this would
have led to other new contracts, and contacts in the business. This was
my first big contract, and if successfully completed, I believe that I
would have had the experience that I had been lacking and would have
been able to successfully bid on larger and more lucrative contracts.
The Penn Co contract was canceled one week after it was signed. I
was told to come and pick up my roll off containers, and that the
contract was canceled. I would like to stress to the committee that the
contract was canceled, not just delayed or postponed. The project was
placed on hold until the Airport Commission could figure out whether or
not the new safety regulations would allow for the expansion project to
continue. The project may or may not resume. It is my understanding
that if and when the project ever resumes, that I would have to re-
submit my bid for the project. I would not be guaranteed that I would
be the successful bidder for the project. This cancellation of the Penn
Co contract is going to place a great financial burden on my company.
In order to bid for the additional work that the contract would
have generated I needed a second roll off truck. I had been saving up
for the past three years so that I would be in a position to purchase a
new truck if the business justified the second vehicle. I was finally
able to add the second roll off truck, and purchased five new thirty
yard containers. The cost for the new equipment was over $150,000.00
dollars. I now have the equipment, but no contract to help defray the
cost.
While my business is struggling to meet the increased expenses, I
have less money for my family. This has directly affected my family's
well being. I recently won a trip to Jamaica in a raffle at my son's
school. I was planning on taking the family on the first vacation we
have had since I started my own business. Now, even if I had the money
to go on the trip, I am not sure I would want to take my family on a
vacation where we would have to fly to the destination.
The President has said we should get back to doing things we would
normally do. This is hard in my case since almost a third of my revenue
for this year has been lost as a direct consequence of the terrorist
activity. I am not complaining about my losses. My losses have only
been economic in nature. I have not lost family or friends to the
terrorists, and my prayers and sympathy go out to those that have
suffered from the loss of family or friends. I just have to work a
little harder to make sure my business is successful, and any help your
committee can give, is greatly appreciated.
Prepared Statement Cheryl Dusek
As one of the many people who lost their jobs with Northwest
Airlines this past week, I became another statistic in an ever-growing
population of people impacted by the terrorism of Sept. 11 and its
affect on our nation's economy. I have counted myself fortunate as I
watch the heartwrenching stories of people who lost family members and
businesses that lost large numbers of their employees in this tragedy.
I still have my family intact and a spouse who is employed. At first I
did not think past the sadness I felt for those people to see the
impact this would also have on my family and me. I have been through
layoffs with three different technology companies since 1997 and
thought I was doing the prudent thing by choosing a more traditional
business when I last went through a job search. I had survived two
bouts with cancer and with a child in college wanted stability in my
life, so I took a position with NWA.
We were fortunate to be in the position of paying for a college
education for our daughter from my income--avoiding the need for either
her or us to take on student loan debt. We have lived in a comfortable
home in Eagan for over 20 years, have been able to provide for our
children's education and help provide support to aging parents whose
only income is Social Security. Suddenly I am concerned about my
ability to meet mortgage payments, pay for health insurance and most
importantly continue to meet our daughter's education expenses. I know
that we will find a way to survive--I learned long ago that you make of
your life what you are willing to work to accomplish. My experience
with cancer taught me to keep going. I took up marathon running to
celebrate my success over cancer at age 50 and know that the same
determination that allows me to run 26.2 miles at my age, will also
help me through this situation. But as a 54-year-old woman, I realize
that while my age may not have been a limiting factor in recent
employment searches, that is likely no longer true. My long working
career will mean that I will be viewed differently in a market where
companies will be looking to fill the positions they have available
with the least expensive ``resources'' they can find.
I realized that while I am feeling very uncomfortable personally
about my situation, there are a large number of people for whom the
impact is much more severe than what I am experiencing. When NWA
announced a reduction in its management staff of 1,000 people, they
were not speaking strictly of ``managers'' and executives. Management
staff at NWA refers to all positions that are not union/contract
positions. These are people in the finance, computer services, sales
and marketing, and administrative services areas of the company. Many
of these people have spent much or all of their working career with
NWA--a look at the term of service of those affected finds a lot of
people with over a decade of employment with NWA and some with more
than 20 years with the company.
I did a quick interview with a few of the people that I know who
lost their jobs and found some stories that show just how this layoff
will affect families (and futures).
An employee in the NWA Aerospace Engineering whose only work
experience has been with NWA told me the impact to him is devastating:
Lost all seniority even if called back to NWA--over a decade of
time with NWA
Lost medical, dental, disability and life insurance
Lost future pension contributions, 3 months accrued sick pay
Sole provider for family of five--one child and wife are full-time
college students
Degree in highly specialized field limits his opportunities for
employment to airline industry related companies most of which are not
faring well with the current economic situation.
Large numbers of people are already in the job market for positions
that his experience and education prepare him for--and the number of
jobs is very limited.
Retraining for a new career takes a long time and with 2 family
members in college even if he has funding to cover education costs, he
still needs to support his family during that time.
Relocation would interrupt the college education for his wife and
daughter.
Relocating means selling his home of 10 years--and the housing
market and home sales prices are certain to be impacted by the talk of
recession.
A 49-year-old Project Analyst with 6 years of employment with NWA
told me that he had planned (hoped) to make this his career home until
retirement. His story is also one of a sole provider: Wife just
enrolled in nursing school after many years as a stay-at-home mom.
Three children--one in college, one a senior in high school and a
student in junior high. Because of the education expenses, his budget
was already stretched thin prior to the layoffs. Now he knows that
unless he can find a comparable position within the time frame of his
severance he will either face a large amount of debt for education or
his wife will have to put off her plans for a nursing degree.
A 53-year-old single woman with 16 years at NWA has a different set
of concerns:
How to start over at age 53--when you are competing with young,
attractive people for jobs in a very fast-paced society that places a
premium on ``beauty''.
Pension issues--current information from NWA following the layoff
conflicts with what she was told previously about her pension. She is
looking at almost $200K that she had been told she could ``take with
her if she left the company'' and now she may no longer be able to do
so.
Not expecting to find a position with comparable pay.... takes a
lot of time to build up to the level she had achieved. This loss of
earning power impacts her ability to save for retirement via 401K and
Social Security.
``Singles'' have no one else's financial support to turn to in a
lay-off situation. They are on their own for insurance, etc.
Expresses concern about the number of long-time employees let go
while many younger, newer (and less expensive) people are still
employed.
Wants retraining.
Simply providing money to the airlines to strengthen their business
position is not going to solve the problems facing these people. Their
layoffs were permanent--they do not have the opportunity to be called
back to work once the business position of NWA improves. All of the
talk right now is about getting people back on planes with the thought
that will improve things throughout the travel related business
community. I think the reduction in travel has less to do with people's
fear of flying than with the economic situation of individuals and
businesses. Business travel is down--not because business travelers
don't want to fly, but rather because when times get tough the first
budget that gets ``whacked'' is travel. Leisure travel is very low at
this time of year anyway, but is further suppressed this year because
so many people are either fearing loss of their jobs or have already
been the victim of layoffs. These individuals are not going to spend
money to travel when they know their future is uncertain. Until
individual consumers have money in their pockets to spend on the
products and services that businesses sell, those businesses will not
be putting people back in the air. Travel is a convenient, but not
essential, means of meeting with customers, vendors, and co-workers in
our global economy. Teleconferencing and video conferencing options are
available either on-site for large companies and through business
services such as Kinkos....and is a much less expensive way to have
meetings. I understand the need to help out the airlines with the
losses they sustained during the 4 days of no flying, but the hotels,
restaurants, entertainment, and travel related services are feeling the
same pinch....the trickle down effect has not yet been totally
quantified. The real solution is getting people the help they need to
weather the layoffs and find employment. Only then will the economic
situation for all types of businesses improve.
Prepared Statement of Hydra Juhor
Thank you Senator Wellstone for inviting me to speak to you and the
whole Minnesota Congressional delegation. I feel privileged, to be able
to speak on behalf of the tens of thousands of hospitality workers here
in Minnesota and across the nation who have lost their jobs as a result
of the devastating bombing that took place on September 11, 2001 at the
World Trade Center.
My name is Hydra Juhor. I emigrated to the U.S. in June of 2000
with my husband and my children. I am a refugee from Ethiopia and am
here with refugee status.
I worked at LSG SkyChefs at MPLS/St. Paul International Airport as
a Food Production Worker--we supplied all of the in-flight food service
for NW Airlines and KLM. After the attack on the World Trade Center the
in-flight food service was drastically cut back and as a result I was
laid off from my job. Many of my coworkers have also been laid off.
As a Food production worker I was receiving $8.70 per hour plus
medical and dental benefits as well as life insurance. I have lost all
of my benefits that were provided to me through my union contract.
I am married and have eight children ranging from 30 years old to 8
years old, two of my children are still in Ethiopia. I do not know what
to do, my industry, the hospitality industry, has been devastated,
there are no jobs to go to especially jobs that provide the level of
benefits that I had at LSG SkyChefs. My husband works, but in order to
feed and clothe my children, pay our rent and other bills my husband
and I both need to work to bring income into our home.
Back home I was an accountant, I planned to go back to school to
further my education and learn about computers. I am trying to better
myself and attain a better job and lifestyle. Presently my plans are on
hold as I don't know how I am going to go to school until I can get
back on my feet.
The bombing on September 11, 2001 killed 6000 people and put a lot
of others out of work, but I feel confident that this nation will pull
itself together. One way of doing that is to make sure that people like
me and my co-worker are not left forgotten. Thank you again for the
opportunity and privilege to speak to you this morning.
