Originally Posted by certifiedfunds
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.
That's what I meant. As the economy picks up, more hiring. When the economy cools, less productive employees are the first to go. I've watched it evolve several times over the past 30 years. It works great except when someone's brother in law or beer drinkin' buddy is kept in favor of more qualified employees. That happens a lot too. Unfortunately, that happens a lot with probates applying for union membership. Not worth a damn on the job but a good friend and beer drinking buddy so he gets the signatures needed to become a member. Then we have to put up with him until the company fires him. Down here that's pretty easy to do. Apparently, up north it's not so easy.