View Poll Results: See OP: Which do you choose?

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  • -10% pay reduction for everyone

    28 84.85%
  • -10% of your department will be laid off.

    5 15.15%
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Thread: Lay-offs or pay cuts?

  1. #1
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    Lay-offs or pay cuts?

    Let's say that you work in a department within a company. Your department has 100 employees, all of whom make about the same wage.

    Management informs your department that it needs to cut your overall payroll by 10%, and offers you, collectively, the choice:

    -10% pay reduction for everyone
    -10% of your department will be laid off.

    The chance of you being laid off is the same as everyone else's

    Which do you choose?
    Please explain your answer
    Last edited by Goobieman; 03-25-10 at 02:06 PM.

  2. #2
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    Re: Lay-offs or pay cuts?

    Paycuts are typically the better option in a recession. Laying people off means you lose their productivity, which can easily cancel out the money saved getting rid of them, especially in the long term. Furthermore, because of wide spread economic downturns, you aren't likely to lose employees to other companies even with reduced pay.

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    Re: Lay-offs or pay cuts?

    Paycuts of course. In this economy, the 10% who are cut are unlikely to find other jobs and this just puts an additional drain on the economy that's already stretched to the breaking point. Further, you have the cut in productivity and, when the economy gets better, a much longer training time to hire new workers to come back up to speed.
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    Re: Lay-offs or pay cuts?

    Quote Originally Posted by Goobieman View Post
    Let's say that you work in a department within a company. Your department has 100 employees, all of whom make about the same wage.

    Management informs your department that it needs to cut your overall payroll by 10%, and offers you, collectively, the choice:

    -10% pay reduction for everyone
    -10% of your department will be laid off.

    The chance of you being laid off is the same as everyone else's

    Which do you choose?
    Please explain your answer
    Personally I would take the paycut.On the other hand I can see a workers not wanting to take a pay cut because there is no guarantee that when the company is doing well that they are going to reinstate everyone's regular pay,they could just pocket that 10% or use that 10% to hire more workers and then in another crises ask for another 10% pay cut from workers and do the same thing over again.
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    Re: Lay-offs or pay cuts?

    On the other hand I can see a workers not wanting to take a pay cut because there is no guarantee that when the company is doing well that they are going to reinstate everyone's regular pay,they could just pocket that 10% or use that 10% to hire more workers and then in another crises ask for another 10% pay cut from workers and do the same thing over again.
    If the company doesn't raise wages when the economy picks back up again, they risk getting their employees poached by their competitors who do. Provided you have a competitive market run by real management, the system works pretty well. The biggest problem is when they lay everyone off to boost their stock price enough to make fortune, then simply leave and cash out before the lack of productivity kills the company.

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    Re: Lay-offs or pay cuts?

    Assuming I'm in the same financial position I am right now, I can live with a 10% reduction in pay without worrying about paying my bills because I have a more than 10% surplus at the moment.

    I would not be able to handle a 100% reduction in pay, so the 1 in 10 shot that I would lose my job isn't worth the risks involved to try and maintain that 10% of my income.

    Even if I had less than a 10% surplus of income, I could more than likely pick up a second job fairly easily that would make up the difference at my current pay scale, so again, it's not worth the risk.


    But let's say I wasn't in my current situation. Let's say I already had a second job and I was in danger of losing my home and struggling to put food on the table.

    In that scenario, there is a 100% chance that I would be screwed if I took a 10% reduction in pay. This is identical to the chance that I'd be screwed if I lost my job: 100%.

    But I would only have a 10% chance at losing my job.

    In that instance, it just becomes a matter of probabilities:

    Taking pay cut = 100% chance of not making ends meet

    Going for layoffs = 10% chance of not making ends meet.

    In that case, the smart money would actually be on risking the layoff since your odds of coming through it OK are far greater than they are if you take a reduction.
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    Re: Lay-offs or pay cuts?

    It would depend on if the layoff were based on productivity or seniority....
    The only way I would go with a pay cut is if it were a seniority issue & I was at the bottom of the totem pole......
    That said, even if you get to keep your job in that scenario, you would be taking an equivalent of a paycut through an increased workload....
    So, the reality is you are screwed either way, just how screwed remains to be determined.....

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    Re: Lay-offs or pay cuts?

    Quote Originally Posted by Partisan View Post
    It would depend on if the layoff were based on productivity or seniority....
    The only way I would go with a pay cut is if it were a seniority issue & I was at the bottom of the totem pole.
    The question stipulated that everyone had the same chance of being laid off.

  9. #9
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    Re: Lay-offs or pay cuts?

    On a macroeconomic level, pay cuts are by far the superior choice. It's much better to have more people working fewer hours. Even if it's hard, people who are making 90% of what they were previously making will generally be able to get by.

    On a personal level...if my chances of getting laid off were the same as everyone else's, I think I'd prefer to roll the dice and vote for the layoffs. I'm confident that I can find employment fairly easily, regardless of how bad the economy is.
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  10. #10
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    Re: Lay-offs or pay cuts?

    Really a silly question.

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