Tuesday, March 3, 2009

The Psycological Cost of Layoffs

Companies around the U.S. are laying people off in record numbers - more than 3.6 million since the recession began, and 560,00 in January 2009 alone.

The U.S. unemployment rate is at 7.6%.

The number of people seeking unemployment is 5 million.

But those are all numbers. They neatly quantify things in an all-too-easy way that lets those of us not laid off (yet) shake our heads, complain a little and move on - perhaps hoping we're not next, but generally disassociating "us" from "them." Numbers help us do that.

However, I think the "cost" of a layoff - let alone a massive wave of them - to a person, a family, a community and a nation of people is much, much more than numbers.

On a psychological level for the individual, we're taking about legitimate trauma. Why me? Why now? What did I do? I must not be very good at what I do. How will I be able to pay my bills? What if I cannot? Will I have to sell my house? Car? What about my kids education?

A layoff causes an real and emotional crisis in a person's life. Some get over it relatively quickly, many do not. Either way...we're talking trauma here! And why? So a company that targeted 20% profit but only made 12% profit can "send a signal" to the market or Wall Street? So executives can make their bonuses anyway? Or, because as we're seeing more of now, traditionally industry giants have to cut back massively after decades of short term thinking and miss-management?

Replicate that trauma across the county in each state as companies large and small "shed cost" or "make adjustments" to meet their numbers - or in some cases actually go under.

What are the implications of so many many lives upended? I'm no psychologist, but it seems like if you've got millions of people walking around in personal crisis, unemployed and not too many opportunities to re-establish a good income...you're gonna have some problems that don't necessarily show up in government economic reports.

And what about those people having to do the layoffs? Sure, they still have a job, but telling people their position has been eliminated knowing the economic conditions we're in and what that could mean for people...well, that can be traumatizing too unless you're a cold, corporate tool. There are probably all too many of those out there. For every one CEO who takes his $60 million bonus and divides it up between all his employees as did Leonard Abess, thousands more companies will simply toss their people aside.

In short, I think layoffs of this magnitude will have an negative psychological impact on everybody involved, and ultimately therefore an impact on our culture and well being as a country. It will be harder for us to be optimistic, harder on our personal relationships, harder for us to relate to each other, harder for us period. The potential is there for a very pessimistic and negative society. 

These are not things easily measured by numbers. However, if they occur with enough people over an extended period of time, we may see things that we can measure like more divorce rates, poorer health for our population, crime rates, lower high school and college graduation rates and others. All of this will exacerbate our all-too-well-know economic problems.

So, what is the psychological impact of layoffs of the magnitude we're seeing today? I would say it goes way beyond the typical numbers we see into areas that are not so easily packaged and dismissed.

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