As an employer wants to reduce the production cost during the economic recession, he or 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?
In an effort to reduce production costs there are many factors to consider in whether to lay off workers or reduce workers wages. For one, if workers are laid off is the company able to keep up the necessary levels of production output for revenue to remain above costs? If costs were reduced, would current workers leave in search of a better paying job? In either scenario would morale and employee satisfaction falter leading to a decrease in production and therefore revenue? Both cases could lead to decisions that create bad publicity as the company would be either letting people go or taking away money, but is one a better situation?