The recession that started in 2008 had devastating implications for employment.

Question

The recession that started in 2008 had devastating implications for employment. But one surprise was that for some manufacturers, the number of jobs lost was actually lower than in previous recessions. One of the main explanations for this was that between 2000 and 2008, many factories adopted lean manufacturing practices. This meant that production relies less on large numbers of low-skilled workers, and more on machines and a few highly skilled workers. As a result of this approach, a single employee was supporting far more dollars in sales. Thus, it would require a larger decline in sales before an employee would need to be laid-off in order to continue to break even. Also, because the employees are highly skilled, employers are reluctant to lose them. Instead of lay-offs, many manufacturers have resorted to cutting employees hours.

As an employer would you lay-off a few employees or cut the hours of all employees? Please explain, why.

Explanation / Answer

As an employer I would definitely not lay-off employees instead I would hope to avoid or limit layoffs and introduce four-day workweeks, unpaid vacations and voluntary or enforced furloughs, along with wage freezes, pension cuts and flexible work schedules. That way as an employer I am still cutting labor costs, but hanging onto the labor. I as an employer will also be able to cut the indirect wages atleast during recession.

This tactic builds long-term loyalty among workers who are not laid off and spares the company having to compete again to hire and train a new. Being optimistic about the future, doing this, things could turn around in six months and We want our guys to stay around because they’re good guys and they work hard.”

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