Stardate 20030511.2053

(Captain's log): John writes:

I'm curious what your views are on corporations rush to save money by laying off or letting go (a nice term for firing), employees. I think its somewhat foolish to go that route first. If every company were to do this then how could anyone purchase their products or services?

The primary reason our unemployment level is lower than in Europe is because it's easier to lay people off here, as paradoxical as that might seem. This is a classic example of the law of unintended consequences.

In most of Europe it's virtually impossible to lay people off when times get bad, and what that means is that during booms employers only hire as many people as they think they could support during a bust period, out of fear of being stuck with a huge staff they can't afford to pay when things go sour. Employers in Europe tune their hiring practices to the worst conditions they expect to face, not to the best ones.

Because our corporations don't have that worry, and know they can shed staff during the bad times, they're more willing to hire during booms, which creates jobs and increases spending and consumption and make the economy overall grow much faster.