Which Firms Resort to Layoffs Throughout Robust Instances?

The financial pressures introduced on by the COVID-19 pandemic have required many companies to scale back bills. Whereas worker layoffs will be an efficient value reducing measure, additionally they threaten the remaining workers’ morale and undermine a corporation’s social construction. New analysis (Bentley et al., 2021) examines the components that predict whether or not an organization will resort to layoffs as a price reducing measure. 

The researchers used a pattern of 1,364 US retail banks with quarterly observations from the primary quarter of 2019 by way of the fourth quarter of 2020. They gathered layoff information from a number of sources—monetary reviews, firm bulletins, and information reviews. Moreover, the researchers examined state Employee Adjustment and Retraining Notifications (WARN). The WARN act requires companies with 100 or extra workers to file notifications with state labor departments when conducting layoffs that exceed a threshold (sometimes 50 workers). 


Outcomes confirmed that monetary stress considerably predicted will increase in each layoffs and workforce reductions (i.e. the online lack of workers). Nevertheless, outcomes additionally indicated that the connection between monetary stress and layoffs was weaker as firms invested extra monetary capital in issues like worker coaching pre-pandemic. Additional, this weakening impact was extra pronounced when firms additionally invested in pre-pandemic bodily capital (e.g., department areas, expertise). Lastly, supplementary outcomes discovered that banks with the best ranges of pre-pandemic human capital investments made cuts to bills in different areas of the enterprise outdoors of worker layoffs when confronted with pandemic monetary pressures. 


Outcomes from this examine present that companies that develop human and bodily capital throughout regular instances can be extra inclined to guard worker job safety within the face of monetary pressures. This data could also be assist job seekers determine organizations which are seemingly to offer elevated job safety throughout tough instances. Nevertheless, this suggestion must be taken with a grain of salt, because the pandemic created a novel context to look at how organizations reply to excessive monetary stress. 

Bentley, F. S., Kehoe, R. R., & Chung, H. (2021). Investing for retains: Corporations’ prepandemic investments in human capital decreased workforce reductions related to COVID-19 monetary pressures. Journal of Utilized Psychology, 106(12), 1785-1804. 

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