Layoffs And Downsizing In 2007

Many businesses are being forced to downsize their number of employees to cut costs or because the business feels it should operate with fewer employees. Downsizing is the act of reducing the number employees on a company’s payroll and is considered different than layoffs. Downsizing is scaling down the number of employees permanently rather than temporarily like layoffs. Employees who are laid off usually have a good chance at being rehired, where as those who are victims of downsizing do not.

The majority of layoffs are due to a company’s desire to lower costs. Usually there will be employees in positions that are unnecessary, thus allowing the company to do the same amount of work with fewer employees to pay. Other times when layoffs are high are when employees are simply not working to the standards of the company and their competition is much more successful. Sometimes this situation can be prevented if the employees get word of a possible layoff ahead of time, but many times businesses will still layoff employees even if they will lose profits in the end.

When downsizing occurs it is generally due to a much more serious situation than when employees are laid off. Downsizing is almost always a permanent decision, and most people will never get their jobs back. Most causes for downsizing are due to the economic market. For example, if companies’ products are below the current market price, employees are no longer creating products for profit because the company has to put all of the profits toward employee wages. Therefore, companies will only keep workers if the products they are making are earning enough profit for their pay and for the company to profit.

As of April 2007, the unemployment rate in the U.S. was 4.5 percent, with largest part of this number coming from the manufacturing sector. Over 230,000 jobs have been lost in this sector, which includes mining, construction, manufacturing, trade, and retail. Most of these layoffs were due to an increase in worker participation and advancements in technology that make many jobs obsolete because they can now be accomplished by a machine that can do more work in less time. The increase in the number of factories being established overseas is also adding to the number of layoffs in the U.S. Many companies will take advantage of the lower wages in other countries and will close U.S. factories down. However, not all layoffs are due to these circumstances. Since a layoff is determined when a worker is separated from a job for more than thirty days, some of the layoffs were due to seasonal breaks from jobs that have high and low seasons.

There are a number of key terms associated with layoffs and downsizing called reductions in force. These terms differentiate between the types of layoffs that are performed. An Involuntary Reduction in Force (IRIF) is when a company chooses to layoff employees without their consent. A Voluntary Reduction in Force (VRIF) is when the employees are active in the decision. A VRIF is usually due to resignation or retirement with promise of a nice payout. Also, if employees have been laid off they are entitled to file for unemployment benefits, depending on the state in which they live.

In today’s job market it is becoming more uncertain who will have a job and who will be laid off. For many unskilled workers’ jobs are being taken over by more cost efficient computers that do the same work while increasing the company’s revenues and production of goods. These people are having a hard time finding quality work and will often resort to living off unemployment payouts or working a harder, lower paying job in less than desirable conditions. Although technology has led to the advancement of so many industries, it is posing a serious threat to the blue-collar workers in the U.S. If the trends continue as they have over the last few years, many of these workers will be permanently out of jobs and unable to support their families. This trend in turn will likely lead to multiple jobs for all capable people in households and continue to support the fact that most American’s spend nearly eighty-five percent of their time in the workplace.