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Downsizing, layoffs, re-engineering, reshaping, reduction in force (RIF), mergers, early retirement, and outplacement—the description of these increasingly familiar changes has become a matter of commonplace jargon around the world in the past two decades. As companies have fallen on hard times, workers at all organizational levels have been expended and many remaining jobs have been altered. The job loss count in a single year (1992–93) includes Eastman Kodak, 2,000; Siemens, 13,000; Daimler-Benz, 27,000; Phillips, 40,000; and IBM, 65,000 (The Economist 1993, extracted from “Job Future Ambiguity” (John M. Ivancevich)). Job cuts have occurred at companies earning healthy profits as well as at firms faced with the need to cut costs. The trend of cutting jobs and changing the way remaining jobs are performed is expected to continue even after worldwide economic growth returns.
Why has losing and changing jobs become so widespread? There is no simple answer that fits every organization or situation. However, one or more of a number of factors is usually implicated, including lost market share, increasing international and domestic competition, increasing labour costs, obsolete plant and technologies and poor managerial practices. These factors have resulted in managerial decisions to slim down, re-engineer jobs and alter the psychological contract between the employer and the worker.
A work situation in which an employee could count on job security or the opportunity to hold multiple positions via career-enhancing promotions in a single firm has changed drastically. Similarly, the binding power of the traditional employer-worker psychological contract has weakened as millions of managers and non-managers have been let go. Japan was once famous for providing “lifetime” employment to individuals. Today, even in Japan, a growing number of workers, especially in large firms, are not assured of lifetime employment. The Japanese, like their counterparts across the world, are facing what can be referred to as increased job insecurity and an ambiguous picture of what the future holds.
Job Insecurity: An Interpretation
Maslow (1954), Herzberg, Mausner and Snyderman (1959) and Super (1957) have proposed that individuals have a need for safety or security. That is, individual workers sense security when holding a permanent job or when being able to control the tasks performed on the job. Unfortunately, there has been a limited number of empirical studies that have thoroughly examined the job security needs of workers (Kuhnert and Pulmer 1991; Kuhnert, Sims and Lahey 1989).
On the other hand, with the increased attention that is being paid to downsizing, layoffs and mergers, more researchers have begun to investigate the notion of job insecurity. The nature, causes and consequences of job insecurity have been considered by Greenhalgh and Rosenblatt (1984) who offer a definition of job insecurity as “perceived powerlessness to maintain desired continuity in a threatened job situation”. In Greenhalgh and Rosenblatt’s framework, job insecurity is considered a part of a person’s environment. In the stress literature, job insecurity is considered to be a stressor that introduces a threat that is interpreted and responded to by an individual. An individual’s interpretation and response could possibly include the decreased effort to perform well, feeling ill or below par, seeking employment elsewhere, increased coping to deal with the threat, or seeking more colleague interaction to buffer the feelings of insecurity.
Lazarus’ theory of psychological stress (Lazarus 1966; Lazarus and Folkman 1984) is centred on the concept of cognitive appraisal. Regardless of the actual severity of the danger facing a person, the occurrence of psychological stress depends upon the individual’s own evaluation of the threatening situation (here, job insecurity).
Selected Research on Job Insecurity
Unfortunately, like the research on job security, there is a paucity of well-designed studies of job insecurity. Furthermore, the majority of job insecurity studies incorporate unitary measurement methods. Few researchers examining stressors in general or job insecurity specifically have adopted a multiple-level approach to assessment. This is understandable because of the limitations of resources. However, the problems created by unitary assessments of job insecurity have resulted in a limited understanding of the construct. There are available to researchers four basic methods of measuring job insecurity: self-report, performance, psychophysiological and biochemical. It is still debatable whether these four types of measure assess different aspects of the consequences of job insecurity (Baum, Grunberg and Singer 1982). Each type of measure has limitations that must be recognized.
In addition to measurement problems in job insecurity research, it must be noted that there is a predominance of concentration in imminent or actual job loss. As noted by researchers (Greenhalgh and Rosenblatt 1984; Roskies and Louis-Guerin 1990), there should be more attention paid to “concern about a significant deterioration in terms and conditions of employment.” The deterioration of working conditions would logically seem to play a role in a person’s attitudes and behaviours.
Brenner (1987) has discussed the relationship between a job insecurity factor, unemployment, and mortality. He proposed that uncertainty, or the threat of instability, rather than unemployment itself causes higher mortality. The threat of being unemployed or losing control of one’s job activities can be powerful enough to contribute to psychiatric problems.
In a study of 1,291 managers, Roskies and Louis-Guerin (1990) examined the perceptions of workers facing layoffs, as well as those of managerial personnel working in firms that worked in stable, growth-oriented firms. A minority of managers were stressed about imminent job loss. However, a substantial number of managers were more stressed about a deterioration in working conditions and long-term job security.
