Layoff

Not to be confused with Degrowth or Shrinkage.

A layoff[1] or downsizing is the temporary suspension or permanent termination of employment of an employee or, more commonly, a group of employees (collective layoff)[2] for business reasons, such as personnel management or downsizing (reducing the size of) an organization. Originally, layoff referred exclusively to a temporary interruption in work, or employment[3] but this has evolved to a permanent elimination of a position in both British and US English,[1][failed verification] requiring the addition of "temporary" to specify the original meaning of the word. A layoff is not to be confused with wrongful termination.

Laid off workers or displaced workers are workers who have lost or left their jobs because their employer has closed or moved, there was insufficient work for them to do, or their position or shift was abolished (Borbely, 2011).[4][5] Downsizing in a company is defined to involve the reduction of employees in a workforce. Downsizing in companies became a popular practice in the 1980s and early 1990s as it was seen as a way to deliver better shareholder value as it helps to reduce the costs of employers (downsizing, 2015). Research on downsizing in the US,[6] UK,[7][8][9] and Japan[10][11] suggests that downsizing is being regarded by management as one of the preferred routes to help declining organizations, cutting unnecessary costs, and improve organizational performance.[12] Usually a layoff occurs as a cost-cutting measure. A study of 391 downsizing announcements of the S&P 100 firms for the period 1990-2006 found, that layoff announcements resulted in substantial increase in the companies’ stock prices, and that the gain was larger, when the company had prior layoffs. The authors suggested, that the stock price manipulation alone creates a sufficient motivation for publicly-traded corporations to adopt the practice of regular layoffs.[13]

  1. ^ a b "layoff noun – definition in British English Dictionary & Thesaurus – Cambridge Dictionary Online". Dictionary.cambridge.org. Archived from the original on 2012-03-02. Retrieved 2012-03-13.
  2. ^ "Redundancy: your rights". www.gov.uk. Archived from the original on 2018-11-06. Retrieved 2015-02-11.
  3. ^ "Labor Terminology". Bulletin of the Bureau of Business Research. 25. Harvard University. Graduate School of Business Administration: 50. 1921. Retrieved 8 January 2017.
  4. ^ "Labor force characteristics". Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. October 18, 2010. Archived from the original on 11 December 2020. Retrieved 20 October 2010.
  5. ^ "Glossary". Bureau of Labor Statistics. Archived from the original on 6 May 2009. Retrieved 20 October 2010.
  6. ^ Baumol, W. J., Blinder, A. S. & Wolff, E. N. (2003). Downsizing in America: Reality, Causes and Consequences. New York: Russell Sage Foundation. See also the American Management Association annual surveys since 1990.
  7. ^ Sahdev, Kusum; Vinnicombe, Susan; Tyson, Shaun (1999). "Downsizing and the changing role of HR". The International Journal of Human Resource Management. 10 (5): 906–923. doi:10.1080/095851999340224.
  8. ^ Chorley, David (May 2002). "How to: Manage downsizing". Financial Management. London: 6. ISSN 1471-9185.
  9. ^ Mason 2002; Rogers 2002[full citation needed]
  10. ^ Mroczkowski, T. and Hanaoka, M. (1997), 'Effective downsizing strategies in Japan and America: is there a convergence of employment practices?', Academy of Management Review, Vol.22, No.1, pp. 226–56.
  11. ^ Ahmakjian and Robinson 2001
  12. ^ Mellahi, K. and Wilkinson, A. (2004) Downsizing and Innovation Output: A Review of Literature and Research Propositions, BAM Paper 2004, British Academy of Management.
  13. ^ Schulz, A. C. and A. Himme (2022). "Stock market reactions to downsizing announcements: an analysis through an institutional lens." Socio-Economic Review 20(4): 1825-1855; 10.1093/ser/mwab046