Prepared Statement of Jaye Rykunyk
Mr. Chairman, Members of the Committee:
Thank you for inviting me to address you today. My name is Jaye
Rykunyk. I am the principal officer of the Hotel Employees and
Restaurant Employees Local Union No. 17. I am also a Vice President of
my International Union based in Washington DC. My local union
represents 5,000 workers here in the Metropolitan area.
Internationally, my union represents 300,000 workers who are employed
in hotels, casinos, restaurants, and airports and sports venues in the
United States, Canada, Guam, Siapan and the Virgin Islands. We cook the
food, we serve the drinks, we make the beds, we sell the beer and the
peanuts at the ball games and we make 95% of the meals served on
airplane flights originating in the United States and Canada.
The hospitality and food service industries are made up in large
part of workers who are minorities, women and immigrants. We have
served as the gateway to the American workforce and indeed to the
American dream for more immigrants than any other industry in the
history of our nation. Our workforce is the training ground for more
welfare to work employees than any other industry. In our union, we
have accepted the challenge of uplifting the standard of our industry
so we too may earn a livable wage, have medical coverage, own our own
homes, send our children to college and look forward to a pension which
will allow us to enjoy our retirement.
As our society has changed from a manufacturing economy to a
service based economy, the hospitality and tourism business has been
one of the fastest growing segments of the new economy. More jobs have
been created in hospitality than in any other single industry. Large
public investment has been made in building hotels and convention
centers through TIF, low interest loans or direct subsidy by brown
field clean up, building of infrastructure and other mechanisms. Tax on
hotel rooms, food and beverage sales, sports tickets and parking
surcharges have become a mainstay of the budget of the majority of all
cities who seek to attract visitors. Beyond these direct taxes are the
revenues collected by local and state governments for licensing,
taxicab fares, etc., etc. The list is long and diverse.
When a pebble falls in the pond, the hospitality industry is always
in the first ripple. The attack of September 11th was not a pebble, it
was a boulder. The effect on our industry was not a ripple, it was a
tidal wave.
The immediate impact here locally has involved the lay off of
thousands of hospitality workers in the metropolitan area. Our union
represents 1,100 workers at the MSP Airport. The majority of these
workers were sent home immediately following the attack. At the SkyChef
facility where the airline meals are made, the majority of the
workforce is made up of immigrant workers. Most of these workers are
paid below $12.00 per hour and most of them not only support their
families here but have an obligation to send money home to support
their families overseas. HMS Host provides food and beverage and retail
services inside the airport. Sales were down more than 50% in the first
weeks, and now are slowly rebounding. We have permanently lost 130 jobs
at SkyChef At HMS Host, we have lost 150 jobs.
October is the catchup month in our industry to recover from a slow
summer. We generally expect to have close to full occupancy in our
hotels. That occupancy has fallen to below 50% by the most current
forecast. The Radisson Plaza closed its white tablecloth restaurant, as
has the Minneapolis Hilton. These two restaurant closings alone will
throw close to 50 workers out of jobs. Prior to September 11th, the
workers in these restaurants would not give a second thought to re-
employment. Now there is literally nowhere for them to go. High end
dining has been adversely effected throughout the city. The prospect of
securing a job that provides benefits is non-existent to workers who
were at the high end of the income scale in our industry. There simply
are no jobs available for workers who are the most highly skilled. A
review of the want ads in the Sunday paper confirms this dire
statistic. The jobs are simply gone.
By far the large majority of workers in the hospitality industry
hold down two jobs to make ends meet. Even working more than 60 hours
per week, they are barely able to make enough to cover the basic
necessities. The main meal for most hotel and restaurant workers is the
one that is provided at no charge to them by their employer as a
benefit of working at the facility. In an area with one of the tightest
housing markets in the country, many of our members are already making
plans to move in with relatives because they know they will be unable
to pay rent or make a mortgage payment. If you own a home, invite
someone to share your space. If you rent, look for a room with a family
member. As much as we would like not to believe these grim statistics,
it is not uncommon now for many of our members to already live two or
three families in two-bedroom apartment. We have a number of members
who work full time who live in homeless shelters or in their cars.
The most vital pieces of information we put in our union newspaper
following the attack was about programs for heat share, food share and
emergency assistance. Our industry is in free fall and our members, who
are among the poorest workers in Minnesota, are without a parachute.
The reality of living on unemployment for our members is the reality of
not enough to eat and no place to call home.
The waiting week for unemployment benefits represents two weeks
without enough money to buy groceries. It represents standing in line
at a food bank or going through garbage cans behind grocery stores and
restaurants for what the wealthy can afford to throw away.
While there are numerous mechanisms by which workers can be helped,
I cannot stress to you enough the need for continuation of medical
benefits for laid off workers. Given the extremely low wages in many
sectors of our industry, and the large number of workers who will be
eligible for public assistance for medical benefits, the loss of health
insurance will be devastating not only to those workers as individuals,
but to the public health care system as well. Our public health care is
simply not equipped to handle the large number of workers and their
children who will suddenly become eligible if immediate action is not
taken to guarantee benefits through COBRA supplements.
I have brought a number of the laid off members of my union with
me. Let me introduce you to them. These 10 workers represent the best
of our industry and the best of our country. These are the workers who
are willing to fill so many of the jobs, which have made our cities and
our country and our economy strong. They work long hours serving the
public for low wages. They cannot be overlooked in the discussion about
recovery from the terrible tragedy that our country is now facing. If
you do not speak up for them, who will.
Prepared Statement of David C. Olson
My name is David Olson. I am president of the Minnesota Chamber of
Commerce. The Minnesota Chamber represents more than 3,200 Minnesota
companies of all types and sizes on state public policy and regulatory
issues. We work closely with state legislators and state agencies. We
do not focus on federal issues, and I am not here to offer specific
suggestions on federal policy initiatives. However, we travel the state
regularly to understand business conditions and our members' issues. I
believe I am in a very good position to share with you what our
members, and Minnesota businesses in general, are thinking, and quite
frankly feeling, about today's economy. I appreciate your invitation to
be here today and I hope my comments will help you in developing some
solutions to the issues Minnesota employers and their employees are
facing--solutions that focus on tax cuts and regulatory expense
reductions.
When I received the invitation to participate in this hearing, we
asked our members to provide input for my testimony. We sent a
broadcast fax and email to our members. We received an immediate and
impressive response.
While this is not a statistically valid survey, I believe it fairly
represents the views of Minnesota Chamber members, and Minnesota
businesses across the state.
The first question we asked our members was related to workforce.
Specifically, we asked them how their workforce numbers have, or will
change over the next few months based on the events of September 11.
11% of the respondents think their workforce will grow;
36% believe that their workforce will shrink; and
53% believe that their workforce numbers will remain the
same.
In terms of workforce, perhaps this is better news than expected.
Many manufacturing firms were having a bad year before September 11
so they already had trimmed their workforce. They are now hoping to
hold their own.
Other firms hope to reduce their workforce through attrition and
retirements as opposed to layoffs, but some companies do not have this
option.
A large Twin Cities area hotel reported that by year end, it will
have a 20% reduction in management staff and several layoffs of hourly
positions. A greater Minnesota travel agency with offices around the
state also reported a 20% layoff.
The second question focused on their company's profitability in the
year ahead.
19% of respondents foresee higher profits;
21 % are projecting about the same level; and
unfortunately,
60% of those responding are projecting lower profits.
Sixty percent is a big number, especially when you consider that
many companies, particularly manufacturing firms, already had one tough
year and now are not seeing any improvement.
A metro area footwear company said that in the two weeks after
September 11, business was down 35%.
One company stated that they had the worst September in 16 years
and sales were double in September of this year than what they were 16
years ago.
A manufacturer reported that raw material costs are up, as well as
labor and energy costs, yet customers are not willing to pay more,
putting even greater pressure on already thin profit margins. Yet
another manufacturing company said that they were just starting to see
an uptick in August, and the events of September 11 eliminated the
momentum towards an improved outlook.
Retailers are reporting slow or no sales of high ticket items, but
discount retailers think they will hold their own.
A company that provides parts to the airline industry was forced to
lay off 50 people since September 11. The owner commented that the
business is 57 years old, and they will be lucky to survive and stay in
business.
Those companies that support the housing industry, including a
lumber company and a window manufacturing company, say they continue to
remain strong, but expect a downturn later this year.
A florist actually reported that business is up since people are
sending flowers to ease the pain.
Finally, we asked our members how they are responding to the
economy and what actions they are taking to survive.
Across the board, companies are cutting expenses which include:
Personnel--layoffs when necessary and cutting hours of
remaining personnel.
Going without raises and bonuses if necessary. One
business owner reported that he is not taking a salary in order to
cover his employee's salaries and other business costs.
Delaying capital expenditures.
Cutting overhead, including travel.
Asking employees to consider lower cost health care.
options and pay more of their monthly premiums.
A number of companies expressed frustration about costs they feel
they can not control including energy, transportation (particularly
rail for manufacturers) and insurance costs, namely health care
insurance. Just a couple of the comments on health care include:
According to one business owner ``Currently, one of our
big concerns is health insurance. We had 60 employees a year ago and
now we are down to 42. Our health insurance went up 40% in March of
this year, and they are raising rates again in October by 15%. We are
being forced to look at dropping our coverage or just go to major
medical only. We would allow employees to upgrade to family coverage at
their cost, but the cost is so high I am sure many can not afford it.''
``The main reason our profits are lower is due to huge
increases in health insurance...every year it is up 20 to 30%,''
another stated.
And related to health care, several of our members took this
opportunity to share their frustration with the state employee strike.
While I know it is not a federal issue, it is like rubbing salt in the
wound of business owners. As one business owner put it ``As I fax this,
a major union is out on strike due to wages and health insurance costs.
Our health insurance renewal went up 29%. What is a small business to
do?"
