Tuesday, January 13, 2009

Layoffs - Are Business Owners Slaveholders?

I have recently written a couple of times about layoffs. In addition, I had an interesting conversation at SUMP on the same topic.

In that conversation an anonymous commenter expressed a view that one reason capitalism is evil is that employees are mere slaves to their employers. In fact, they are worse than slaves, the argument went, because slave owners paid a lot of money for their property, fed them, housed them, and clothed them. Employers in our capitalist society do none of these things, and when the employee is no longer needed they are let go.

It is an extremely jaded view, and one that predictably fails to see the whole picture.

Employers are as much slaves to their employees as the other way around. They can leave anytime they want - and many do. During the hey day of economic growth and all-time low unemployment rates employers often found themselves fighting each other for the best candidates. Candidates could pick and choose which position to take based on which offer was best for them. When that was the case, no one decried the capitalist system.

Turnover is costly. When employees leave a job for a better offer somewhere else, this results in a real, monetary loss to the original company. Generally a significant amount of time is spent on training employees - making them better at what they do. The time, effort, and productivity spent doing this is lost when they leave.

With a lost employee, the old employer has to find someone new to replace them. And this means time and money spent training the new people. New people are always slower, which results in lost productivity, which can turn profits into losses.

A real world example of this occurred in my company last year. We had an employee in one of our branch offices retire - and then go to work for our competitor. She took 1/3 of that office's business with her. We were unable to replace that business, and so we eventually closed the office completely. What was once a relatively profitable business is now closed because an employee found a better offer elsewhere.

So who really was the slaveholder here?

No comments: