Firing people to hire people with lower salaries hurts business
Posted: Sun Jan 19, 2025 9:31 am
In times of crisis, entrepreneurs seek to reduce their company's costs as much as possible, cutting expenses of all kinds. A common strategy in this regard is to lay off employees and hire new employees with lower salaries.
What apparently seems normal, since in a crisis decisions are not questioned much precisely because everyone is looking for job opportunities with more apparent stability, in fact proves to be a dangerous mistake.
Research conducted by Jason L. Brown and Patrick R. Martin at Indiana University showed that people being hired are frustrated when they learn that their salary is lower than that of other, more senior colleagues in the same role.
Furthermore, it was also found that older costa rica phone numbers employees were also less motivated to perform their duties.
Therefore, the strategy of cutting costs by reducing the salaries of new hires, which most entrepreneurs employ in times of crisis, may prove to be extremely wrong for the company's longevity.
This is because, according to researchers, these lower wages do not lead to an improvement in the company's profitability, since the decision to hire new workers with lower wages makes both new and current workers work less hard.
They also claim that hiring workers with lower wages considerably reduces social well-being and, therefore, deteriorates the work environment, generating harmful consequences for the company.
These unintended consequences suggest that companies should more carefully consider the potential gains from wage cuts when deciding whether to replace some workers with others earning lower wages.
An alternative that some entrepreneurs have employed precisely to avoid penalizing both current and new employees is a win-win partnership based on commitment to business results.
When the entrepreneur proposes to reward employees for their efforts with a share of future profits, even if the fixed salary is lower than that practiced some time ago, a productive work environment can be created, which is conducive to overcoming the crisis.
What apparently seems normal, since in a crisis decisions are not questioned much precisely because everyone is looking for job opportunities with more apparent stability, in fact proves to be a dangerous mistake.
Research conducted by Jason L. Brown and Patrick R. Martin at Indiana University showed that people being hired are frustrated when they learn that their salary is lower than that of other, more senior colleagues in the same role.
Furthermore, it was also found that older costa rica phone numbers employees were also less motivated to perform their duties.
Therefore, the strategy of cutting costs by reducing the salaries of new hires, which most entrepreneurs employ in times of crisis, may prove to be extremely wrong for the company's longevity.
This is because, according to researchers, these lower wages do not lead to an improvement in the company's profitability, since the decision to hire new workers with lower wages makes both new and current workers work less hard.
They also claim that hiring workers with lower wages considerably reduces social well-being and, therefore, deteriorates the work environment, generating harmful consequences for the company.
These unintended consequences suggest that companies should more carefully consider the potential gains from wage cuts when deciding whether to replace some workers with others earning lower wages.
An alternative that some entrepreneurs have employed precisely to avoid penalizing both current and new employees is a win-win partnership based on commitment to business results.
When the entrepreneur proposes to reward employees for their efforts with a share of future profits, even if the fixed salary is lower than that practiced some time ago, a productive work environment can be created, which is conducive to overcoming the crisis.