While the overall outlook of business people is one of uncertainty
and lower profits, some companies do have a positive outlook for the
year ahead. A company that sells office computers and copiers is
projecting a 10 to 15% growth next year, for example.
In addition, firms are also doing whatever possible to boost their
sales and marketing efforts. In typical midwestern fashion, many
companies are stating they are working harder, smarter, longer and
leaner...a couple even mentioned they are praying a little harder.
As I said in my opening remarks, I am not here to provide federal
policy recommendations. I do hope that the commnents provided by our
members make it clear that Minnesota businesses do not need further
burdens and costs from any source and, for your purposes, their
prospects and those of their workers, would greatly improve if
government would continue to do its part to reduce both tax and
regulatory expenses.
Prepared Statement of Ray Waldron
Mr. Chairman and Members of the Committee,
Thank you for this opportunity to help with the Committee's
examination of Minnesota's economy in the aftermath of September 11.
I'm here today to speak on behalf of the working people in our state.
First let me say that we all recognize that the economic effects of
those events cannot be compared to the unimaginable pain and suffering
of the victims or the loss and sorrow of their families and friends.
But the economic consequences are real, and many working families
in Minnesota and around the country are feeling them.
Airline employees and other workers in the air transportation
industry h0ave been affected most immediately.
By Oct. 1, District 143 of the Machinists Union (IAM) reports that
1,327 union members who work for Northwest Airlines in the Twin Cities,
Rochester and Chisolm had received layoff notices.
The Airline Pilots Association (ALPA) has informed the Minnesota
AFL-CIO that 30 Northwest pilots were laid off, and 850 pilot layoffs
are expected in the next eleven months.
Reports from Hotel Employees and Restaurant Employees (H.E.R.E.)
Local 17, indicate that 20 percent (130) of Local 17 members who
prepare airline meals at SkyChef are on layoff.
Twenty cleaners at the Twin Cities Metropolitan Airport who belong
to Service Employees International Union (SEIU) Local 26 have been laid
off. That represents 20 percent of the airport cleaning contractor's
workforce. Union leaders report that airport officials are estimating a
possible 20 percent drop in airport employment overall.
Cutbacks in air transportation are leading to layoffs in other
industries also. State building and construction trades unions
anticipate significant job losses due to the delay of dozens of
airport-related construction projects necessitated by the sudden
shortfall in Metropolitan Airport Commission revenues.
Hotel Employees and Restaurant Employees are bracing for a possible
downturn in Minnesota's hospitality industry. Even workers who are not
laid off could lose health insurance benefits or have to pay higher
premiums or co-pays, if their hours are reduced. Health benefits are
tied to the number of hours worked.
The sudden and unexpected job losses that have taken place since
Sept. 11 magnify the effects of our state's economic slowdown.
Minnesota workers have been hit hard by a surge of dislocations. To
cite just a few examples, workers on the Iron Range are experiencing
job loss at a pace not seen since the 1980's. Hundreds of workers in
Albert Lea have been displaced by the terrible fire at a meat
processing plant. And the technology hardware manufacturing industry is
in a slump that began at least 6 months ago and could be extended by
the contraction in air transportation.
These are just a few examples of the situation of workers here in
Minnesota. Judging from news accounts and communications from the AFL-
CIO, it is clear that working people and their families in our state
and all around America are facing layoffs on a scale unprecedented in
recent memory.
Our government must respond to this growing human need with the
same kind of urgency, energy and resources it has already devoted to
aiding airline corporations.
In September, when Congress was considering emergency funding for
the airline industry, the Minnesota AFL-CIO urged our state's U.S.
Senators and Representatives in Congress to include a benefits package
for all affected workers. Senator Wellstone, Senator Dayton and a
majority of Minnesota representatives advocated such measures and
continue to do so. Minnesota's working families appreciate their
support.
We urge the Senate Subcommittee on Employment Safety and Training
to do all in your power to speed enactment of legislation to assist
airline employees and all workers who lose their jobs, in whole or in
part, due to the terror attacks and their aftermath.
This assistance should include income assistance and job re-
training allowances, extended health coverage, assistance with child-
care costs and hire-back provisions when employers return to a sound
economic footing.
In addition, Congress must provide for diligent public oversight of
how airline corporations use the $15 billion of public assistance
provided to them. Among other things, corporations that benefit from
the bailout must be required to honor severance pay and other
contractual obligations to laid off-workers.
As our government mobilizes in response to the immediate needs of
laid-off workers and their families, it must also develop policies and
enact legislation to assure the long-term economic security of all
Americans.
The AFL-CIO is convening a Special Committee on Economic Security
and drafting a comprehensive Economic Recovery Plan. I am sure that
representatives of the national federation will be sharing that plan
with the Committee in the near future. I urge the Members to give it
your most serious consideration.
Our nation is in a struggle against global terrorism to protect and
defend our democratic way of life. We have prevailed in previous
struggles because we have been united as a people. That unity has
derived, in no small measure, from every American's sense that each of
us has a personal stake in the future of this great nation.
Mr. Chairman and Members of the Committee, Minnesota's working
families have rolled up their sleeves and are pitching in to do our
duty at this critical hour in history. We are all in this together, for
as long as it takes. As we labor for liberty and justice, we count on
your leadership to assure economic equity and security for all
Americans.
Prepared Statement of Brad Anderson
Thank you Senator Wellstone, Sen. Dayton, Rep. Sabo, Rep. Ramstad,
Rep. Oberstar and Rep. McCollum for inviting Best Buy to speak.
IMPACT OF SEPTEMBER 11 TERROIST ATTACKS
During this time of national crisis, our top priority has been the
safety and well-being of all Best Buy employees and their families. For
that reason, we closed 100 Best Buy stores and 700 Musicland stores
September 11th. We lost a Sam Goody store in the World Trade Center,
but are grateful that all company employees are accounted for
nationwide.
The much more significant loss we have sustained is the missing
family members and friends of many of our employees who live or work in
the New York, Washington or Pittsburgh areas, or were on one of those
ill-fated flights. All of our stores reopened, except for our World
Trade Center location, and we are working to find jobs for those
employees in our other stores in the area. Of utmost importance to me
as we adjust to these events is that we continue to live our Company
values, including respecting all employees and customers.
Approximately 150 of our employees have been called up for military
service, and we salute their bravery and dedication.
Regarding travel, Best Buy told employees that no business travel
would be required for the two weeks after the tragedy. Since that time
we have resumed normal business travel. The majority of travel by Best
Buy employees is related to store openings. Since we are on track to
continue opening stores, this travel is expected to resume to near
normal.
While it is still to be determined what the final impact will be of
Sept. 11th's tragedies, in the week after the attack, our sales
declined modestly, resuming to near normal levels by the end of that
week.
As a public company, we only report our results quarterly, which we
did on Sept. 18th. Our enthusiasm over our extraordinary 2nd quarter
results was tempered by the tragic events of September 11.
While we won't comment further on sales, our outlook remains
cautiously optimistic with positive comparable store sales for the
third and fourth quarters.
ABOUT BEST BUY
Best Buy is the nation's number one specialty retailer of consumer
electronics, personal computers, entertainment software and appliances.
The Company operates retail stores and commercial Websites under the
names: Best Buy, Magnolia Hi-Fi, Media Play, OnCue, Sam Goody, and
Suncoast. The Company reaches consumers through more than 11,800 retail
stores nationwide.
Best Buy strives to improve people's lives by making technology and
entertainment products affordable and easy to use.
Best Buy achieved an overall rank of 156 on the Fortune 500 in
2001, has 75,000 employees nationwide and operates more than 450 retail
stores in 41 states throughout the U.S.
Best Buy is Minnesota's 5th largest company. Today, there are
approximately 7,500 employees at Best Buy corporate offices and stores
in Minnesota.
MOVING FORWARD
In spite of the economy and the tragic events of September 11, we
remain cautiously optimistic about the third quarter.
The principal drivers of our cautiously optimistic outlook are:
Continued expansion of digital products, such as digital
TVs, cameras and camcorders;
New product introductions, including new game hardware and
software such as Microsoft Xbox and Nintendo Gamecube, and new computer
operating systems such as Microsoft XP;
High caliber of employees;
Experienced management team and a culture of excelling
under adversity.
Some analysts predict that people will stay closer to home, and
therefore, sales of televisions, DVD hardware and software may be
strong. They anticipate that consumers will rely more heavily on mobile
communications and portable technology to stay in touch.
Since Best Buy meets its customers at the intersection of
technology and life, we are in the best position to provide the home
entertainment products to make their time at home more enjoyable and
more productive.
We will continue with plans to open 45 new Best Buy stores in the
third quarter. We expect to hire more than 5,000 employees for those
locations as well as begin our hiring for the holiday season. We
estimate that we will increase our staff levels by approximately 30%
with occasional seasonal employees, which equates to about 14,000 jobs.
Best Buy will continue its aggressive growth, opening more than 60
new stores per year and is on track to have more than 650 stores
nationwide by 2004. We will continue the acquisition of Canada's Future
Shop.
Best Buy will stick to our mission and our 75,000 employees will do
it better than we've done it before. We will move forward, being
prudent in managing our business given the economy and September 11th's
events.
Best Buy will do its part to help the state and nation's economy by
continuing to open stores, hire employees and offering products that
improve consumers' lives and take advantage of the newest technologies
for home and work.
Thank you. I will be happy to take any questions.
Prepared Statement of Marilyn Carlson Nelson
Mr. Chairman and Members of the Minnesota Delegation:
I am Marilyn Carlson Nelson, Chair and Chief Executive Officer of
Carlson Companies, Inc.
I am proud to say that Carlson Companies, one of the world's
largest global travel and hospitality companies, is headquartered right
here in Minnetonka, Minnesota.
