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Are reduced hours really better than layoffs?

Posted by Amy Wilson on January 10, 2009


officespacemilton1Every time I turn around, there is a news flash about another layoff. Meanwhile, everyone is wondering “is there an alternative?” Last month, companies were weighing the plusses and minuses of an unpaid holiday. Now, there are the possibilities of wage cuts and reduced hours. Peter Capelli explores this in his piece, Alternatives to Layoffs, and wonders why companies aren’t doing this more? Is it due to morale concerns or are companies just following the herd to please Wall Street?

A couple of friends, living the reality, have recently provided me with two different perspectives. Interestingly, the results break between having a college degree versus not and salaried versus hourly workers.

On the one hand is my friend, the attorney for the State of California. They have been asked to take a “weekly furlough” for 2009 (somewhere in the realm of 4 hours/week). He’s not exactly thrilled about it because it does mean less money, but hey he gets a nap on Fridays! He understands the reason and appreciates that he can keep his job. But, most importantly, he can plan for it.

On the other hand is my friend, the district manager for Starbucks. The primary source of her job stress is not the threat of layoffs, but rather the inability to provide her store workers with sufficient hours to pay their bills. It was particularly rough over the holidays; at a time when workers came to expect extra hours, they were suddenly turned away from getting any. Sure, the workers understand why, but it doesn’t really help because they can’t plan for it.

Back to Kris Dunn’s question: is it better to have a college degree? It sure is … and please, use it to plan.

13 Responses to “Are reduced hours really better than layoffs?”

  1. Excellent post, Amy! It would seem to be much more demoralizing for surviving employees to see their colleagues being laid off and wonder if they were next, to be constantly reminded of it by the empty offices, etc.

    I was intrigued by some reader responses to Cappelli’s article, including one from Chuck Yarbrough, talking about how 16 states offer a program that “allows an employer to reduce hours worked from 20 percent to 40 percent and have the state unemployment insurance account make up the difference as a percent of the weekly benefit amount.” It would be interesting to see if companies doing layoffs in states with those programs did not take advantage of it and why not.

    There is also the notion of making different investments during the downtime. Tom Lenzo from the ASTD mentioned, “When Toyota closed a plant in Indiana a couple of months ago, they kept the employees in training sessions designed to sharpen their job skills and find better ways to assemble vehicles.”

    Much of the upside of keeping people on but having reduced hours/pay is about keeping/improving the skills for “the eventual upturn.” It seems to be fear and uncertainty about when that upturn will arrive that makes companies do what they see everyone else doing. This is a common fear-based reaction, reflecting the same “run for the fire exit” approach so often seen in financial markets lately.

  2. Meg Bear said

    We’ve been having this discussion at our house a lot these days. I agree that there is a hierarchy of needs kind of logic to it. Assuming that you can survive on the reduced wages than the reduction of hours sounds pretty OK. If you are on the edge financially it sounds really bad. I still fail to see how it cannot sound better to the majority vs. a layoff. I think the problem is that most people do not really realize just how close a layoff is to them personally.

  3. charley2u said

    The experience of you friend from Starbucks is similar to mine whenever I raise this idea. As an advocate of shorter working time, it the most difficult for folks to wrap their heads around.

    One way to look at it is this: Pres-elect Obama is going to spend 775 billion dollars to create 4 million jobs: that is $193,000 per job.

    Which is amazing, since it would not cost a penny for Washington to reduce the work week by one measly day – and the $775B saved could be returned to American working families as reduced tax rates to offset the incomes impact of the reduction.

    $775B/ Labor force of 153M = $5100.00, or about $100.00 per week in additional after-tax income per worker.

    No need for a stimulus, and a better standard of living, with more time for our familes too.

  4. Amy Wilson said

    @Charley – thanks for your comment! I can certainly appreciate the idea of a reduced work week. Am wondering though if Americans would remain competitive in the world economy as a result?

    @meg, @mark – I agree that a temporary reduction could save a lot.

  5. Bob Bear said

    Amy,

    I have been laid off and put on reduced work weeks in the past and can say it is definitely better to be on reduced work weeks. Not only do you get to keep you job and not be out looking with everyone else but you are ready to go back full time when things turn around (which is better for the company). This is clearly a win win, in my opinion, and I hope more companies think about doing this and more employees realize that it is short term pain but much better then being laid off.

  6. Amy Wilson said

    Bob,
    Thanks so much for sharing your experiences. I *hope* businesses are incented to take this approach in the future.
    Kind regards,
    Amy

  7. Teresa said

    Depends on your pay level and the hours you are reduced to. I was reduced from 40 hours a week to 3 – yes that is three! hours a week. I cannot collect unemployment in my state – unless I am unemployed completely – so how are reduced hours better for me? And I am not the only employee this has been done to. So obviously the company wants us to quit – so we will not get any unemployment at all.

    So how am I better off earning less than 20 dollars a week?

    With unemployment I would earn at least a couple hundred a week.

    But I am not unemployed – so not eligible.

    • Tara said

      I began working for my employer back in 1993 and he started a new company in 2002 and because of my seniority I began working for the newer company meanwhile the old still exists. However, my hours were cut 1 1/2 years ago from 40 hours a week to 10 hours a week in hopes that business will pick up. I won’t quit because I know I could receive more on unemployment but they’re just pushing me in a corner to die. Are their any rights for people like us? Someone please help?

  8. Amy Wilson said

    Teresa – Thank you for sharing your experience. I would imagine that when most people think “reduced hours” they think 40 down to 35, not 40 down to 3. This is a reality that everyone should keep in perspective. Best of luck on getting the hours (0 or 40) that you want.
    Kind regards,
    Amy

  9. Amy Wilson said

    Interesting counter to Peter Capelli’s article by John Sullivan:
    “Employee furloughs can be a bad alternative to layoffs”
    http://www.ere.net/2009/02/09/employee-furloughs-can-be-a-bad-alternative-to-layoffs/

  10. […] hiring freeze is an admirable way for an organization to prevent future lay-offs and other cost-cutting measures. In fact, I don’t hear too many people with a job complaining about hiring freezes these […]

  11. Ryan Jones said

    I am getting this myself at Kohl’s. I’ve been working at Kohl’s since last March (2008). Originally, I had 2 other jobs in addition to Kohl’s, but Kohl’s started getting busy that following summer, and so I had to drop the other 2 jobs (though part of the idea was that I do ad set in the evenings). And while that worked for a while, after the holiday season ended back in January, they cut everyones’ hours and now I am only averaging about 4 to 10 hours a week. I’ve been trying to find a new jobs that can either go alongside with Kohl’s or replace it, but as a relatively new college graduate, it is hard to land the perfect job these days. Although one thing I did do was take up affiliate marketing (though generating sales can be tricky lately).

  12. Amy Wilson said

    Ryan – thank you for sharing your story. Best of luck in finding the right job for you.

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