A Little Leaven

Up until about 1980 a layoff was viewed considerably different. It represented a management and business failure to be avoided at all costs. It was an announcement management was inadequate. It would be a negative albatross the management would carry the rest of their career.

After 1980 layoffs became a fall back position in most all the business cases I read of major companies. The business case solution, to not meeting revenue with proposed plans, was a layoff. Layoffs became a financial celebration of investors to increase short term gains. It was rewarded by Wall Street as astute management. Taking credit for having instituted force reductions became chic on executive resumes.

Also after 1980 a rash of consolidations, mergers and acquisitions took place. The financial benefit used to justify a large share of the costs was reducing the labor force of the combined companies. It would be accomplished by supposedly eliminating duplication. The larger this speculative reduction number, the larger the smile on the Wall Street Cheshire cat.

A question popped in my mind at the time all this was starting. What is the impact of a layoff to society?  The Federal and local tax revenue would be less. Social services would be required. There would be the upset of the family and an enduring psychological impact.  People would consume less. I thought at that time that a tax should be placed on business for each employee they layoff. The goal would be to raise the financial costs to the business to make a layoff much less attractive.

Such a financial penalty scheme would have had a sobering effect on American business. First, there would have been far less mergers and acquisitions. Second, it would have changed the financial calculus of “off shoring”. Third, it would have thinned out the financial investor speculating sharks. Finally, it would have greatly slowed the surging America growth rate during the years. The net result would be a much smaller but longer term consistent rate of growth. It would also have perpetuated a longer term for egalitarian distribution of business prosperity.

Perhaps today the argument would be how much growth, as opposed to getting growth started.