Originally Posted by SevenSixtyTwo
Companies have been doing that for decades. Hire too many people and then weed out the dead weight. Seems like a pretty effective way to promote productivity by competing employees wanting to keep their jobs knowing someone is getting the axe at any moment.
That's a very expensive way to go about things. I doubt most successful companies employ that tactic.
What happens is, when the economy is robust and growing the labor pool gets tight and quality of candidates goes down. Once hired and trained there are sunk costs to consider (recruiting, training). A "good enough" employee might not be worth firing when labor is in tight supply but he might not be the guy you'd choose again.
Then when the economy cools headcount needs to shrink and/or the labor pool improves and the company's options are different.
I've watched the oil business expand and contract several times and I'm watching my own industry deal with Obamacare. Though there are certainly some innocent casualties along the way, generally speaking strong horses get retained and the weaker one's get cut loose.
Then, when hiring starts again companies trade employees before they dip into the UE pool because everyone knows that the UE pool often contains less desirable employees.