NCPA - National Center for Policy Analysis

"Churning" Workers In Boom Times

March 13, 2000

When a company lays off workers while also hiring new ones, it is called "churning." In today's vibrant economy, it is an increasingly common practice. As companies seek to position themselves to meet new technological challenges, workers with certain skills are being replaced by workers with differing skills.

  • According to the personnel-consulting firm of Challenger, Gray and Christmas, U.S. companies announced 675,000 layoffs in 1999 and 678,000 the year before -- the highest levels for the decade and up from just 111,285 in 1989.
  • Meanwhile, the Bureau of Labor Statistics -- whose figures include layoffs that weren't publicly announced -- says the number reached a preliminary 1.57 million in 1999, although that figure is expected to be revised downward.
  • But in a recent survey by the American Management Association, 36 percent of the approximately 2,000 companies contacted created new jobs at the same time they were cutting existing jobs during the year ended June 1999 -- compared to 27 percent the year before.
  • New hires and layoffs occurring at the same time are examples of what economists refer to as "creative destruction" -- and rather than being a negative sign, they actually demonstrate that companies are renewing themselves, redirecting their focus or attempting to increase productivity.

Source: Patrick Barta, "In This Expansion, As Business Booms, So Do the Layoffs," Wall Street Journal, March 13, 2000.

 

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