As an employer wants to reduce the production cost during the economic recession, he/she
could choose to (1) lay off some workers without changing wages or (2) keep all workers
but cut wages for all. Which method would you choose? Why?
We are going through something like this where I work right now. It is not so much an
economic recession than it is a slow period in travel. I work at a travel center, and while
holidays, Spring Break, and summertime consists of plenty of business, the winter months of
January, February and March can be slow. We need to keep enough employees for the summer
months but need keep labor under a certain percentage of sales at all times. When sales are low,
our labor percentage does not change but, for example, 25% of $5,000 allows for less labor than
25% of $10,000. Our solution to this dilemma is to cut the employees hours by 8-10 hours per
week, and often send people home early during this slow period.
It would make a difference if it was a small business or a larger business. A 2013 study
found that in times of economic recession, large corporations acted swiftly to scale down labor
while small and medium businesses also reacted swiftly but did not slash labs quickly as the
large companies (Varum & Rocha). If a small business were able to temporarily cut wages (or
hours) and hang on to their valuable employees, it would probably be better for them than to lose
these employees that they may have invested training in, including the reputation of the small
business. Large corporations would lay off employees who could file for unemployment and
hopefully find another job.
The Bible is clear on the subject that a worker earns a wage, it is not a gift and he should
be paid promptly on the promised day of payment. “You shall not oppress your neighbor, nor rob
him. The wages of a hired man are not to remain with you all night until morning”, (Leviticus
19:13, New King James Version). I think it is also prudent to be honest with the employees and
let them know as soon as possible what the business plans are so that they have the opportunity
to plan for the reductions as well
References
Varum, C. A., & Rocha, V. C. (2013). Employment and SMEs during crises. Small Business
Economics, 40(1), 9-25. doi:10.1007/s11187-011-9343-6
