NCPA - National Center for Policy Analysis

Tracking Layoffs And Productivity

November 22, 1999

News that one's job is being eliminated is almost always a source of personal stress, but the process is good for the economy. Workers usually have little difficulty finding another position in today's booming economy and their relocation boosts productivity, economists now recognize.

  • During the 1990s, over 5.1 million jobs were eliminated -- but over 16 million new jobs were created.
  • During the first 10 months of 1999 alone, 580,000 U.S. jobs were lost -- while 1,370,000 new ones came into existence.
  • A survey of 10 companies that had massive layoffs in the early 1990s revealed that output per worker increased an average of 26.2 percent.
  • Even though those companies trimmed their payrolls by 850,000 workers, those let go found other jobs and experts estimate that the economy benefited to the tune of $49 billion by their relocation.

The average time spent out of work was 13.2 weeks in October versus 15.5 weeks in January of last year.

Economists point out that if the economy had not endured the downsizings of the 1980s, we would have been stuck with an inefficient and high-cost allocation of resources -- and fewer new products.

Source: W. Michael Cox (Federal Reserve Bank of Dallas), "Pink Slips in Good Times?" and Jim Christie, "Why Federal Reserve is Concerned: Warning Flags in U.S. Economy," both in Investor's Business Daily, November 22, 1999.


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