I am pleased to be here today to discuss with you our people, our
industry and our country and what can be done to minimize the harm to
all, as a result of the September 11th tragedy.
SUMMARY
Before the events of September 11, the US was already experiencing
a 10 percent decline in the travel industry. By the end of September,
Carlson businesses were off 35 percent. (If this were to continue and
were to hold true across the nation's travel and tourism industry, it
would represent a potential loss of 3.7Million jobs nationwide.)
Under ordinary circumstances, only the efficient survive in these
businesses affected by powerful market forces and fierce competition;
however, these are far from ordinary circumstance--these are
extraordinary times for all of us. The market simply cannot handle such
a catastrophic, dislocating, externality.
We at Carlson are private and fiercely independent. We have never
sought government assistance, but our employees, our franchisees and
even we now have suffered or will suffer tremendous harm from this
totally unforeseen calamity, without the short term, immediate
assistance of the Federal Government.
Americans are not traveling. While safety was, initially, the
primary reason, now it is concern about a possible recession, costs,
their jobs and the perceived need to conserve.
Unchecked, this crisis has the potential to put 163,000 Minnesotans
out of work in the next 60-90 days. If the tourism industry decreases
by 20 percent:
The US economy will lose 2.2 million jobs
There will be 3.6 percent decrease in gross domestic
product (GDP)
The pre-September 11 economic forecasts were predicting only a 1.6%
increase in GDP. A 2% net decline would make consumers lack of
confidence a self fulfilling prophesy.
We are not asking for a bail out for business. Nor are we asking
for measures which would only treat the symptoms and not the cause.
We, our franchisees, our employees and Carlson desperately need 3
things, immediately:
1. A short term stimulus package that will keep people employed,
2. Help for Displaced Workers, and
3. Liquidity.
However, the most crucial is the stimulus.
We desperately need financial incentives to get Americans on
planes, in hotels and dining and using our great entertainment
facilities. This will keep people employed, be a benefit to consumers,
reduce costs for business and enable travel agents, restaurants, hotels
and resorts and entertainment providers to survive.
Without this a recession is a certainty and government cost will
increase as tax revenues at the Federal, State and local levels decline
by far more, long term than the near term costs of the package.
How do I know this?
CARLSON PEOPLE AND COMPANIES
We and our franchisees employ approximately 9,717 people here in
Minnesota, 124,244 people throughout the United States and 192,000
people worldwide. We are a major employer in the state, supplying
services that fuel hundreds of related businesses and provide many
times the number of jobs we create, in our state and throughout the
United States.
We recognize that we sink or swim together. Our fates and theirs
are intertwined.
We operate and franchise travel agency businesses under the Carlson
Wagonlit Travel, Results Travel and Cruise Holidays brands, here and
throughout the United States and the World. Seventy agencies, with 90
locations, are located in Minnesota and 1,205 throughout the United
States.
Our 506 owned, operated and franchised domestic Hotels include
Radisson Hotels, Country Inns and Suites by Carlson, and the Regent,
Park Plaza and Park Inn Hotels. Worldwide the total is 765, 50 of which
are hotels located in Minnesota.
Our Carlson Marketing Group is one of the worlds largest marketing
companies, providing incentive travel for over 200,000 people a year.
The vast majority of our Carlson Marketing Group employees are located
right here.
We own and franchise 15 restaurants here in Minnesota and a total
of 749 restaurants in 47 states and 52 countries. These include 671
T.G.I. FRIDAYS, 53 PICK UP STIX, and 25 other restaurant concepts.
Our Radisson Seven Seas Cruise line, headquartered here in the U.S.
is the worlds premiere cruise line operating 6, Five star cruise ships.
In short, we embrace every aspect of the travel, lodging and dining
industry other than air and ground transportation services.
Notwithstanding the severity of what we have and are experiencing,
I want to note with a great deal of pride that the owners and employees
of our travel agencies worked night and day since the grounding of the
airlines, assisting stranded travelers with lodging and rebooking
travelers directly affected by this crisis. All of this was without
charge to the traveler and in almost all cases, without any additional
compensation, for this assistance over many weeks, while they were
experiencing a 45% decline in business.
The stories of the extraordinary efforts of people at the our
Regent Hotel in downtown Manhattan, our Carlson Wagonlit people, in the
Pentagon, supporting our government travel, our airport Fridays people
serving hungry passengers and our Hotel people in Canada and Europe, as
well as here accommodating passengers, literally bring tears to my
eyes.
IMPACT ON OUR PEOPLE AND CARLSON
Travel
Overall, our business travel in Minnesota and the U.S. is down an
average of 35% since September 11.
Before September 11, all of our travel agency businesses were
severely impacted by the airline commission cutbacks.
Most of our franchisees are small, family owned businesses,
employing 3 to 4 people at each location. They rely heavily on small
business travelers and leisure travelers. Due to the discretionary
nature of leisure travel, that segment of the business, alone, is down
more than 45%.
All of these businesses operate in tremendously competitive
markets, operating on razor thin margins of 1-2%. A sustained sales
decline of only a few percent over a few months doesn't just represent
an operating loss, it often means closing their doors.
If nothing is done, quickly, I can predict with confidence that
that many of our small Minnesota travel agent franchisees will be
closing their doors, due to this unprecedented reduction in travel,
stemming from this disaster.
Hotels
Our hotels which are primarily dependent on business air travel
have experienced a similar 35% decline. Those which service the driving
public have returned to past levels.
While the numbers of hotels are great, consider a single hotel and
its value to people. Here is the break down at a typical 300 room
Radisson hotel which employs on average 200 people:
Management 15% (60% female)
Food/Beverage 50% (50% women)
Housekeeping 15 % (90% women)
Front Office 10% (60% female)
Maintenance 2% (1% female)
Accounting/Purchasing/Store Room 7% (50% female)
Sales (90% female)
There is a large immigrant population in housekeeping in
particular, many also in food and beverage.
Most employees in those 2 groups (which represent 65% of total
hotel workers) are female, at the lower end of the wage scale, some are
sole wage earners, and some are single mothers. Many have had little
opportunity to have prepared financially for a lay off situation.
Furthermore, our ``Typical Hotel'' writes 500-600 checks per month
to outside suppliers monthly for various products and services. Among
these are:
Transfer Suppliers (limo services/cab drivers)
Food Suppliers
Non and Alcoholic Beverage Suppliers
Linen Suppliers
Uniform Suppliers
Laundry Suppliers
Furniture Suppliers
Carpets Suppliers
Drapery Suppliers
Fixture Suppliers (lamps/sinks/tubs/showers/toilets)
Cable TV Supplier
Movie Channel Supplier
China/Glass/Silverware Suppliers
Amenities Suppliers (soaps, lotions, shower caps, shoe shine mitts,
ashtrays, matches, etc.)
Office Supply Companies
IT Suppliers
Utility Companies (Electric/Gas/Water)
Waste Removal Suppliers Chemical Suppliers
Air Conditioning/Electrical/Plumbing Suppliers
Pest Control Suppliers Gift Shops (and their suppliers--t-shirt
vendors, candy bars, aspirin, magazines, books, souvenirs, etc.)
And the list goes on....especially when you factor in surrounding
area economic damage to local restaurants, tourist attractions, gas
stations, convention centers, and so on.
Restaurants and Cruise
If things do not rapidly change, our restaurants expect losses
stemming directly from this crisis in excess of 10 million dollars by
the end of the year and we estimate that our Cruise business will
suffer in excess of 7 Million dollars in losses.
If these losses continue, the economic fall out to our employees,
small business franchisees and their employees will be staggering.
Overall Impact on Minnesota
In Minnesota our travel based economy, like our agricultural
economy, constitutes a life blood for our great state. The facts for
Minnesota are--
Travel Expenditures-$7 Billion \1\
---------------------------------------------------------------------------
\1\ State of Minnesota figures from the Travel Industry Association
of America, Tourism Industries/international Trade Administration.
``Travel Expenditures'' includes spending by U.S. resident and
international travelers in the U.S. on travel related expenses (i.e.,
transportation, lodging, meals, entertainment & recreation, and
incidental items), as well as international passenger fares on U.S.
flag air carriers.
---------------------------------------------------------------------------
Travel & Tourism-generated Sales Tax Receipts-$1.1 billion
\1\
170,000 jobs related to Travel & Tourism \1\
2699 lodging properties in the state
Anecdotes
The convention bureaus for the Twin Cities Metro area estimate
that, since September 11, the greater metro area has lost over 25
Million dollars in lodging and dining alone, as a direct result of this
crisis. That is in excess of 1 Million dollars a day in lost lodging
and dining sales, right here in the Twin Cities. (This does not include
the impact on Northwest and Sun Country airlines nor the Minneapolis
Saint Paul Airport, Mail of America and other retail outlets.)
Grandview Lodge on Gull Lake----Comments by General Manager Mark Ronnei
Lodge usually employs 500 people during peak season; year-
round average is 300.
20% of visitors are from out of state.
Sept. decrease in revenue: 12%; October projection: 20%;
November: ``virtually gone''.
35% of business usually comes from conferences--this has
been ``wiped out.''
Many of the conferences are held by MN-based corporations,
who bring in employees from all over the country and world. They're now
not coming.
Have made seasonal adjustments only at this point in their
workforce, but if there is no bounce back in November, a 15% reduction
in workforce is expected.
Bloomington Convention and Visitors Bureau----Comments by Shaun Corwin
There are 20,000 workers in the Bloomington Hospitality
industry.
There are 35 hotels in Bloomington that are reporting an
estimated $6 million lost in room revenue for September.
