Economy

Layoffs' Second-Hand Effects on Those Still Working

by Frank Newport

Employees at companies laying off workers are much more worried

PRINCETON, NJ -- A new Gallup analysis finds that worry about money is far greater among U.S. workers whose companies are reducing the size of their workforces (50%) compared to those whose companies are either keeping their workforces steady (35%) or hiring (30%).

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These data are based on a Gallup analysis of more than 14,000 interviews conducted in January and February of this year, and demonstrate a progression of worry among employees, based on whether their companies are hiring, staying steady, or letting people go.

These findings reinforce the idea that in today's economy, everything is tied to everything else. The ability of many companies to prosper and avoid layoffs depends in part on the willingness of American consumers to continue buying their goods and services. But if these consumers are employed in companies that are laying people off, their financial worries may restrict their willingness to spend, thus forming a difficult-to-break cycle.

Financial Worry

The data used in this analysis come from two questions included in Gallup Poll Daily interviewing. The first asks Americans whether they worried about money "yesterday." The second asks employed Americans whether their company is hiring, maintaining its current workforce, or laying people off.

On average, 38% of employees Gallup interviewed in January and February of this year worried about money the day before they were interviewed, while 62% said they did not. Overall, 23% of employees said their companies were hiring, 47% said the size of their companies' workforces was remaining steady, and 27% said their companies were reducing the size of their workforces and letting people go.

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As noted above, the key finding of the current analysis is the significantly higher level of financial worry among employees in companies that are currently laying people off, compared to those who work in companies in which layoffs are not happening. It's important to keep in mind that all respondents included in this analysis were employed at the time of the interview. But current employment status apparently does not shelter workers from the psychological impact of what's happening at their places of employment.

Is it possible that other, secondary factors might explain this relationship? Previous analysis has shown that income is related to worry about money: Americans with higher household incomes tend to have lower levels of financial worry. Thus, one hypothesis could be that workers with lower incomes are more likely to work in firms susceptible to layoffs and, thus, that these workers would worry regardless of what's happening in their particular places of employment.

The data do not support this hypothesis. Across four levels of annual income, ranging from less than $24,000 to $90,000 or more, employees of firms that are letting people go are the most likely to report worrying about money.

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What about age? Again, as is seen in the accompanying graph, it does not appear that age explains the relationship. Older workers in general tend to worry less, but across the age spectrum, workers appear to be affected by whether their firms are laying people off.

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A similar analysis shows that the hiring/firing status of one's firm has a significant impact on worry among both male and female employees. Women in general are more likely than men to worry, but the impact of their employer's hiring status is present for both genders.

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And the relationship persists across the four major regions of the country. Employees in the Midwest and South are in general somewhat less likely to worry about money than are those on the two coasts, but regardless of region, working for a company that is laying people off is strongly associated with increased worry about personal finances.

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Bottom Line

Employed Americans' tendency to worry about money is significantly higher if they work in a firm that is laying people off and reducing its workforce as opposed to a firm that is not. This relationship between worry and company hiring status occurs regardless of the employee's income level, gender, region, or age.

Previous Gallup analysis has established that worry about money is related to demographic and geographic variables. Those with lower incomes, women, middle-aged Americans, and those living on the East or West Coasts are more likely than others to worry about money. The current analysis indicates that one's workplace environment also has an apparently independent impact on financial worry: Being in a work situation in which others are being laid off appears in and of itself to be associated with worry about money.

The data highlight some of the difficulties policy-makers face in attempting to fix the U.S. economy. Stanching job losses would appear to be one way to increase consumer positivity and confidence, which in turn can be assumed to be necessary if an increase in consumer spending is to occur. However, many companies will not begin hiring again until consumer spending increases, raising the age-old question of which comes first, the chicken or the egg. Whether the recently passed economic stimulus package and other efforts will manage to break this cycle remains to be seen.

Survey Methods

Results are based on telephone interviews with 14,097 employed adults, aged 18 and older, conducted Jan. 2-Feb. 28, 2009, as part of Gallup Poll Daily tracking. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±1 percentage point.

Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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