The Cultural Fallout of Layoffs: Understanding Impacts, Recovery, and Policy Implications
This study investigates the cultural consequences of layoffs by linking firm-level lay-off events from the U.S. Worker Adjustment and Retraining Notification (WARN) database with employee-reported ratings from Glassdoor. Using a Difference-in- Differences framework complemented by an event study design, the analysis estimates the causal impact of layoffs on perceived organizational culture, with particular emphasis on culture and values ratings provided by employees. Results show that layoffs trigger a statistically significant decline in cultural ratings. Event study estimates indicate that these cultural disruptions are immediate and only partially attenuate in the months following layoffs. The findings underscore that layoffs impose organizational costs beyond immediate labor market adjustments, eroding morale, trust, and reputational capital.