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When Are Layoffs Acceptable? Evidence from a Quasi-Experiment

Gary Charness and David I. Levine
Industrial and Labor Relations Review
Vol. 53, No. 3 (Apr., 2000), pp. 381-400
Published by: Sage Publications, Inc.
DOI: 10.2307/2695965
Stable URL: http://www.jstor.org/stable/2695965
Page Count: 20
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
When Are Layoffs Acceptable? Evidence from a Quasi-Experiment
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Abstract

If, as has been widely suggested, internal labor markets are declining and a new employment contract with reduced employer-employee commitment is emerging, the criteria by which employees judge layoffs as fair or unfair may be changing. This paper presents findings relevant to that question, based on quasi-experimental surveys in Canada and the United States. Respondents rated layoffs stemming from reduced product demand as more fair than those resulting from employee suggestions. Behind this judgment, apparently, was the normative premise that companies should not punish employees for their efforts; rent-sharing norms appear to have played little or no role, as respondents deemed new technology an acceptable reason for layoffs. Consistent with theories of distributive and procedural equity, layoffs were perceived as more fair if the CEO voluntarily "shared the pain." Respondents in Silicon Valley were not more accepting of layoffs than were those in Canada, on average.

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