Experts Say Jumping the Gun on Layoffs Could Hurt Companies During Recovery

Like cutting marketing budgets, layoffs are one of the most common, immediate responses of businesses to an economic downturn. The negative impact on companies of reducing marketing budgets during a recession has been well documented in the business literature. And now, experts are weighing in with assessments that workforce reductions, too, may do companies more harm than good.

Quoted in an April 7 story from the Associated Press (AP), University of Central Florida economics professor Sean Snaith, who also heads the Institute for Economic Competitiveness at the university, cautioned that workforce reductions during the recession could handicap the ability of companies to benefit from the recovery once it begins.

The AP story also reports that, although more than 70 percent of companies have resorted to layoffs during the current recession, more companies than in the past are pursuing alternative cost-saving measures due to the known negative impacts of layoffs.

Among examples cited in the AP story of companies that are avoiding layoffs is Costco Wholesale Corp. (NASDAQ:COST) which, in spite of a more than 25 percent decline in profits, has not pink-slipped any permanent employees. Sphere: Related Content

MIT Economist Compares Dialogue from Right to Andrew Mellon

Watching a re-run of Crash: The Next Great Depression on The History Channel last night, I got a good refresher on the Great Depression and the tragic mistakes the U.S. government, under the leadership of the staunch free-market apostle Andrew Mellon, made in responding so slowly to the crisis.

According to Ricardo J. Caballero, head of the economics department at MIT, those on the conservative side of the equation today don't seem to have learned very much since. In an opinion piece from today's Washington Post, Caballero writes that it is "scary to hear the right regurgitating the untimely liquidationist claims that Treasury Secretary Andrew Mellon made."

He goes on to suggest that the best sign of promise in the recent economic news is President Obama's recent pledge of "persistence" in the effort to get the economy out of the hole it's currently in.

Well put. We'd all do well to make sure we think beyond politics and ideology and persist in "doing stuff," because ultimately it's our actions and efforts, as individuals, as businesses, and as a nation, that will turn the situation around. Not every effort will succeed. We can't expect to get everything right the first time. But, as the lessons of the Great Depression teach us, inaction is the greatest enemy, and the actions taken by the Roosevelt administration, however imperfect, were what finally moved things in the right direction.

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