She is seeing some creative ways to cut back on payroll
expenses by hotels such as: part time employees giving up jobs so
fulltime employees can keep their jobs; administrative staff is cutting
back to 4 day work weeks; reduction in hours worked by hourly
employees--the average goal is a 20% reduction in payroll.
Unchecked, this crisis has the potential to put 163,000 Minnesotans
out of work in the next 60-90 days. \2\
---------------------------------------------------------------------------
\2\ Based on a 20% decline in Minnesota jobs; using statistic that
6% of U.S. jobs are generated by T & T (Travel Industry Association of
America research), the actual percentage of jobs in MN related to T & T
could actually be higher.
---------------------------------------------------------------------------
Nationwide
In the United States Travel & Tourism is the number 2 industry. \3\
---------------------------------------------------------------------------
\3\ ``Number two U. S. industry"per House Caucus on Travel and
Tourism.
---------------------------------------------------------------------------
The estimated financial impact of travel (includes U.S. resident
and International Travel) is: \4\
---------------------------------------------------------------------------
\4\ Travel Industry Association of America, Tourism Industries/
International Trade Administration. ``Travel Expenditures'' includes
spending by U.S. resident and international travelers in the U.S. on
travel related expenses (i.e., transportation, lodging, meals,
entertainment & recreation, and incidental items), as well as
international passenger fares on U.S. flag air carriers.
---------------------------------------------------------------------------
Travel Expenditures--$578.8 Billion
Travel-Generated Payroll--$171.5 Billion
Travel-Generated Employment--7.8 Million Jobs (I in 17)
Travel-Generated Tax Revenue--$99.5 Billion
Trade Surplus with Other Countries--$14.1 Billion
Before the events of September 11, the U.S. was already
experiencing a 10 percent decline in the travel industry. In September,
Carlson businesses were off 35 percent. (If this percentage were to
hold true across the nation's travel and tourism industry, it would
represent a loss of 3.7 Million jobs.) \5\
---------------------------------------------------------------------------
\5\ Based on a 20% decline in U.S. jobs; using statistic that 6% of
U.S. jobs are generated by T & T (Travel Industry Association of
America research).
---------------------------------------------------------------------------
If the tourism industry decreases by only 20 percent:
The US economy will lose 2.2 million jobs.
There will be a 3.6 percent decrease in gross domestic
product (GDP) will result. \6\
---------------------------------------------------------------------------
\6\ World Travel and Tourism Council estimates.
---------------------------------------------------------------------------
And I understand that It costs the government five times as much to
maintain an unemployed individual than it does to support one with a
job.
The Minnesota and the U.S. economy face an immediate crisis in its
number two industry: Travel and Tourism. This crisis could easily:
Put 2 million Americans out of work, many of them in the
next 60-90 days. (Compared to the 100,000 airline workers who have
already lost their jobs.) \5\
Cause failure and foreclosure of many hotels, sending a
shock wave through the banking sector. \7\
---------------------------------------------------------------------------
\7\ Statements by Bill Marriott, Chairman & CEO Marriott Hotels,
Marilyn Carlson Nelson, Chairman & CEO, Carlson Companies, Jonathan
Tisch, Chairman & CEO, Loews Hotels; Barry Stemlicht, Chairman & CEO,
Starwood Lodging in Travel & Tourism CEO Summit meeting with U.S.
Commerce Secretary Donald L. Evans, September 25, 2001.
---------------------------------------------------------------------------
Cause the loss of more than 100,000 U.S. travel agents
(who write 80% of airline tickets) thus exacerbating the problem. \8\
---------------------------------------------------------------------------
\8\ Estimates, American Society of Travel Agents.
---------------------------------------------------------------------------
Compound the loss of U.S. restaurant worker jobs, already
estimated to exceed 90,000 in September alone. \9\
---------------------------------------------------------------------------
\9\ Estimates, National Restaurant Association.
---------------------------------------------------------------------------
Cost Federal, state, and local governments more than $20
billion in tax revenues: Minnesota could lose $420 million in taxes
alone. \10\
---------------------------------------------------------------------------
\10\ Based on a 20% decline of the $100 billion in tax revenues
currently generated by T & T (Travel Industry Association of America
research).
---------------------------------------------------------------------------
Reduce the U.S. GDP by 3.6% (based on a 20% decline in
Travel & Tourism business). \6\
what are the industry and our employees asking for?
A Stimulus package--Not a Bail out. A short term program that will
keep people working and be good for all affected by this crisis. It has
3 essential components:
1. Stimulating Travel and Keeping People Employed,
2. Helping Displaced Workers, and
3. Liquidity
Stimulating Travel and Keeping People Employed
1. Provide for a $500 tax credit ($1000 for taxpayers filing
jointly) for enumerated personal travel expenses for travel originating
within North America (airplane, cruise, train and bus tickets, hotel
and motel accommodations, and rental cars, but not meals) for the
period 9/12/01-12/31/02.
2. Restore full deductibility for those business entertainment
expenses, including meals, that are now subject to a 50% deduction for
the period 9/12/01-12/31/02. (The average business meal is less than
$20 and does not include any alcoholic beverages at lunchtime.)
3. Restoration of the tax deduction for travel expenses of a spouse
accompanying an employee on a business trip to 100%.
4. Provide a workforce tax credit for training, retention, and
hiring of travel and tourism industry workers.
5. Provide substantial federal funding, with private-sector support
and input, for advertising campaigns to encourage travel to and
originating within the United States.
Helping Displaced Workers
1. Direct assistance by the Federal government to those states that
may be overwhelmed with worker compensation and unemployment claims
resulting from the September 11th attacks.
2. Assurance by the Federal government that health benefits will be
continued for displaced workers.
Liquidity
1. Payroll tax relief for employers and employees.
2. Expand the SBA loan program to small businesses that would not
otherwise qualify for the Economic Injury Disaster Loan Program, with
loans to be available at the lowest possible loan rate; granting
discretionary authority to the SBA Administrator to adjust size
standards for eligibility to ensure that firms falling outside the
SBA's definition of ``small'' are not inadvertently left behind.
3. Expand the allowance of carry back of net operating losses for
taxpayers in the travel and tourism industry beyond the current two-
year limit for losses attributable to the period 9/11/01-12/31/02.
We recognize that this will mean expenditures. However without
these the economy and government revenues will suffer even more.
The most crucial is the stimulus. While significant, the remainder
is a band aid for the wound.
We desperately need short term financial incentives to get
Americans on planes, in hotels and dining and using our great
entertainment facilities. This will keep people employed, be a benefit
to consumers, reduce costs for business and enable travel agents,
restaurants, hotels and resorts and entertainment providers to survive.
Without this we fear that a deep recession is a certainty and
government cost will increase as tax revenues at the Federal, State and
local levels decline by far more, long term than the near term costs of
the package.
Prepared Statement of Thomas F. Stinson
Mr. Chairman and Members of the Committee:
My name is Thomas Stinson. I am an associate professor in the
Department of Applied Economics at the University of Minnesota. Since
1987 1 have also served as Minnesota's State Economist.
Thank you for the opportunity to discuss with you the impact of the
September 11 terrorists' attacks on the outlook for Minnesota's
economy.
Economists will likely debate for some time whether an economic
downturn would have occurred in the absence of those attacks. There is
no denying though that at best the U.S. economy was in a very
precarious position in August, teetering on the edge of recession. In
that month, unemployment rose by 0.4 percent, payroll employment fell
by 113,000 jobs, and manufacturing output fell for the 11th consecutive
month. Help was on the way from the Federal Reserve's interest rate
cuts and the federal tax rebate, but there was widespread concern that
consumer spending, would turn down before that fiscal and monetary
stimulus had time to take effect. Surveys of consumer confidence taken
between September 1 and September 10 confirmed the legitimacy of those
fears, showing an 8 point decline in consumer sentiment from August's
readings.
Now, nearly three weeks after the attacks, nearly all forecasters
believe that the longest economic expansion in U.S. history has come to
an end. While no one really knows what will occur over the next few
months, there is general agreement that the cutbacks in economic
activity following September's shocking events were sufficient to cause
a decline in real GDP in the third quarter of 2001. Growth during July
and August had been anemic and September's disruption so substantial
that even though just 20 days of third quarter economic activity were
directly affected, forecasts of a decline in real GDP at an annual rate
of between 0.5 percent and 1.0 percent are now common. For the current
quarter, forecasters are even more pessimistic, calling for real GDP to
decline at an annual rate of between 1 percent and 2.5 percent. The
majority of forecasters currently believe the economy will begin to
rebound after the start of 2002, although a significant minority expect
the recession to continue for one or two additional quarters.
Differences in estimates of how quickly the consumer sector bounces
back are the key to both the depth and duration of the recovery.
While I hope that the current majority view is correct I currently
assign a higher probability to a forecast in which the recession
extends until at least late spring of 2002. I hasten to add, however,
that because so much of the outlook for the next twelve months depends
on consumer psychology, and because economists have no special
expertise in anticipating a change in consumer sentiment, all
forecasts--including my own--are little more than quasi-informed
speculation. The econometric models we use to prepare our forecasts
rely heavily on historical patterns and interactions in projecting the
outlook for the U.S. economy, and the shocks to our economy which
occurred on September 11 were without historical precedent.
The terrorist attacks also weakened Minnesota's near-term economic
outlook. Our state's productive capacity remains intact and there was
no physical damage to our office towers, plants and equipment as there
was in New York. But, the national and international demand for
Minnesota produced goods and services has certainly diminished, and
until that demand recovers output and employment in Minnesota will
shrink. Minnesota is part of the national economy, our manufacturers
and service providers market their products throughout the country, and
the current national economic slowdown will be felt in Minnesota. Our
state's economy is well diversified. We are not overly reliant on a
single industry and that diversification helps us avoid some of the
booms and busts which occur in states with less diversified economies.
