Feb 25 2009

Layoffs can mean more than lost wages, says author

On Wednesday, Louis Uchitelle, economic reporter for the New York Times, told an audience of nearly 90 faculty and students from the University of Illinois at Chicago that layoffs had gotten out of hand in the United States, and that the consequences of mass layoffs extended far beyond the corporate bottom line.

Beyond the immediate financial impact to laid-off workers, psychological consequences can linger long after a laid-off worker has found a new job, according to Uchitelle.  “Layoffs in themselves are a truly damaging situation,”  Uchitelle said.  “In America, they’ve gone far beyond what’s necessary.”

Uchitelle said he was drawn to explore the psychological impact of layoffs as he researched his book, “The Disposable American: Layoffs and Their Consequences”.  “I consulted psychiatrists,” he said, “and they said, yes, layoffs are traumatic experiences.”

That impact can be seen in workers who give up on finding new employment or settle for any job at all, often undermining the benefits of advanced education and experience.

Uchitelle said for every three people laid off, two years later one of them had dropped out of the job market, one had a job that earned 20 percent less that the job from which they were laid off, and one had a new job making as much as their previous job.  According to Uchitelle, 19 percent of laid off workers take jobs for which they are overqualified after being laid off.

The Bureau of Labor Statistics tracks layoff events involving more than 50 employees.  According to seasonally-adjusted BLS statistics, there were 2,227 layoff events in January, involving nearly 238,000 employees.  That represents a 50 percent increase in layoff events, compared to the previous year.

However, Uchitelle said those numbers don’t take into account buyouts and early retirement, often proposed as alternatives to layoffs.  Uchitelle said that if those numbers were included in the calculations, it might be that 7 to 8 percent of all adult full-time employees suffer from the effects of layoffs every year.

Uchitelle said that it’s important to recognize the people laid off that aren’t getting jobs, and to think about the damage that causes, including the psychological as well as the financial ramifications.

“Skill is part of your sense of self,” Uchitelle said.  He said layoffs tell employees that “your skill doesn’t have value.”  Workers who have been laid off sometimes drop out of the job market completely.  “People felt so burned, they didn’t want to get back into the job market,” he said.  Uchitelle said that workers that had committed themselves to a career were more vulnerable to the psychological impact of layoffs than younger workers just entering the job market.

Uchitelle also criticized President Barack Obama’s address to Congress on Tuesday, and said that the only solution presented by the President was to replace jobs lost to layoffs with newly created jobs, a solution he said was an extension of the policies of prior administrations, and an inadequate solution.  He said that newly-created jobs aren’t equivalent to skilled positions that have been lost.

He said that he was worried that, “when we really start spending money [on economic stimulus projects] we won’t have the skilled labor to do it.”

Possible solutions that Uchitelle said should be considered included encouraging employers to cut wages across the board as a substitute for layoffs, tax credits to companies that avoid layoffs, and government wage subsidies for companies that agree to forgo layoffs.

“That debate isn’t on the horizon,” Uchitelle said.