An employer facing economic recession is tasked with the choice of laying off some percentage of workers
The student must also reply to one classmate’s thread and the reply must be at least 150 words, with at least 1 citation in current APA form.
Eric Cope
Forum 4
An employer facing economic recession is tasked with the choice of laying off some percentage of workers, or keeping all workers but cutting each of the worker’s wages. This is a difficult decision. On the one the hand, the employees who were laid off would certainly suffer in the recession. On the other hand, cutting wages of all workers would cause many more individuals to suffer, but to a lesser degree. Ultimately, as the employer I would decide to reduce wages of all employees. Hashimoto (1975) discussed the implications of such a decision. They arrived at the conclusion that it is especially important to minimize the likelihood of job separation. As layoffs would likely be permanent, and wage reductions would not, this will aid in retaining a valuable workforce.
Hashimoto (1975) goes on to discuss the increased costs of wage reduction. Ultimately, it is more costly to reduce wages than to lay off employees, as information about alternative wages must be analyzed. The higher the level of skill of the worker, the greater the wage reduction tends to be. Specifically, the greater a worker’s share in returns to investment, the higher percentage magnitude of wage reduction. This makes sense in a recession if a skilled laborer’s compensation is tied to revenues. Ultimately, it may be cheaper to lay off employees, but it makes more sense to reduce wages. This will aide in retaining the company’s workforce, and also will not leave any of the company’s workers unemployed during a recession, which is the right thing to do. As Hebrews 13:16 states, “Do not neglect to do good and to share what you have, for such sacrifices are pleasing to God” (English Standard Version). In other words, the company, which is also suffering during the recession, should do good and share what they have, or spend what it costs to devise a wage reduction scheme, in order to provide for its employees during a difficult time.
References
Hashimoto, M. (1975). Wage reduction, unemployment and specific human capital. Economic Inquiry, 13(4), 485-504. https://search-proquest-com.ezproxy.liberty.edu/docview/1297360794/fulltext/7A16225A4D7C47F5PQ/1?accountid=12085&imgSeq=1
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