Myth Two

Layoffs make American business more productive.

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.


Little evidence supports this widely accepted myth. While downsizing has proved very effective for a few organizations like General Electric and Xerox, layoffs haven’t helped most companies realize any increase in overall productivity.

In a survey by the AMA, whose member organizations employ one-quarter of the country’s workforce, 62.8 percent of human resource managers reporting layoffs said that worker productivity either had stayed the same or had decreased after a layoff.

One study, whose authors included two governors of the Federal Reserve Board, found that manufacturing firms that upsized during the 1980s contributed about as much to the economy’s overall productivity as those that downsized. The study also found that increases in productivity were due to differences between companies and not due to internal changes in the same company over time (i.e., downsizing).

Consider what happens after a layoff. The loss of accumulated job knowledge is like an organizational lobotomy. It leaves a sluggish, bumbling organization that must relearn even the most basic functions. Compounding the problem, the company’s top performers often jump ship. They have other job options and they exercise them. And why shouldn’t they? If the ax fell once, it could fall again.

One way layoffs supposedly make business more competitive is by replacing obsolete workers with advanced technologies. But technology hasn’t leveraged manpower or eliminated many jobs. Only 19.7 percent of the downsized companies in the AMA survey for 1994-95 said that automation contributed to the layoff. In the four previous years, that number averaged 11.3 percent.

The related claim, that workers are laid off because they don’t have the technological skills to compete, is equally suspect. Most jobs don’t require high skill. Neal H. Rosenthal, the co-author of one Bureau of Labor Statistics study, points out, “You can’t forget that 40 percent of our jobs still can be learned in less than a month and are generally low-paying.”

THE TRUTH IS...

what drives Mother Jones' team of 50-plus journalists. The truth is powerful, as evidenced by how hard those with something to hide, or profit to gain, seek to discredit it. The truth, stated boldly and reported meticulously, is what draws so many readers to Mother Jones.

And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

It's not, and if you can right now, please consider a year-end donation to support our team's fearless nonprofit journalism so we can close that big fundraising gap and finish the year strong, ready for all that's ahead in 2021. Whether you can give $5 or $500, it all matters in keeping us charging hard, and we'd be grateful.

payment methods

THE TRUTH IS...

what drives Mother Jones' team of 50-plus journalists. The truth is powerful, as evidenced by how hard those with something to hide, or profit to gain, seek to discredit it. The truth, stated boldly and reported meticulously, is what draws so many readers to Mother Jones.

And the truth is, going into the final 4 days of the year we still needed to raise $TK to hit our $350,000 goal and start 2021 on track. It's nerve-wracking, wondering if the big spike we normally see at the end of December is going to be another thing that doesn't go as planned in 2020, or worse, if, now that Donald Trump is set to leave the White House (for longer than a taxpayer-funded golf trip to a property he owns), folks might be pulling back from fighting for the truth and a democracy and think the hard work is done.

It's not, and if you can right now, please consider a year-end donation to support our team's fearless nonprofit journalism so we can close that big fundraising gap and finish the year strong, ready for all that's ahead in 2021. Whether you can give $5 or $500, it all matters in keeping us charging hard, and we'd be grateful.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate