Even more significant are the blighting effects on survivors. Meanwhile, low morale weakens engagement. Other research suggests that people who are laid off often struggle to find new jobs, and those who do often wind up taking roles at a lower salary. Both Sucher and Uchitelle say that the psychological and financial distress commonly experienced by workers who lose their jobs must also be taken into account in any discussion of the benefits and drawbacks of mass layoffs.
Even those who find another full-time role can remain permanently shaken by the experience of having a job in which they have invested their time, energy, and emotions suddenly disappear for reasons beyond their control. One study of 7, UK workers who had been laid off, for example, found that people who had lost their jobs between the ages of 33 and 50 were 4.
The long-term effects of layoffs extend to physical health as well; a study , for example, found that people who had involuntarily lost their jobs in the first 10 years of their careers were about six percentage points more likely to report having health issues later in life.
Sucher acknowledges there really are times when companies have valid reasons to cut large numbers of jobs. But even in such cases, too many companies continue to go about layoffs in a dehumanizing way.
She points to Michelin and Nokia as examples of companies that have taken active steps in recent years to change the way they go about managing impending layoffs, including providing as much advance notice as possible. Sucher also argues that companies have an ethical obligation to play an active role in helping laid-off workers gain new employment. Uchitelle, meanwhile, is skeptical about the party line that the solution to layoffs involves getting workers more education so that they will have the proper skills for in-demand jobs.
Both Sucher and Uchitelle agree that corporate culture is badly in need of a paradigm shift when it comes to mass layoffs, which are too easily passed off as a necessary evil when the necessity may not, in fact, exist at all. Companies that need to trim costs should strongly consider alternatives to layoffs, such as buy-outs, furloughs, and salary cuts, for the sake of their own self-interest as well as the lives of their employees, Sucher says.
Some solutions could also lie at the government level. This is shown in Table 6 , where a multivariate analysis of the probability of being re-employed is conducted. All else equal, laid-off workers who expected to be recalled were at least percentage-points more likely to find a paid job in the short term than those who expected no recall. The likelihood of high-seniority workers experiencing relatively high short-term re-employment rates evolved differently across groups.
High-seniority workers who expected to be recalled were more likely to be re-employed than their counterparts newly hired in the first two downturns: the re-employment rates of the former group exceeded those of the latter by 6. Among workers who did not expect a recall, this seniority advantage amounted to 9.
In general, employment rates varied little across industries. Public services were a notable exception. In all three downturns, workers laid-off from public services were at least percentage-points more likely to be employed shortly after layoffs than workers in primary industries and construction.
Further research is needed to uncover other sources underlying this difference. As expected, workers who were laid-off in the fourth month or the fifth month of the LFS interview were less likely to have a paid job during the sixth month than their counterparts laid-off during the second month of the LFS interview.
Different downturns affected regions differentially. Among comparable employees, the likelihood of being employed shortly after a layoff was consistently lower for workers laid-off in the Atlantic Provinces than for their counterparts laid-off in Ontario. However, the difference narrowed over time. In contrast, workers laid-off in the Prairie Provinces were more likely to be employed in the short term than those laid-off in Ontario in to, although this was not the case during the early s.
Since LFS information on wages is available only for and subsequent years, the question of how wages before and after layoffs compare is examined only for to and to Workers who were laid-off during the most recent downturn and found a job shortly thereafter experienced, on average, a slight drop in employment income. Fairly similar declines are observed in to Yet these averages mask considerable heterogeneity in wage changes Figure 1.
Figure 1: Kernel density of log hourly-wage change and log weekly-wage change to Measuring wage movements by using average changes in log wages, Table 9 shows that average wage changes were fairly similar in to and to To assess the degree to which average wage losses vary with worker and job characteristics, changes in log hourly wages and changes in log weekly wages are regressed on worker attributes age, sex, education, and seniority , a binary indicator for whether workers expect to be recalled, interaction terms between this indicator and seniority, a binary indicator capturing the end of temporary, term, or contract jobs, as well as transition-related variables.
The results for to are shown in Table Table 11 generally reveals no robust association between worker attributes including education and wage changes; this is consistent with Table 9.
Two exceptions are the fact that, all else equal, re-employed women experienced smaller wage losses than men 30 and that senior workers with more than 20 years of job tenure experienced larger wage losses than their counterparts with two years or less of seniority. In contrast, transitions across job types account for part of the observed wage changes.
For instance, workers who lost union coverage and workers who moved from a firm with employees or more to a smaller firm experienced hourly-wage losses that were between 9-percentage-points and percentage-points larger, and weekly-wage losses that were about percentage-points larger, than those of workers who remained non-unionized and those of workers who remained employed in smaller firms.
The substantial wage losses associated with loss of union coverage are in line with the results of Kuhn and Sweetman To shed light on the labour market implications of these slowdowns, this study attempts to answer four key questions:.
Consistent with Farber and Riddell and Song , the study showed that having a university degree was generally associated with a greater likelihood of being employed shortly after being laid-off. However, conditional on being re-employed shortly after the layoff, holding a university degree was not associated with smaller wage losses.
