by Bill McBride on 12/21/2008 11:20:00 PM
Sunday, December 21, 2008
From the NY Times: More Firms Cut Labor Costs Without Layoffs
A growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations and voluntary or enforced furloughs, along with wage freezes, pension cuts and flexible work schedules. These employers are still cutting labor costs, but hanging onto the labor.Click on graph for larger image in new window.
Several employees at Hot Studio said they did not mind the policy, particularly as they have heard of layoffs elsewhere in the economy. “People feel they’d much rather have a job in six months than get a bonus right now,” said Jon Littell, a Web designer.
The magnanimous feeling will probably pass, said Truman Bewley, an economics professor at Yale University who has studied what happens to wages during a recession. If the sacrifices look as though they are going to continue for many months, he said, some workers will grow frustrated, want their full compensation back and may well prefer a layoff that creates a new permanence.
“These are feel-good, temporary measures,” he said.
This graph shows the number of employees working part time for economic reasons for the last 50 years. IMPORTANT: The BLS made a change in Jan 1994, and prior to that change more workers fell into this category.
From the BLS:
Reasons for working part time. Persons who work part time do so either for noneconomic reasons (that is, because of personal constraints or preferences) or for economic reasons (that is, because of business-related constraints such as slack work or the lack of full-time opportunities). Because respondents typically are not familiar with this distinction, the question was reworded to provide examples of the two types of reasons. More importantly, the measurement of working part time involuntarily (or for economic reasons) was modified to better reflect the concept. Starting in 1994, workers who usually work part time and are working part time involuntarily must want and be available for full-time work.Although the chart is not population adjusted, this suggests that there is a larger move to part time employment in the current downturn than in previous downturns. I tend to focus on the unemployment rate, but employees working part time (for economic reasons) is an important part of the weak employment picture.
Posted by Bill McBride on 12/21/2008 11:20:00 PM