Employee Layoffs: An Examination of Economic and Social Consequences

This discussion post examines the multifaceted issue of employee layoffs. It begins by outlining the various causes of unemployment, including shifts in demand, the need for specialized skills, and wage disparities. The analysis highlights the role of interest rates and inflation, and how layoffs can arise from downsizing and restructuring. The post presents statistical data on layoff trends, particularly within the steel and media industries, and compares unemployment rates across different countries like the US, France, and China. While layoffs often lead to financial hardship, the post also explores potential benefits, such as access to unemployment benefits, and the possibility of securing new jobs with higher wages. Overall, the discussion aims to provide a balanced view of the economic and social consequences of employee layoffs, and their impact on both individuals and the broader economy.

Running head: Employee Layoff
Employee Layoff
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Employment layoff
There are several reasons behind unemployment of labors, which includes demand
and supply gap between employers and employees, demand for highly skilled labors and the
lower wages of the companies. Under such a situation, the natural rate of unemployment can
be healthy for an economy suffering from such economic gaps. This is because of high-
interest rates that reduce investment and affects the growth of a business. Recently, the Fed is
reducing the interest rate of the US. Despite this cut in interest rate, the inflation and the
wages are low. A lower interest rate is beneficial for business growth, as destined by the
Federal Reserve of the US. This kind of natural rate of unemployment is harmful to any
economy. Moreover, there can be labor layoffs, which can occur due to downsizing or
restructuring of a business (Murtin & Robin, 2018). Workers of a company are laid off either
on a temporary or permanent basis. Corporations or organizations undergoing restructuring
layoff employees temporarily and hire them after the process. On the other hand, downsizing
companies layoff workers permanently. The data below indicates an increase in the total
number of layoffs by companies.
Figure 1: Different forms of unemployment

2Employee Layoff
(Source: Bls.gov, 2020)
The diagram indicates an increase in the number of layoffs in January 2019. Labor
layoff can occur due to the merger of firms, acquisition and performance degradation. There
are several industries that layoff labors, which includes the Steel or manufacturing industry
and media sector (Mitsopoulos, 2016). The newsroom or media department of the United
States has recorded an increase in the number of employees departed. In addition to this, the
wages of the newsroom sector are continuously falling from a lifelong of poorer wage
condition. Low wage and difference in salaries are a huge problem that leads to
unemployment (Pinheiro & Visschers, 2015). Therefore, there is an increase in
unemployment derived from this sector.
Figure 2: US unemployment in the media sector
(Source: pewresearch.org, 2019)

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Positivity in labor layoff
Not only the US but also other economies such as France, the UK and China are
suffering from unemployment. However, France is severely affected by a hike in
unemployment number compared to other economies.
Table 1: Unemployment Rate of Economies in 2019
COUNTRIES Unemployment Rate
United States 3.87
United Kingdom 3.81
France 9.09
China 4.43
Australia 5.33
Japan 2.41
(Source: Data.worldbank.org, 2020)
Whether temporary or permanent, a layoff is worse for the financial condition of the
respective families. Unemployment of any kind leads to a fall in demand and economic
activity, which is ultimately harmful to the economy. However, this not always true for labor
layoffs. Because companies with employee benefit policies provide such benefits to its
employees when laying off (Dou, Khan & Zou, 2016). This employment support help to
combat their financial instabilities.
Additionally, a permanent layoff can help workers to secure better job opportunities
with higher wages. Reports suggest that new jobs offer higher salaries than old ones.

4Employee Layoff
Moreover, workers can bargain for their experience and skills to increase their wage. Thus,
after permanent layoff labor, searching for a new job can grab newer opportunities (Jung &
Kuester, 2015). Therefore, a layoff is not always bad for the workforce, as it brings greater
wage and employment opportunities for labors.

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References
Bls.gov, (2020). Number of unemployed on temporary layoff increase by 175,000 in January
2019 : The Economics Daily: U.S. Bureau of Labor Statistics. (2019). Retrieved 29
February 2020, from https://www.bls.gov/opub/ted/2019/number-of-unemployed-on-
temporary-layoff-increase-by-175000-in-january-2019.htm
Data.worldbank.org, (2020). Unemployment, total (% of total labor force) (modeled ILO
estimate) - China, France, United Kingdom, United States, Australia, Japan | Data.
(2020). . Retrieved 29 February 2020, from
https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?end=2019&locations=CN-
FR-GB-US-AU-JP&start=2016
Dou, Y., Khan, M., & Zou, Y. (2016). Labor unemployment insurance and earnings
management. Journal of Accounting and Economics, 61(1), 166-184.
Jung, P., & Kuester, K. (2015). Optimal labor-market policy in recessions. American
Economic Journal: Macroeconomics, 7(2), 124-56.
Mitsopoulos, M. (2016). Greek Export and Labor Market Performance: Facts and Myths that
Can Help Devise a Useful Growth Strategy. In Stagnation Versus Growth in
Europe (pp. 155-182). Springer, Cham.
Murtin, F., & Robin, J. M. (2018). Labor market reforms and unemployment
dynamics. Labour Economics, 50, 3-19.
pewresearch.org, (2019). U.S. newsroom employment has dropped a quarter since 2008, with
greatest decline at newspapers. (2019). Pew Research Center. Retrieved 29 February
2020, from https://www.pewresearch.org/fact-tank/2019/07/09/u-s-newsroom-
employment-has-dropped-by-a-quarter-since-2008/

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Pinheiro, R., & Visschers, L. (2015). Unemployment risk and wage differentials. Journal of
Economic Theory, 157, 397-424.