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Do Layoffs Encourage Quitting in The “Next” Job that a Worker Gets? Yes!

April 17th, 2017

  This is important new research by Paul Davis at Cornell’s Industrial Labor Relations School (and colleagues) that both quantifies and emphasizes how damaging layoffs are far beyond the company where a layoff occurs – with the damage spilling across our economy and our society as a whole.

Obviously, workers who are laid off suffer. As do their families

And as I wrote in SPARK, the evidence that layoffs are smart effective strategic decisions made by CEOs facing tough times is  – to say the least – weak at best. In the vast majority of these sad situations, a layoff is powerful evidence of a massive failure of management and corporate vision.

Paul Davis’s research looks at what happens when laid-off workers eventually get new jobs – i.e. how they perform for their new employer.

(Great to see this new work because since the Great Recession, there has – amazingly –  NOT been a lot of research on the impacts of layoffs compared to the previous two decades.)

In a nutshell, they are far more likely to voluntarily quit that next job (compared to others in their new workplace who have never experienced a layoff) due to, in large part and to no surprise,  the “psychological spillover” from that first layoff and the resulting loss of an employee’s trust in management anywhere, fueled  by the increasing perception that job security is a bygone dream.

This is not good for our economy, as Davis stresses, given the growing prevalence of layoffs across so many sectors. And especially, given widespread doubts that the gig economy can offer a viable sustaining replacement for steady work.

“The influence of layoffs on voluntary turnover is substantial and persistent.  

   Quitting is 56 percent more likely in a laid-off worker’s next job (relative to the individual’s propensity to quit prior to ever having been laid off).  

   Among those who are laid off multiple times over their careers, each additional layoff increases the likelihood of quitting in subsequent employment.  

  For those who do reach six layoffs in their work history (FK’s note: this is not as rare as you’d think), the decision to quit voluntarily is about six times more likely (than for workers who have not experienced a layoff.)

  The study results are consistent with a “psychological spillover” explanation in which a layoff by one employer negatively influences employee expectations (e.g., obligations owed to an employer) and perceptions (e.g., job security) surrounding post-layoff employment. 

  Given that layoff victims represent an increasingly large proportion of the workforce (and thus the talent pool upon which virtually all other organizations rely) and given that voluntary turnover is notoriously expensive  …….. the findings indicate that layoffs are relevant not only for the organizations that engage in them, but for all organizations.”

And thus across our economies as a whole.

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