Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Disney Outsourcing in Orlando Demonstrates Why Americans Hate Big Business

Some recent events at Walt Disney World show why Americans are so angry at Big Business and Wall Street these days. The Walt Disney Company (NYSE: DIS) laid off 250 IT employees at the theme park and replaced them with technicians brought in from India by an outsourcing firm, The New York Times reported.

To add to the outrage, Disney actually had the technicians train their replacements before the layoff, according to a June 3, 2015, Times article that has ignited a firestorm of controversy on the Internet. It is easy to see why the layoffs have stoked such anger: the financial numbers prove that Disney is a highly profitable company that is making tons of money.

Disney reported a market capitalization of $187.15 billion, a net income of $8 billion and an enterprise valuation of $202.06 billion on March 31, 2015. It also reported a TTM revenue of $50.71 billion that was growing at a rate of 6.97% a year.

Disney’s revenues actually increased by $2.72 billion over the past year, giving the company a profit margin of 16.92% and an earnings per share figure of 4.644%. While Disney employees look forward to pink slips, Disney investors can look forward to a return on equity of 17.81% and a dividend yield of 1.04%.

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Disney’s Money Machine

Many of Disney’s businesses are churning out cash like crazy. Its summer blockbuster, Avengers: Age of Ultron, made $191,271,109 in its first weekend of release, according to Box Office Mojo. As of June 7, 2015, the movie, which cost $250 million to make, had grossed a little over $1.3 billion worldwide, Box Office Mojo estimated.

That means Disney made more than five dollars for every dollar it invested in the super team fantasy in just the first month of release. The real profits from the movie—the streaming video and DVD sales—have yet to be counted.

Disney is also the company that is reportedly paying its biggest star, Robert Downey Jr., $40 million for a supporting role in the next Captain America movie. If that was not enough, Disney also paid to ship Downey’s furniture to the movie location in Atlanta from Los Angeles, reported.

How Disney Abused a Federal Program to Cut Workers’ Pay by More Than 50%

Despite those profits, Disney decided to save a few bucks by abusing a system of temporary visas set up to help technology companies bring in skilled experts such as software designers. Congress set up a class of temporary visas called H-1B designed to help people with advanced computer or science skills in short supply in the United States to enter the country.

Instead of bringing in computer scientists to help Google or Uber write software as the program was designed, Disney had a company called HCL America bring in individuals to replace workers in existing IT jobs. The reason Disney took such a move is clear—it can save money.

Firms that replace American IT workers with H-1B employees can reduce salary costs by 25% to 49%, Howard University public policy professor Ronil Hira told the U.S. Senate’s Judiciary Committee on March 17, 2015.

“H-1Bs are paid below that market wage, and they are hired because they are cheaper than American workers,” Hira testified.

Many Companies Replacing American Workers with Visa Employees

“Most of the H-1B program is now being used to import cheaper foreign guest workers, replacing American workers, and undercutting their wages,” Hira testified. Hira estimated that there are now 600,000 H-1B workers in the U.S., with 120,000 more coming every year.

Disney is not the only company replacing U.S. residents with H-1B workers, Hira alleged. He named a long list of companies engaging in the practice, including electric utility Southern California Edison, Harley Davidson, Northeast Utilities, agribusiness giant Cargill and pharmaceutical house Pfizer. The 540 IT workers Southern California Edison replaced made around $110,466 a year each; their H-1B replacements made between $39,584 and $44,901, a chart provided by Hira indicates.

If that was not enough, Deloitte Consulting is using H-1B workers to upgrade the computers that run the State of California’s unemployment insurance system, Hira claimed. He noted that the state of Indiana used guest workers imported by Tata Consultancy to perform similar work on its unemployment insurance system a few years ago.

“It is a sad irony that firms are importing guest workers to service the unemployment system when hundreds of thousands of Americans who have the skills to do this work are unemployed and underemployed,” Hira remarked.

Layoffs Will Fuel Political Discontent

The spectacle of an iconic American company laying off workers to slash salary costs in half while it is reporting substantial profits demonstrates why there is such widespread anger against corporate America. That anger is fueling discontent that could change the political landscape beyond recognition.

The New York Times reported receiving 2,800 comments about the story on June 7, 2015, most of them angry. The reporter who wrote the story, Julia Preston, said the response to the story was driven by people feeling “uncertain about their middle class security.”

Disney Story Shows Why Corporate America Is Bernie Sanders’ Best Friend

One person who will definitely benefit from this outrage is presidential candidate and U.S. Senator Bernie Sanders (I-Vermont). Preston is right; the American middle class feels extremely insecure in its position, which makes Sanders’ agenda of expanding entitlement programs, taxing the rich, curbing Big Business’s influence and reversing free trade and globalization highly attractive to average people.

The crowds are coming out for Bernie.
The crowds are coming out for Bernie.

It is no coincidence that Sanders is attracting large crowds in Iowa, where he is campaigning for the Democratic Presidential nomination as the news stories about Disney spread. More than 300 people turned out to see Sanders in the Iowa town of Kensett, population 240, The New York Times reported. Some of those people drove 50 miles to see the self-described social democrat.

Sanders drew 700 people to a rally in Davenport, Iowa, on Thursday, May 28, the largest crowd so far in the Iowa campaign season. In contrast, a more mainstream candidate, former Maryland Governor and Baltimore Mayor Martin O’Malley, only attracted 50 people to his event.

“Judging from Mr. Sanders’s trip here last week, there is real support for his message,” The Times stated. That message, as Bill Moyers noted in a June 6 Salon op-ed, is a closer reflection of popular opinion than many Democrats would care to admit. Moyers cited polls that show 63% of Americans think the distribution of wealth in the country is unfair, and 52% of them think the rich should be taxed to reduce income inequality.

Even some Democrats are now worried about Sanders’ popularity; U.S. Rep. John K. Delaney (D-Maryland) just wrote a Washington Post op-ed warning about the rise of a left-wing version of the Tea Party. Judging by Sanders’ success, Delaney’s warning seems to be too late; the rise has already begun.

Disney’s abuse of the H-1B visa program shows why there is such support for Bernie Sanders. It also tells us that if Corporate America does not want to see more politicians like Sanders, it had better start rethinking some of its policies. The American public is no longer amused by the cavalier attitude companies like Disney are taking towards their workers.