Freeze Layoffs, Save Jobs?

A friend of mine calls me up yesterday with and interesting proposal.

We often go back and forth with business ideas, our observations on the economy, and just the overall state of our financial well-being. We've done this since we were in high school and over the years we've come up with some good ideas, but haven't always
been able to capitalize on them.

In a nutshell, he said that the government should put a 3 month freeze on layoffs nation wide. The goal would be to keep people working, so that they can keep spending and paying their bills. If you have a job, you are likely to spend some portion of your income and contribute to the circulation of currency.

On the surface this seems like a noble idea, but after some thought, it would only drive private enterprises into the ground and delay the inevitable.

In theory, placing a freeze on layoffs would curtail the number of people receiving unemployment benefits from the government and ease the pressure on the federal budget. It would also enable employees to prove their worth to their managers and possibly increase productivity in the process.

However, keeping people on the payroll is generally not in the best interest of a company that is trying to save money. Additionally, we would have to factor in the size and employee requirements for such a plan.

Unlike freezing interest rates or converting adjustable rate mortgages into affordable fixed rate mortgages, placing a national freezing layoffs falls out of the scope of government. Of course extraordinary times call for extraordinary actions, but private companies should be regulated by the government, not tied to it. The government can set a minimum wage, set safety guidelines, impose taxes, and foster better working environments, but telling an employer that they can not scale down when there aren't enough customers for growing inventories is not their job.

It's like telling the Gap, they have to keep seasonal employees on until March, even though the holiday season is three months behind them. It's like going into a dealership and having 10 sales associates tending to 2 customers, it just doesn't make sense.

We know that all industries are not the same, so applying a moratorium on layoffs in the auto industry is very different from doing so in retail or health care. A band-aid will not help someone who needs stitches, the gesture is nice, but practically flawed.

As I've said many times before, I am not a financial expert or an economist, but as a small business owner there are many proposals, theories, and ideas on the table about how to keep the financial system from deteriorating further, but freezing layoffs, to save jobs is really not one of them.

-whatdabusinessis.com