A new term is emerging from economists: “labor hoarding”. In this current economic downturn, it is the notion promoted by economist Arindrajit Dube who describes it as “when employers faced with an economic downturn don’t lay off workers but keep them around even though there is not as much work. Why? Because it’s costly to recruit/retrain”.
The first time I heard the term “labor hoarding”, I had a deep, visceral reaction. In a bit, I’ll share why.
But let me first say, that conceptually, I am in full agreement with his assertion that there is a real cost to lay offs and those costs include recruiting and retraining new employees when the business rebounds. I’ve argued that point for decades!
I would also add that there are many “hidden” costs to lay-offs. I’ve personally experienced, far too many times, the plummet in productivity that comes in anticipation of pending lay-offs, the shell shock that comes as lay offs are announced and executed and the flight of top talent in organizations that shed people with regularity. And these are only the costs to the business. There is a human cost that comes when employees are shed, both for those who are exited and those who stay.
My revulsion is less about the underlying assertation and more with the choice of words. Because words matter – and words tell us much about our beliefs and values.
The word “hoarding” implies dysfunction. People who hoard things are irrational, are the ultimate manifestation of a scarcity mentality, and due to their hoarding often are unable to function well day to day.
“Hoarding” is about things, not people. We may hoard toilet paper during a pandemic, but how do you “hoard” people? Saying you are “hoarding” humans implies that they have no free will, that they are commodities, that you can inventory and warehouse living, breathing people to save them for a future need.
The word “labor” is also problematic, as it paints an image of a human being who is valued on one dimension – their ability to “labor” or to do hard physical work. It divides those managing the work from those doing the work. It minimizes living, breathing humans into one key characteristic: their ability to do the grunt work of the organization.
I’ve been in the workplace enough to learn this: Excellent companies go the extra mile during an economic downturn to keep their employees as whole as possible. They support them. They share the pain. They get creative and find innovative ways to get through a downturn together. That might mean reduced hours or across the board pay reductions or doing work that is an investment in the future or moving people temporarily into other roles or areas of the company. Or a host of other ways to come together, support both the employees and the company and to find ways through the current situation.
In these companies, layoffs are seen as a last resort, not an easy first step. Leaders in these companies understand the multi-faceted downside of layoffs – not only from a future cost of re-recruiting, rehiring and retraining, but in the loss of talent, the damage to morale and the impact to the well-being of both casualties and survivors.
My suggestion is that, instead of calling it “labor hoarding, we call it something better, more humanizing, and more aspirational. What if we described this notion of finding ways our valuable human talent contributing during an economic shift by these terms?
- Acting with integrity
- Doing the right thing
- Working with a long-term perspective
- Valuing all that contribute to the success of the company, no matter what their position or role
- Creatively finding ways to weather a downturn
Or perhaps just smart business, because that is exactly what it is.