WHEN ARE LAYOFFS ACCEPTABLE? EVIDENCE FROM A QUASI-EXPERIMENTGary Charness and David Levine University of California at Santa Barbara, Economics Working Paper Series from Department of Economics, UC Santa Barbara 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 performed 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 ustifications considered valid differed slightly. Keywords: fairness; layoffs; employment contract (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucsbec:qt4vs7h4hh Access Statistics for this paper More papers in University of California at Santa Barbara, Economics Working Paper Series from Department of Economics, UC Santa Barbara Contact information at EDIRC. |
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