Layoff in United States

Reasoning

A layoff is typically driven by one of two forces. In the first case, the goal is to increase a company's profits. Typically the reasoning is that the company will be able to generate the same gross revenues in the future with a smaller number of workers: if the company's revenues do indeed stay constant while labor costs go down, then self-evidently profit will be increased. However, some layoffs occur even when management believes that revenue might actually go down: this usually occurs when there are other firms in the same industry who are performing better, or when a company needs to reduce excess capacity during times of lower volumes. A layoff, or even the suggestion of a layoff, may motivate workers to be more productive. Often, however, rumors of an impending layoff sap productivity as employees who are likely to be affected engage in searching for a new job.

In the second case, downsizing is driven by macroeconomic forces. A company determines that its workers can no longer profitably produce products at current market prices. A company will only employ workers when the per-hour value of their output (marginal productivity of labor) exceeds the cost to employ those workers.

United States

Throughout the last quarter of the 20th century, the manufacturing sector has seen massive downsizing due to increased per-worker productivity, technology advances that have rendered human labor obsolete and the availability of lower-cost labor overseas.

U.S. manufacturing companies have also increasingly shifted production overseas, closing down factories in the U.S. and establishing factories and assembly plants in Latin America, the People's Republic of China, Veitnam, etc., or using manufacturing sub-contractors owning such facilities. U.S. manufacturing and service companies have also opened call centers in India or sub-contracted with companies owing such facilities.

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