But, in a time when demand for most goods and services is expected to
slip, Minnesota's economy will not escape relatively unscathed as we
did in the 1990-91 recession.
Even though Minnesota's unemployment rate was a full 1.3 percentage
points below the U.S. average in August, signs of softening were
already visible prior to the attacks. In recent months our state's
unemployment rate has hovered around 3.5 percent, payroll employment
has actually fallen by 9,000 jobs since May on a seasonally adjusted
basis, and state withholding tax collections are failing below
forecast. In 1998 Minnesota's unemployment rate was 2.5 percent, the
lowest in the nation and in recent years we had added an average of
10,000 jobs over the May-August period. Since the start of this year
manufacturing employment has fallen by 12,000 jobs, a particularly
disturbing statistic, since Minnesota has until recently been notable
for increasing manufacturing employment even though nationally
manufacturing employment was failing. The accompanying chart showing
initial unemployment claims and active unemployment claims for the past
three and one-half years provides further evidence of the weakening in
the Minnesota economy which had occurred during the past twelve months.
Two forecasting services have attempted to forecast state economic
impacts of the terrorists' attacks in recent weeks. One expects
Minnesota's economy to be among the hardest hit, placing us in the
bottom quartile of states. The other, ranks us just about average in
growth after the shock, although they find that Minnesota's economy
would be relatively less damaged by reaction to September 11 than the
U.S. average. While it truly is much too early to gauge the extent of
the economic weakness brought on in Minnesota, my own preliminary
analysis leads me to suspect that our state's economy will perform
about as well as the national averages over the next twelve to eighteen
months. Again though, let me emphasize that this recession will be more
severe in Minnesota than the last recession, and it is likely to be
felt by all sectors of the economy.
The problems facing certain sectors of the Minnesota economy,
particularly the airline transportation and the tourism and hospitality
related sectors, have received considerable media attention during the
last two weeks. There is no doubt that firms in those sectors and the
employees of those firms face difficult times in the weeks ahead. But,
this state's economic problems will extend well beyond those sectors,
important as they are. Increasing airport security, relieving the cash
flow problems of the airlines, and increasing air travel will not be
enough to turn the U.S. economy or the Minnesota economy around. This
economic slowdown was already being felt widely across the Minnesota
economy prior to September 11. The post September 11 impacts will be
even more widespread.
I believe that additional stimulus is required to ensure that the
current decline in the U.S. economy does not extend beyond early 2002.
Lower interest rates will help stimulate increased business investment,
but at a time when capacity utilization rates are already as low as
they were during the twin recessions of the early 1980s and real,
inflation adjusted interest rates are near zero, monetary policy by
itself will not be enough. The fiscal stimulus provided by the federal
rebate certainly helped economic activity in the last quarter, but now
that stimulus has been exhausted and additional stimulus timed to hit
the economy in the crucial first quarter of 2002 is required.
Federal Reserve Chairman Greenspan and former Treasury Secretary
Rubin have been reported to have advised Congress that a substantial
and immediate stimulus package is needed. Their suggestion should be
taken seriously. Immediate action by Congress is particularly important
because to be effective the fiscal stimulus must be flowing to the
economy by early January. A substantial cut in payroll taxes effective
only during the first quarter of 2002, or a second tax rebate based on
payroll taxes paid during the fourth quarter of 2001 are potential
alternatives which would provide the fiscal stimulus needed on a timely
basis. There are of course, a number of other potential options which
also meet the immediate and substantial test.
I encourage you to draw a sharp distinction between tax cuts or
spending programs which may be worthy on their own merits and those
that are needed to quickly stimulate the economy. Tax cuts or spending
programs which dribble out a little money each week for a year or more
are unlikely to provide a sufficient boost to economic activity next
January and February when the jump-start is needed. A spending program
which authorizes new money which will not actually be spent until later
in 2002 or even 2003, even has the possibility of being counter-
productive, creating inflationary pressures by adding stimulus after
the economy has already begun its recovery.
Prepared Statement of Sung Won Sohn
Mr. Chairman, and Members of the Committee:
I am pleased to be here today to discuss with you the important
issue of the Minnesota economy in the wake of the terrorist attack of
September 11th.
All indications are that the state of the U.S. economy was
precarious even before the terrorist attack of September 11th. Private
investment was contracting at an 11 percent annual rate in the second
quarter of this year. In the outset, corporations slashed investment
spending following the Y2K scare and a tighter monetary policy
environment from the Fed. Since then, profit margins have been squeezed
by higher energy costs and dwindling corporate demand. A lack of
corporate earnings growth in the coming quarters is likely to keep
investment spending below recent norms, threatening productivity and
production growth.
The magnitude and duration of the economic malaise depends
critically on consumer spending. Consumer spending, though moderating
since last year, still remained at historically high levels in the
second quarter. Leading to the widely held belief that consumption is
the last pillar propping up the U.S. economy. Though a look at third
quarter GDP and consumer spending will not occur until later this
month, the deterioration of consumer sentiment surveys as well as lower
retail sales reports, suggests significant weakening in consumption in
the third quarter. This weakness in consumer spending is likely to
carryover to at least the fourth quarter in our most optimistic
scenario. The prospects for consumer spending clearly remain on the
downside.
The impact on the U.S. labor market is beginning to take shape. The
unemployment rate in the U.S. currently stands at 4.9%. A level that
many economists had previously predicted as being the peak of the
jobless rate during the current economic downturn. But in the wake of
the terrorist attacks, these relatively mild projections have been
revised. Private sector economists now expect the unemployment rate to
rise as high as 5.5%, with the possibility of it going to an even
higher 6.0%. Employers have reported a widespread hesitancy to make
future investment and employment plans in the now uncertain economic
environment,
Mass layoff announcements continue to mount from the airline,
travel, hospitality, and financial services industries. The
manufacturing industry, which comprises about 17% of employee
compensation, remains squarely in recession for the fourteenth
consecutive month according to the latest National Association of
Purchasing Managers manufacturing survey. Industrial production growth
has now been contracting for 14 consecutive months. Industrial
machinery, auto and auto parts manufacturing, transportation equipment,
electronics and electrical components, printing and publishing, and
telecommunications equipment manufacturers have been hit the hardest by
the slackening of corporate demand. Nationally, a net 940,000 jobs have
disappeared in manufacturing in the past year.
Minnesota is not immune to the national manufacturing and economic
downturn. After enjoying a decade of above average employment growth,
many of Minnesota's top industries face tough times ahead. As a result,
employment has not appreciably grown in Minnesota compared to a year
ago. The Iron Range of Northern Minnesota is seeing a decline in demand
for taconite pellets as the auto and auto parts industry sees flat or
weakening demand. Intense competition from foreign steel manufacturers
is also behind much of the decline. Employment in metals mining is down
24 percent or 1,300 jobs from a year ago. Manufacturers in industries
such as computers and telecommunications equipment, printing and
publishing, paper, lumber and wood products, rubber and plastics have
all seen significant employment declines.
Many of Minnesota's largest employers have announced mass layoffs,
such as Honeywell, Qwest Communications, Northwest Airlines, 3M, Allina
Health Systems and American Express. Minnesota has seen a total of
23,128 mass layoffs through August 2001 versus 9,124 through the same
period in 2000.
Honeywell has cut 700 jobs at its Electronics Materials Division
and is expected to cut another 150 jobs this year in Minneapolis. At
the same time, Honeywell employment should be supported by an expansion
of the $5 billion Home and Building Control Group into a new $8 billion
Automation and Control Group.
Qwest Communications is struggling with lack of demand and excess
capacity in its fiber optics network. The Denver based company has
announced it will cut 4,000 jobs nationwide or 6 percent of its total
staff. It is unclear how many of those cuts will occur in Minnesota,
but with 7,550 Qwest employees in the state, there are bound to be some
job losses here.
The Minnesota airline industry is also being hit with a large
number of layoffs. Northwest Airlines has announced 4,600 job cuts due
to the diminished demand for travel. Mesaba Airlines is cutting 400
jobs, and Sun Country is eliminating 250 jobs. Also, 3M and Allina
Health Systems have announced they will cut 1,000 jobs each in
Minneapolis. In financial services, American Express Financial Advisors
has announced it will cut 800 to 1,000 jobs in the state. In addition,
the state's agricultural industry has seen limited growth due to
subdued agricultural and commodity prices. Many of these industries,
major exporters for the state, are engines of job growth and a driver
of above-average Minnesota per capita incomes.
As a result, Minnesota's labor market is beginning to loosen. Since
the first of the year, Minnesota's unemployment rate has spiked 50
basis points to 3.6%, though still well under the national average.
Unemployment is expected to become an even larger problem over the next
two quarters as Minnesotans continue to enter the labor force even as
employment growth grinds to a halt.
It is important to realize that the challenges facing the Minnesota
economy over the next year are cyclical in nature, and do not reflect
any fundamental or structural defect in the state's economy. In fact in
the long-run Minnesota's economy is well positioned to continue to
perform on par with the nation. The state benefits from strong net in-
migration from Wisconsin, California, North Dakota, Illinois, and Iowa,
in a notoriously slow-growth Midwest region. This positive net
immigration drives state population growth and boosts demand for
consumer goods, housing, and services, while also allowing above-
average employment growth.
In addition, Minnesota has a well-diversified industrial base that
keeps economic and employment volatility to a minimum. During the last
national recession in 1991, Minnesota's economy never really
contracted, allowing economic growth to rebound much more quickly and
with more vigor than other regions of the country. Minnesota did not
experience the real estate boom and bust that hit the rest of the
country, or experience the dislocations that the real estate bubble
caused. The current downturn is likely to hit closer to home. With many
of Minnesota's major industries facing deteriorating business
conditions, the economic decline is likely to be more abrupt and
broadly based this time around.
