Dilemmas of Downsizing During the Great Recession: Crisis Strategies of European Employers

• Published in: De Economist (Netherlands) 2013-09, Vol.161 (3), p.307-329
• Main Authors: van Dalen, Hendrik P., Henkens, Kène
• Format: Article
• Language: English
• Subjects: Denmark; Downsizing; Early retirement; Economic conditions; Economic Policy; Economic statistics; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Employees; Employers; Employment; Great Recession; Hours of labor; Human resource management; Labor economics; Labor market; Layoffs; Management of crises; Microeconomics; Older workers; Poland; Public Finance; Recessions; Retirement; Studies; Surveys; Threats; Wages & salaries; Younger workers
• ISSN: 0013-063X; 1572-9982
• DOI: 10.1007/s10645-013-9211-7

The present paper analyzes the choices faced by European employers when threatened with the prospect of the mass lay-off of their employees as a result of the Great Recession. By means of a representative survey among employers in Italy, Germany, Denmark, Poland, the Netherlands and Sweden in 2009, we show that employers mainly prefer to tackle such threats by offering short-time work, and by early retirement packages to older workers, in conjunction with buy-outs. The latter preference is particularly visible in countries where employers perceive the level of employment protection to be high. The only notable exception is Denmark, where employers prefer to reduce working hours. In general, a sense of generational fairness influences downsizing preferences, with those employers who favor younger workers particularly likely to use early retirement and buy-outs when downsizing, followed by working time reductions. Wage reductions and administrative dismissal are less favored by European employers. In particular, CEOs and owners are more inclined than lower-level managers to cut wages.