Last month the number of people getting pink slips rose to almost 700,000. Companies are doing the one worst thing they could do in this economy -- dumping their employees from the payroll.
It may be a relatively fast way to free up cash, but in the long term it is making this recession much worse. If you've been laid off, you're not going to be buying anything. If you aren't laid off and you see these kinds of numbers, you aren't going to be buying anything. In the end nobody buys anything, and what happens? Companies hurt themselves because they can't make any money. If they can't make any money, they have to close. I've never understood why the senior management of these corporations take such a short-sighted view. It's as if the only numbers that matter are next quarter's. Forget the fact that when (and if) business picks up, they'll have to hire again, and train again, and waste all that time and money getting new employees up to speed when they could have just hung on to the ones they had in the first place. Couldn't they ditch the private dining rooms for senior management and the private jets? Here's another idea -- if they absolutely have to cut personnel costs, couldn't they ask the top 20% of wage earners to take a temporary pay cut rather than lay off people?
Maybe they do this because their bonuses are tied to how much money the company makes or what the stock price is. It's not about what's right for the economy in the long-term.
Granted, there are some companies (like the Big 3 automakers) who will have to get leaner and meaner to survive because they don't have the customer base they used to -- and I don't think for those companies the customers are coming back. But if you have the kind of unemployment numbers we are seeing now, layoffs will just cause a further downward spiral in the economy. Companies need to look at trimming costs in other areas and do everything they can to hold on to their employees until we can get through this mess.