To date, the aggressive and rapid response of Federal policy makers
provides a floor for the Minnesota economy. Congress's swift action to
enact stimulatory tax cuts aimed at boosting consumer spending, as well
as recent initiatives to provide additional spending on airlines,
defense, security, and disaster relief, should go a long way toward
getting the national and Minnesota economies back on track.
Additional stimulus has come from the rapid loosening of monetary
policy. Nine interest rate cuts so far this year by the Federal Reserve
has brought the Fed funds rate down to a near zero real interest rate
environment. The benefits from the cuts are only now starting to be
realized, since the lag on monetary policy can take anywhere from six
months to a year before any impact is felt in the overall economy. The
massive amount of liquidity injected into the financial system by the
Federal Reserve will keep the Minnesota economy from totally derailing.
On balance we believe that the next six months will entail modestly
worsening employment conditions and continued hesitance of consumers
and businesses to commit to long-term purchases and investments.
However, we expect a robust economic recovery sometime in 2002,
returning the State of Minnesota to its pre-slowdown expansion path.
Thank you Mr. Chairman and Members of the Committee.
Statement of Mark McClain
Mr. Chairman and Members of the Committee:
My name is Mark McClain, Chairman of the Northwest Airlines Master
Executive Council at the Air Line Pilots Association (ALPA). Thank you
for affording me this opportunity, speaking on behalf of all Northwest
pilots, to inform you of the negative economic impact to their careers
following the September 11 attacks against the United States.
As a result of these attacks, Northwest Airlines was forced to
reduce its system capacity by 20 percent. This has resulted in the
planned layoff of 850 pilots, approximately 15 percent of Northwest's
pilot workforce. Additionally, 153 pilots who are scheduled to retire
over the next six months will not be replaced, yielding another two
percent in pilot workforce, for a total planned reduction of 17
percent.
The reduction in pilot jobs will be taking place over the next
several months. Due to the stringent training requirements of pilots,
layoffs were implemented immediately to allow employed pilots necessary
training time on aircraft formerly held by the laid-off pilots. To
date, 40 pilots have been laid off, 260 are scheduled to be laid off
January 1, 2002, followed by 100 pilots per month until the planned
total of 850 pilot layoffs is achieved.
Obviously, the loss of these jobs is devastating to the affected
individuals and their families. However, this present situation is
unique and unprecedented as compared to other ``turbulent times'' in
past years within the industry in that competing carriers are
experiencing similar reductions in system capacity. Therefore,
Northwest pilots will be unable to gain employment at other airlines as
these carriers are implementing similar pilot layoff plans.
While being highly skilled and educated, the scope of a pilot's
specific training does not easily transfer to other career
classifications. Many pilots who find themselves laid off will have to
be retrained or will require further education in order to establish a
career outside of the airline industry. In many cases, a new career
will result in diminished earning potential as compared to average
income capacity within the piloting profession.
In addition to pilots who have been laid off or will be in the near
future due to the September 11 attacks, the remaining employed pilots
at Northwest and at other carriers will also suffer economic hardship.
For example, pilots select their jobs on a strict seniority system and
as junior members are laid off, more senior members are forced to fill
the lower-paying positions that have been vacated. Furthermore, many
employed pilots will also face a reduction in flying hours. As a
response to a weakened demand for air travel due to the attacks against
the United States, airlines were forced to reduce the frequencies of
flights. Since pilots are paid per flight hour, the pilots who survive
the implementation of layoffs and remain employed, will experience
further wage losses due to a reduction in flying hours available for
scheduling. Because of these two factors--displacements to lower-paying
positions and fewer flying hours on pilot monthly schedules--many
pilots will realize a 30 percent reduction in actual W2 earnings.
Although this testimony is primarily about the negative economic
impact to the pilots of Northwest Airlines, it is important to mention
that pilot layoffs at Northwest and at other airlines have caused a
negative impact to ALPA. The harsh economic reality faced by ALPA's
members has had a ripple effect on the union both as an institution and
an employer. With a reduction in membership caused by pilot layoffs and
further reduced earnings of remaining members, a dramatic decrease in
dues revenue has resulted.
Very similar to the airlines, ALPA is forced by necessity to take
significant cost-saving measures to deal with the huge loss in revenue.
ALPA has already imposed a hiring freeze and will be forced to deal
with reduced budgets at the very time representational demands of its
membership are at historically high levels.
In conclusion, the attacks on September 11 have had devastating
effects to the pilots of Northwest Airlines, pilots at other airlines
and to ALPA's membership and staff including many who reside in
Minnesota.
Thank you again for allowing me to share my views.
Statement of Carlson Wagonlit Travel
The travel and tourism industry in our country is suffering as a
result of the attacks on America last month. As one of your
constituents who works in travel and tourism, I'm particularly
concerned about the severe ripple effect that the federal government
shutdown of last month continues to have on our state. We're not asking
for a handout instead we're asking you to provide your support and
sponsorship to S. 1500, H.R. 3011 and H.R. 3401 to help once again
stimulate demand for and confidence in travel and provide necessary
loans to keep the industry moving.
Ours remains the only industry shut down by the federal government
for the safety of citizens. The shutting down of airlines, and
subsequent fear of travel, created a ripple effect which has resulted
in an ongoing ``travel drought.'' In addition to the devastating impact
we've felt in the travel agent segment of the industry, millions of
jobs are in danger of disappearing in the next few months in hotels,
restaurants, car rental firms, airlines and other related businesses.
One in 17 American jobs is directly related to travel and tourism,
and the industry creates $100 billion in tax revenues. With stakes so
huge, it should come as no surprise that I'm just one of thousands of
your constituents who are reeling from the long-term impact of the
shutdown. I ask you to help give our industry tools that can help us to
get back on track.
The attack on September 11 was against our country's infrastructure
AND economy. Therefore, it is right that swift action be taken at the
federal level to prevent terrorists from seeing both elements of their
plan come to fruition. I urge you to lend your voice to those you are
trying to protect, American jobs and businesses, especially those of
the significant numbers of constituents who are in danger of losing
theirs. Please sign on as a cosponsor today.
Thank you for your consideration.
Statement of Carlson Leisure Group
The travel and tourism industry in our country is suffering as a
result of the attacks on America last month. As one of your
constituents who works in travel and tourism, I'm particularly
concerned about the severe ripple effect that the Federal Government
shutdown of last month continues to have on our state. We're not asking
for a handout instead we're asking you to provide your support and
sponsorship to S. 1500 and H.R. 3041 to help once again stimulate
demand for and confidence in travel.
Ours remains the only industry shut down by the Federal Government
for the safety of citizens. The shutting down of the airlines, and
subsequent fear of travel, created a ripple effect which has resulted
in an ongoing ``travel drought.'' In addition to the devastating impact
we've felt in the travel agent segment of the industry, millions of
jobs are in danger of disappearing in the next few months in hotels,
restaurants, car rental firms, airlines and other related businesses.
One in 17 American jobs is directly related to travel and tourism,
and the industry creates $100 billion in tax revenues. With stakes so
huge, it should come as no surprise that I'm just one of thousands of
your constituents who are reeling from the long-term impact of the
shutdown. I ask you to help give our industry tools that can help us to
get us back on track.
The ``Travel America Now'' legislation introduced in the Senate by
Senators Jon Kyl (R-AZ) and Zell Miller (D-GA) and in the House by
Representatives John Shadegg (R-AZ) and Neil Abercrombie (D-HI) will go
a long way toward doing just that. These bills offer a strong
alternative to a bailout. Instead, they provide Americans with a tax
credit that will encourage them to travel now, and in turn, immediately
stimulate the economy.
The attack on September 11 was against our country's infrastructure
AND economy. Therefore, it is right that swift action be taken at the
Federal level to prevent the terrorists from seeing both elements of
their plan come to fruition. I urge you to lend your voice to those who
are trying to protect American jobs and businesses, especially those of
the significant numbers of constituents who are in danger of losing
theirs. Please sign on as a cosponsor today.
My wife and I are both in the Travel business and she has been laid
off and my job is in jeopardy. We have two kids in college and this is
a scary time for our whole family. We aren't going to get anything from
the airline bailout. (They actually needed help before the disaster.)
We don't want or need that kind of help. We just want Americans to get
back on airplanes. You (the government) have done a great job of
insuring the public's safety. People just need an offer they can't
refuse to get them back in the air so they can see for themselves that
things are safe. I have been on five flights since the disaster and see
people a little, worried each time. This bill would be just the method
to say the government will back up the safety issue with a tax break.
Please help our industry and the traveling public.
Thank you for your help and consideration.
Statement of Jim Callaghan
The travel and tourism industry in our country is suffering, and
because of that, our economy is too. Ours is the only industry shutdown
by the Federal Government as result of the September 11 disasters and
therefore, it is fair to ask for your help. Our industry creates $100
billion in tax revenues. One in 17 American jobs (20 million!) is
directly related to travel and tourism. Industry experts predict that,
overall, hotels could lose $2 billion in room revenue and other
associated income. Moreover, a projection by PricewaterhouseCoopers
shows revenue per available room declining between 3.5 percent and 5
percent this year--the largest decrease in room revenue in 33 years.
Because I am involved in the lodging industry, it should come as no
surprise that I'm just one of thousands of your constituents who is
reeling from the long-term impact of September 11, 2001.
Millions of jobs are in danger of disappearing in the next few
months in hotels, restaurants, travel agencies, car-rental firms,
airlines and other related businesses. I ask for your help to keep this
from happening.