Workers laid-off in to and to experienced very similar changes in hourly and weekly wages. Thus, conditional on their being re-employed in the short term, the impact of layoffs on pay changes did not differ much across these two adjacent periods. While the study documented short-term wage changes for the one-half of laid-off workers who found a paid job in the first few months after being laid-off during the most recent downturn, it neither distinguished temporary layoffs from permanent layoffs nor assessed the long-term wage impact of permanent layoffs.
Recent research has found that high-seniority workers involved in mass layoffs experience substantial earnings losses for five years after losing their jobs Jacobson, Lalonde, and Sullivan ; Couch and Placzek ; Morissette, Zhang, and Frenette Please contact us and let us know how we can help you. Main article View the most recent version. Archived Content Information identified as archived is provided for reference, research or recordkeeping purposes.
This page has been archived on the Web. Top of Page. Characteristics of workers laid-off during the last three recessions to , to , to Decomposition of changes in characteristics of laid-off workers to , to Layoff rates in the last three recessions, by worker characteristics to , to , to Marginal effects of the determinants of the probability of being laid-off during the last three recessions to , to , to Incidence of re-employment across recessions, by worker characteristics to , to , to Linear probability model estimates of the determinants of being re-employed to , to , to Average wage changes among the re-employed workers to , to Distributional statistics of percentage wage changes and log wage changes among re-employed workers to , to Regression estimates of log wage changes and log hour changes with transitions to All too frequently, senior managers dismiss such findings.
Layoffs are so embedded in business as a short-term solution for lowering costs that managers ignore the fact that they create more problems than they solve. Companies that shed workers lose the time invested in training them as well as their networks of relationships and knowledge about how to get work done. Even more significant are the blighting effects on survivors. Meanwhile, low morale weakens engagement. While short-term productivity may rise because fewer workers have to cover the same amount of work, that increase comes with costs—and not only to the workers.
Quality and safety suffer, according to research by Michael Quinlan at the University of New South Wales, who also found higher rates of employee burnout and turnover.
Meanwhile, innovation declines. In addition, layoffs can rupture ties between salespeople and customers. Researchers Paul Williams, M. Sajid Khan, and Earl Naumann have found that customers are more likely to defect after a company conducts layoffs. Geoffrey Love and Matthew S.
Employees who are downsized pay a price beyond the immediate loss of their jobs. The effects follow people throughout their lives. A few companies have been experimenting with better ways to handle their changing workforce needs. So far, the results seem very positive. An analysis of their experiences reveals that an effective workforce change strategy has three main components: a philosophy, a method, and options for a variety of economic conditions.
A workforce change philosophy serves as a compass for senior leaders. A philosophy helps leaders answer the following questions:. The philosophy of the French tire maker Michelin, for example, includes hiring people for their potential rather than for the job. A workforce change strategy should anticipate three different scenarios.
The company also has a defined approach to workforce change and restructuring. Whenever possible, staff at the entities concerned and their representatives are invited to work together to seek and suggest solutions for restoring competitiveness and reducing overcapacity, which may open up an alternative to closing an activity or site. When restructuring is unavoidable, it must be announced as soon as possible and carried out according to the procedures negotiated with the staff representatives.
The ensuing changes on a personal level must be supported for as long as is necessary to ensure that the reclassified employees find a satisfactory solution in terms of standard of living, stability, family life and self-esteem. When Nokia was contemplating that massive workforce reduction in , its senior leaders articulated a philosophy with four core values:. A company must communicate its intent directly without leaving any of them in the dark or piecing together scraps of information to figure out what the future holds.
Having a clear methodology will allow companies to explore alternatives to layoffs, and if they cannot be avoided, minimize the harm they cause. To establish one, firms need to address three questions:. As a result, Michelin integrated three planning processes—product planning, territory planning, and restructuring planning—into one. The product-planning groups project their anticipated production for the next five years, and then the territories identify which regions will have too much or too little production capacity and what technologies each factory will need.
The restructuring plans come out of the dialogue between the product and territory heads. For example, in October , Michelin determined that it would have overcapacity for truck tire production in its Budapest factory and decided to close it in mid Michelin has set up an accountability structure that clearly delineates who is responsible for what. It identifies factories that should be closed or downsized and directly oversees all European restructurings.
Finally, Michelin establishes a committee for each factory that will be affected, consisting of regional and country executives who are responsible for implementing the restructuring plan.
Two senior executives at headquarters—a director of restructuring and a director of product planning—coordinate the entire process.
Management hinted there would be more firings in the future. Merril Lynch went on to lay off 25, positions in December The commercial aircraft division of Boeing, therefore, suffered all the cuts, with the defense segment untouched. In December Boeing fired 28, workers. Ford NYSE: F began to lay off workers long before the — recession put a serious dent in its revenue.
In January , when the economy was still in the contraction that began in , the large cuts at Ford were part of the seemingly endless parade of layoffs at other huge American companies, including United Airlines and Target NYSE: TGT.
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