Opinion: In a recession, companies should not see layoffs as the cure-all solution

Linda Nazareth is a senior fellow at the Macdonald-Laurier Institute. Her bookLet’s not say for sure that there is a recession brewing. All those indicators – that inverted yield curve, those depressed purchasing managers, the fancy models signalling dismal things – well maybe they are just wrong. And who knows, maybe you can take a sledge hammer to free trade amongst countries and go on to have your economy thrive.

Once layoffs start, they tend to result in a plunge in morale both within the companies where they occur and more broadly across the economy. As people fear that their own jobs are in peril, spending gets even slower and escaping recession even more difficult, meaning that from a macroeconomic perspective, they should certainly be avoided if possible.

Layoffs are actually quite expensive to companies anyway. After all, every employee represents an investment in hiring costs and training, which becomes money wasted once that worker is laid off, and then spent again when hiring starts again. Add in the cost of severance and the costs start to mount.

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