Do Layoffs Encourage Quitting Among Those Who Lose Their Jobs?
Davis, Paul; Trevor, Charilie; Feng, Jie
Overview and Key Findings: Organizations pursue layoffs for a variety of reasons, including slumping product demand, escalating costs, and personnel redundancies owing to reorganization or merger. Regardless of the motivation behind a layoff event, many employees report traumatizing consequences. Among those who lose their job (i.e., layoff victims), these disruptions include depressed lifetime earnings, reduced physical and mental well-being, and undermined work attitudes. But even as Bureau of Labor Statistics data reveal that United States employers have laid off over 33 million employees since 1994, virtually no research has addressed the behavior of layoff victims upon reemployment. In a first step toward understanding both whether and how layoffs influence work behaviors, this research investigated the impact of layoffs on subsequent voluntary turnover (i.e., quits), and found that: After a layoff, employees are more likely to leave organizations voluntarily by quitting. The influence of layoffs on voluntary turnover is substantial and persistent. First examining all jobs held after an individual’s first layoff, the researchers report that quitting is 56 percent more likely in post-layoff employment (relative to the individual’s propensity to quit prior to ever having been laid off). Next, examining only those jobs held immediately after a laid off, the researchers report that individuals are 65 percent more likely to quit these jobs (again relative to their propensity to quit prior to ever having been laid off). Among those who are laid off multiple times over their careers, each additional instance increases the likelihood of quitting in subsequent employment (although at a declining rate) up until the sixth layoff. For those who do reach six layoffs in their work history, the decision to quit is about six times more likely than it is in pre-layoff employment. The study results are consistent with a “psychological spillover” explanation in which a layoff by one employer negatively influences employee expectations (e.g., obligations owed to an employer) and perceptions (e.g., job security) surrounding post-layoff employment. In fact, only about 10% of the layoff effect on voluntary turnover is explainable by a layoff s influence on subsequent job quality, as measured by underemployment and job satisfaction. The results demonstrate that employee quit behavior is evolving as a function of the downsizing strategies that are now standard business practice. Given that layoff victims represent an increasingly large proportion of the workforce (and thus the talent pool upon which virtually all organizations rely) and given that voluntary turnover is notoriously expensive and, in the aggregate, a critical predictor of a variety of organizational performance outcomes, the findings indicate that layoffs are relevant not only for the organizations that engage in them, but for all organizations.
layoffs; quitting; voluntary turnover; psychological spillover