When are layoffs acceptable? Evidence from a quasi-experiment

Gary Charness and David Levine

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Many authors have discussed a decline in internal labor markets and an apparent shift to a new employment contract, characterized by less commitment between employer and employee and more portable skills. These discussions occur without much evidence on what employment contract employees currently feel is fair. We perfomed quasi-experimental surveys to study when employees in the U.S. and Canada feel that layoffs are fair. Layoffs were perceived as more fair if they were due to lower product demand than if the result of employee suggestions. This result appears to be solely due to norms of reciprocity (companies should not punish employees for their efforts), rather than norms of sharing rents, as new technology was also considered a justification for layoffs. Consistent with theories of distributive and procedural equity, layoffs were perceived as more fair if the CEO voluntarily shared the pain. CEO bonuses due to layoffs lowered their reported fairness only slightly. Respondents in Silicon Valley were not more accepting of layoffs than were those in Canada on average, although the justifications considered valid differed slightly.

Keywords: New employment contract; fairness; justifications; layoffs; survey; Leex (search for similar items in EconPapers)
JEL-codes: A13 C93 J41 J50 L14 (search for similar items in EconPapers)
Date: 1999-03
New Economics Papers: this item is included in nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://econ-papers.upf.edu/papers/369.pdf Whole Paper (application/pdf)

Related works:
Journal Article: When are Layoffs Acceptable? Evidence from a Quasi-Experiment (2000)
Working Paper: WHEN ARE LAYOFFS ACCEPTABLE? EVIDENCE FROM A QUASI-EXPERIMENT (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:369

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).