THE BLOG

Layoffs Are Bad for Business and the Economy

04/17/2010 05:12 am ET | Updated May 25, 2011
  • Stewart Acuff Utility Workers Union of America, Chief of Staff & Assistant to President

An article by Stanford Professor Jeffrey Pfeffer in the February 15 issue of Newsweek makes a compelling, well-researched case that layoffs and downsizing are bad for the firms that do it as well as bad for the economy.

Many of us have known that high unemployment, reduced wages and benefits, and layoff after layoff have disastrously suppressed consumer demand driving the recession deeper and making it more intractable.

But Professor Pfeffer in Newsweek turns conventional management wisdom on its head:"contrary to popular belief, companies that announce layoffs do not enjoy higher stock prices than peers--either immediately or over time. An examination of 1445 downsizing reported ...that the negative effects were larger the greater extent of the downsizing. Layoffs don't increase company productivity. Another myth: layoffs increase profits. Layoffs don't even reliably cut costs. "

And Professor Pfeffer reminds us of the truth John Maynard Keynes taught us decades ago that when folks lose their jobs, they lose income and spending power and the whole economy suffers.

Turns out this free market claptrap and Ayn Rand ideology and business school cut throat management is not good for business. We know it isn't good for workers. We've learned the hard way how bad it is for America.

Now we are learning how bad Chainsaw Jack Welch ideology is for business.

Once again, those who got America in this economic crisis have no business trying to tell us--their victims--how to get out of their mess.

We have to grow jobs, good jobs immediately--private investment, public investment, however we can.

There is so much productive work that our country and future generations desperately need: green energy generation, wind and solar farms, weatherization and green building retrofitting, remaking our electric grid, rebuilding our infrastructure which will also improve our productivity, restoring manufacturing and industrial capacity to get back to creating in and for America.

And restoring the freedom to form unions and bargain collectively.