The American Shame of Mass Layoffs

More than 150,000 tech workers lost their jobs in 2022, according to one estimate, and an additional 23,000 have been laid off since the start of 2023.

These workers are not alone. More than 30 million American workers have gone through mass layoffs since the Bureau of Labor Statistics started tracking them in 1996.

The modern era of mass layoffs started with manufacturing workers as the Rust Belt corroded during the 1970s and '80s. Then, in the 1990s, white-collar professionals found that their shiny offices were not immune to such disasters.

We have come to accept mass layoffs (defined as 50 or more workers losing their jobs at a single company during a five-week period) as the inevitable cost of doing business in a highly competitive global economy. A successful corporation, Americans are led to believe, has to be ruthless in cutting labor costs or run the risk of joining a long line of failed companies that reacted too slowly.

But mass layoffs are not limited to for-profit corporations struggling to survive while maximizing their returns on capital. They have become routine budgetary strategies in the way employers deal with workers, even in nonprofit organizations.

Oberlin College in Ohio, for example, terminated 113 unionized food service and cleaning workers in the middle of the pandemic (around 50 were fortunate to find employment with one of the subcontractors). This small, nonprofit college — the first in the U.S. to admit women in 1833 and Black students in 1835 — chose to cut costs by laying off those workers, many with decades of service, and replacing them with subcontractors.

The number of workers who lost their jobs at Oberlin is small compared with the tens of thousands laid off by big tech firms like Amazon in one swoop, but the effect mirrors what has happened to millions of Americans, sometimes unconnected to economic downturns.

There is, of course, always a justification. Costs need to be cut because competition demands it. Colleges must temper tuition increases to compete for students. Budgets must be balanced, “structural deficits” addressed and endowments protected.

But this kind of decision-making simply does not factor in the harm done to the workers or consider the consequences to the communities where they live. In the case of Oberlin, the surrounding town was already saddled with a 25% poverty rate.

And the harm is always considerable, as described by a recent report in the Harvard Business Review.

Medical studies have shown that the trauma of unemployment causes disease. One study found that being laid off ranked seventh among the most stressful life experiences — more stressful than divorce, a sudden and serious impairment of hearing or vision, or the death of a close friend.

Experts say that it takes, on average, two years to recover from the psychological trauma of losing a job.

For healthy employees without preexisting health conditions, the odds of developing a new health condition rise by 83% in the first 15 to 18 months after a layoff, with the most common problems being cardiovascular conditions, including hypertension and heart disease, and arthritis. The psychological and financial pressure of being laid off can increase the risk of suicide by 1.3 to 3 times. "Displaced workers have twice the risk of developing depression, four times the risk of substance abuse, and six times the risk of committing violent acts, including partner and child abuse," as noted in the Harvard Business Review.

Income loss for such workers can last for the rest of their careers. Studies estimate that leaving a job is likely to reduce workers’ long-run earnings by 20% to 40%.

Little wonder that even the Department of Labor recognizes that “being laid off from your job is one of the most traumatic events you can experience in life.”

Do we really have to inflict such pain and suffering on millions of working people to build a prosperous society?

Other highly advanced economies have taken a different path. For example, in Germany, Siemens Energy, with more than 90,000 employees, rescinded its plan to terminate 3,000 German workers as part of a global workforce reduction of 7,800, including 1,700 in the U.S. Instead, after negotiations with the union IG Metall, it agreed to reduce its German workforce only through buyouts and attrition. No one would be forced to leave, and no facility in Germany would be shuttered. Meanwhile, in the U.S. Siemens will simply cut those 1,700 jobs, as planned.

Why there and not here?

Our collective memory is short. We have forgotten that before the deregulatory revolution four decades ago, mass layoffs were not viewed as a necessary corporate tactic. As Newsweek put it in 1996, “Once upon a time, it was a mark of shame to fire your workers en masse. It meant you had messed up your business. Today, the more people a company fires, the more Wall Street loves it, and the higher its stock price goes.”

More than 25 years later, the failure to account for the long-term social devastation of mass layoffs is not even questioned. As a nation we have yet to decide that protecting the health and well-being of our working people should be a top priority — at least as important as temporary increases to corporate profits.