Despite industry claims, job losses could exceed job gains
Sprint joined efforts to block the proposed merger of AT&T and T-Mobile USA by filing a lawsuit of its own on Tuesday, presumably as a safeguard measure in case AT&T reaches a settlement with the government. The legal battle to prevent the $39 billion deal comes nearly a week after the Department of Justice filed a federal antitrust lawsuit over concerns that the merger would lessen competition and increase prices for consumers.
Unions and AT&T have defended the deal by arguing that the merger would create jobs, and have even set up an online campaign to rebuff critics like Sprint, which is non-union. But the lawsuits add to the growing number of voices from industry competitors, political officials, media and consumer groups that view job creation promises with skepticism.
Shortly before the federal lawsuit last week, AT&T announced that the company would repatriate 5,000 wireless jobs to the United States as a way to entice regulators to approve the deal. It also added that U.S.-based employees at wireless call centers would not lose their jobs if they are on the payroll at the time of the completed merger.
Yet there have been competing claims on whether the merger will actually add jobs. A May study by the Economic Policy Institute found that the deal could create 55,000 to 96,000 job-years of work if AT&T invests $8 billion toward wireless infrastructure development over the next seven years.
Last week, those findings were refuted in a Sprint-sponsored study by economist David Neumark, director of the Center for Economics and Public Policy at the University of California at Irvine. Neumark said the EPI study ignored reductions in capital expenditures and argued, based on EPI’s formula, that there would actually be 34,000 to 60,000 fewer jobs.
Despite AT&T’s claims of employment growth, politicians and federal officials are worried about the potential job losses at a time when unemployment rates remain steadily high. AT&T says it is expecting to save $3 billion annually via the merger, but it does not explain how, which worries skeptics like Sen. Al Franken (D-Minn). In a letter to regulators written in July, Sen. Franken said that the cost savings will likely come from layoffs, given AT&T’s history with mergers.
“In fact, over the past eight years, AT&T has had five mergers and has eliminated between 5,000 and 25,000 jobs per year for eight of those nine years,” he wrote.
Deputy Atty. Gen. James M. Cole said at a press conference last Wednesday that the lawsuit was an effort to “protect jobs in the economy, not a move that’s going to in any way reduce them,” according to the Los Angeles Times.
The fourth-largest carrier merging with the second-largest might also encourage the industry to de-emphasize improvements to wireless networks, leaving a lot of service workers without jobs. Overlapping jobs could also be eliminated in the merger, and the New York Times reports that retail stores and back-office positions will be likely cut.
Media groups like the Free Press echo those sentiments, stating that AT&T has already told Wall Street that it will be spending less on infrastructure, which would lead to job losses. Free Press Research Director S. Derek Turner writes:
The finding that AT&T’s takeover of T-Mobile would kill jobs should come as no surprise — Ma Cell has made false promises about job creation before. But the fact that it’s put nearly 100,000 Americans out of work over the last decade is evidence that it doesn’t deliver on its claims. Don’t forget that in 2004 AT&T moved to slash thousands of jobs just one month after its merger with Cingular was approved, in large part due to its promise to protect and expand jobs in the merged company.
Labor’s support has remained steadfast because of the promise of job creation. The AFL-CIO has supported the merger from the onset of the deal, stating that T-Mobile employees stand to benefit from the “pro-worker policies of AT&T, one of the only unionized U.S. wireless companies,” at a time when other communications providers have tried to thwart union representation.
The Communication Workers of America, which can reportedly add about 20,000 more workers from the deal, is also in favor. Currently, the CWA represents 160,000 AT&T workers. The union has also been organizing T-Mobile workers in the U.S., and it is currently in contract negotiations with Verizon for its unionized workers following a brief strike last month.
But AT&T’s strategy to promise more jobs may not be enough to convince the Justice Department and Federal Trade Commission that its merger is not harmful to consumers. Even though AT&T is a more worker-friendly company than its competing carriers, horizontal mergers more often than not lead to layoffs. And 5,000 jobs may not be enough to offset any potential reductions.