Our industry isn't asking for a bailout, we're asking for a
temporary Federal stimulus package to help the travel and tourism
industry. We're asking you to provide your support and sponsorship of
the ``Travel America Now'' act embodied in Senate file 1500 and House
file 3041.
A key element of this legislation is the personal tax credit for
travel by Americans. Without this element, the stimulating effect of
the legislation will be slowed--perhaps to the point that it is too
late.
The attack on September 11 was against our country's
infrastructure, economy and way of life. Therefore, it is right that
swift action be taken at the Federal level to prevent the terrorists
from seeing their plan come to fruition. I urge you to lend your voice
to those who are trying to protect the jobs and businesses of America.
In doing so, you'll be protecting the jobs and businesses of your own
constituents, like me.
Please support the ``Travel America Now'' act with the personal tax
credit included.
Thank you for your consideration.
Statement of Gordon Aanerud
RESPONSE OF THE WORKFORCE DEVELOP SYSTEM
The long standing commitment of Congress in supporting employment
and training has allowed state and local officials the ability to
maintain a system that can step up and effectively respond during this
time of turmoil. The mechanisms currently in place under Workforce
Investment Act (WIA) provides a nationwide structure that can be
utilized to respond quickly as layoffs occur.
Congress can help by increasing the funding available through the
Workforce Investment Act programs (specifically, WIA Title I adult and
dislocated worker).
In Minnesota, the One Stop WorkForce Center System is well
positioned to respond to the layoffs resulting from the crisis in the
airline and related industries as well as the overall economic
slowdown. Under the Workforce Investment Act (WIA) Minnesota has
established a network of 53 one stop WorkForce Centers that are
strategically positioned across the state to deliver employment and
training services wherever the need arises.
Currently, the State is requesting an emergency grant of $24
million to respond to the layoffs in the airline and related
industries. If appropriated these funds will be used to serve laid off
workers through a coordinate response that engages the entire
employment and training system. In the Twin Cities Metro area all of
the Workforce Service Areas (WSAs) and other non-profit service
providers are uniting to provide services to the laid off worker in the
airline and related industries. Also, beyond the Twin Cities Area other
Workforce Service Areas are willing to lend staffing support to those
areas experiencing a high demand for services. In addition, the
response effort will be closely coordinated with efforts of the State's
Higher Education Institutions (MnSCU).
Through the active involvement of business leaders on the local
Workforce Investment Boards and local Elected Officials, Minnesota's
One Stop WorkForce Centers are able to effectively coordinate resources
and services to meet the needs of both individual job seekers and
employers. The Workforce Development System is actively responding to
the sudden and dramatic change in the economic situation. Now is the
time to invest in Minnesota Workers!
During these extraordinary times, it seems that everybody has a job
to do to react to the employment crisis. Congress must provide
resources, states must administer programs and local partners must
deliver services to meet the needs of unemployed workers.
Representing the local partners, we are willing do our part.
Thank you for your time and attention to these important matters.
Statement of Thomas E. Parrow Jr.
Mr. Chairman, and Members of the Committee:
I am pleased to share with you my views about the number of laid
off employees at Northwest Airlines. I, a 25 year veteran of the
airline industry, have for quite some time been concerned about the
practice of farming out aircraft maintenance to foreign soils. First,
it obviously takes good paying jobs from our shores. Second, it also
provides a perfect opportunity for terrorist groups to do whatever
mischief they please to American aircraft while in foreign maintenance
facilities. FAR. 145, the governing structure that allows these
practices.
Maybe it is time to resend or greatly scrutinize these practices.
The Airlines will of course howl about cost savings, but in reality if
they would learn that we, their workforce are not an adversary but a
highly skilled and if treated with respect, motivated entity would jump
at the opportunity to come to their aid.
I understand that in this situation layoffs have to occur, this is
and always will be a reality of this business, but the methods and the
personnel that Northwest has laid off are disturbing to me. I hope that
the upper management of NWA would never stoop to the depths of taking
advantage of a horrific national tragedy to circumvent contractual
commitments and use it as an excuse to put more United States citizens,
Minnesota working families out of work. I realize this may seem a rash
statement but remember I am the 25 year veteran whom has worked for
four different carriers. I have seen how these management structures
will expend vast resources to accomplish ridiculous goals, when all
they had to do was just be up front and honest with their workforce.
Thank you for your time.
Statement of Barbara J. Muesing
Mr. Chairman, and Members of the Committee:
I am pleased to share with you my views about strategies for
workforce and business recovery after the horrific events of September
11. This I do as an advocate for training and development as an
effective tool to complement other recovery initiatives.
Certainly, there is urgent need to help people with urgent
problems. Layoffs and the recession economy demand a swift response.
But, there also is urgent need for resources to support workforce
education, career and lifework planning, and employee retraining
programs during this unusually challenging time in our nation's
history.
Minnesota's higher education community is well positioned as a
potential partner with business and industry to design and deliver
quality educational products to meet this need. At the University of
Minnesota, the College of Continuing Education, just this month, has
launched a new Career and LifeWork Center to help individuals in
transition.
Here's the point. Whether the laid-off individual is a professional
in a high-tech company or a food service worker at the airport, the
need is greater than ``finding a job.'' It's counseling and advising to
connect the employee to better employment opportunity. At the October 8
hearing, when Hydra Juhor was asked what she needed, she didn't
respond, because she didn't know about the range of services and
support that would easily move her along to a better paying job and a
better life for her and her family. It's those connections that can
help all the Hydras find and realize new aspirations during this time
of trouble.
Legislation to support LifeWork counseling, career advising,
training and education, are all important to this agenda. Plus, it
gives the term ``relief'' a more forward direction of hope.
Thank you.
Statement of Lara Prieve
At the end of January 19, 2001 1 was told by NWA (Information
Systems Consulting Project Manager) that my services were no longer
needed because the major project I was working on lost its funding. I
went on unemployment until my consulting firm, Alternative Resources
Corporation (ARC) found me project work at the end of April. I worked
intermittently until the September 11, 2001. My wages were augmented
with unemployment money. I was continuing to pursue full-time
employment elsewhere.
Before the attack my firm was negotiating with a company in Des
Moines for additional work. After the attack all negotiations are on
pause. The client is not returning our calls. My manager has told me
that he will call me with any work, although he's encouraged me to look
elsewhere because after the attack all projects in the pipeline are
stalled.
As of this date (October 12, 2001) 1 have $876.00 left in my
unemployment account. I am interviewing for full-time work, but the
least I need is an immediate extension of unemployment benefits along
with extension of COBRA. Currently, my employer is paying my benefits.
Also, a disciplined stimulus package from the Federal government is
urgently needed. This should include, but not be limited to:
Tax incentives for corporate spending
Lowered rates for corporate income tax
Lowered rates for personal income tax
Lowering of capital gains tax
I thank you in advance for your prompt attention to this matter.
Statement of Joseph Wellcome
Mr. Chairman, and Members of the Committee:
I am honored to share with you a brief timeline of events that lead
up to my current economic situation. I have been employed--with a 2
year degree in moldmaking--in the machine trades for over two decades.
The first fifteen years I have been able to live the American dream.
However, the last five years has been a struggle that is unimaginable,
not only for myself but for most of the machine trades, with many
machine shops going out of business.
As the American economic system shifts from a manufacturing based
economy to a more service oriented one--which I believe in part was due
to the NAFTA agreement--I saw the need to return to school. I am a firm
believer of the achievement ideology, therefore I have been returning
to school for approximately the last four years to obtain a degree in
manufacturing Management through the First College at Metropolitan
State University in St. Paul Minnesota. I am optimistic that I will be
able to bring to business new paradigms to level the playing field with
our neighboring countries, and help bring the manufacturing sector in
America back into competition in this global economy.
Due to economic forces I have been unemployed as of July 24, 2001,
furthermore my spouse has been unemployed since May 9, 2001, she was a
travel consultant for Carlson Companies in Minnetonka, Minnesota. We
are both members of the dislocated workers program and are returning
students seeking lasting employment in this new economy. Due to the
tragic events of September 11th, the economy appears to have gone from
bad to worse, and has fallen into a recession. My family and I have
been without employment and health insurance since July 29, 2001, and
our unemployment benefits will soon be exhausted and we will be forced
to return to a workforce that is crumbling.
It is my understanding that the economic stimulus package that is
currently proposed focuses primarily on the individuals and businesses
that are immediately effected by the September 11th incident. In a
crisis such as this, how can our elected officials forget anyone who
builds this nation? Why do certain groups of individuals receive
extended unemployment benefits under the stimulus package whereas
others do not? Are we Americans not worthy of these tools to aid in our
returning to the workforce? Is The President empathetic only to those
that he can see grieving? Isn't this America, the united? I believe
that the September 11th events exacerbated the effect on the economy as
a whole, and there is a ripple effect for all businesses in this
country, therefore all the unemployed should be treated as equals!
Isn't that the basis of our constitution, equality?
As the ethnographic study by Jay Macleod--``Ain't no Makin' it''--
clearly displays the inequalities in America today, Jay exposes the
social barriers to success for two groups of individuals. I believe
these barriers do not only affect people in low income projects (which
his book focuses on) but are spread on a broader scale that attack all
income classes below the wealthy. Furthermore, I believe the current
economic stimulus package is introducing even more barriers to success
by discriminating against people already in the unemployment line by
not considering them as needy recipients of the extended benefits of
unemployment compensation.
Mr. Chairman and members of the committee, I ask that the
``Congress of the United States'' include every American suffering in
this lagging economy by extending a helping hand to all the unemployed
across this great nation. How can we unite if policy makers are not
including every American in the current economic stimulus package?
[Whereupon, at 12:40 p.m., the committee was adjourned.]