Roskies, Louis-Guerin and Fournier (1993) proposed in a research study that job insecurity may be a major psychological stressor. In this study of personnel in the airline industry, the researchers determined that personality disposition (positive and negative) plays a role in the impact of job security or the mental health of workers.
Addressing the Problem of Job Insecurity
Organizations have numerous alternatives to downsizing, layoffs and reduction in force. Displaying compassion that clearly shows that management realizes the hardships that job loss and future job ambiguity pose is an important step. Alternatives such as reduced work weeks, across-the-board salary cuts, attractive early retirement packages, retraining existing employees and voluntary layoff programmes can be implemented (Wexley and Silverman 1993).
The global marketplace has increased job demands and job skill requirements. For some people, the effect of increased job demands and job skill requirements will provide career opportunities. For others, these changes could exacerbate the feelings of job insecurity. It is difficult to pinpoint exactly how individual workers will respond. However, managers must be aware of how job insecurity can result in negative consequences. Furthermore, managers need to acknowledge and respond to job insecurity. But possessing a better understanding of the notion of job insecurity and its potential negative impact on the performance, behaviour and attitudes of workers is a step in the right direction for managers.
It will obviously require more rigorous research to better understand the full range of consequences of job insecurity among selected workers. As additional information becomes available, managers need to be open-minded about attempting to help workers cope with job insecurity. Redefining the way work is organized and executed should become a useful alternative to traditional job design methods. Managers have a responsibility:
Since job insecurity is likely to remain a perceived threat for many, but not all, workers, managers need to develop and implement strategies to address this factor. The institutional costs of ignoring job insecurity are too great for any firm to accept. Whether managers can efficiently deal with workers who feel insecure about their jobs and working conditions is fast becoming a measure of managerial competency.
The term unemployment describes the situation of individuals who desire to work but are unable to trade their skills and labour for pay. It is used to indicate either an individual’s personal experience of failure to find gainful work, or the experience of an aggregate in a community, a geographic region or a country. The collective phenomenon of unemployment is often expressed as the unemployment rate, that is, the number of people who are seeking work divided by the total number of people in the labour force, which in turn consists of both the employed and the unemployed. Individuals who desire to work for pay but have given up their efforts to find work are termed discouraged workers. These persons are not listed in official reports as members of the group of unemployed workers, for they are no longer considered to be part of the labour force.
The Organization for Economic Cooperation and Development (OECD) provides statistical information on the magnitude of unemployment in 25 countries around the world (OECD 1995). These consist mostly of the economically developed countries of Europe and North America, as well as Japan, New Zealand and Australia. According to the report for the year 1994, the total unemployment rate in these countries was 8.1% (or 34.3 million individuals). In the developed countries of central and western Europe, the unemployment rate was 9.9% (11 million), in the southern European countries 13.7% (9.2 million), and in the United States 6.1% (8 million). Of the 25 countries studied, only six (Austria, Iceland, Japan, Mexico, Luxembourg and Switzerland) had an unemployment rate below 5%. The report projected only a slight overall decrease (less than one-half of 1%) in unemployment for the years 1995 and 1996. These figures suggest that millions of individuals will continue to be vulnerable to the harmful effects of unemployment in the foreseeable future (Reich 1991).
A large number of people become unemployed at various periods during their lives. Depending on the structure of the economy and on its cycles of expansion and contraction, unemployment may strike students who drop out of school; those who have been graduated from a high school, trade school or college but find it difficult to enter the labour market for the first time; women seeking to return to gainful employment after raising their children; veterans of the armed services; and older persons who want to supplement their income after retirement. However, at any given time, the largest segment of the unemployed population, usually between 50 and 65%, consists of displaced workers who have lost their jobs. The problems associated with unemployment are most visible in this segment of the unemployed partly because of its size. Unemployment is also a serious problem for minorities and younger persons. Their unemployment rates are often two to three times higher than that of the general population (USDOL 1995).
The fundamental causes of unemployment are rooted in demographic, economic and technological changes. The restructuring of local and national economies usually gives rise to at least temporary periods of high unemployment rates. The trend towards the globalization of markets, coupled with accelerated technological changes, results in greater economic competition and the transfer of industries and services to new places that supply more advantageous economic conditions in terms of taxation, a cheaper labour force and more accommodating labour and environmental laws. Inevitably, these changes exacerbate the problems of unemployment in areas that are economically depressed.
Most people depend on the income from a job to provide themselves and their families with the necessities of life and to sustain their accustomed standard of living. When they lose a job, they experience a substantial reduction in their income. Mean duration of unemployment, in the United States for example, varies between 16 and 20 weeks, with a median between eight and ten weeks (USDOL 1995). If the period of unemployment that follows the job loss persists so that unemployment benefits are exhausted, the displaced worker faces a financial crisis. That crisis plays itself out as a cascading series of stressful events that may include loss of a car through repossession, foreclosure on a house, loss of medical care, and food shortages. Indeed, an abundance of research in Europe and the United States shows that economic hardship is the most consistent outcome of unemployment (Fryer and Payne 1986), and that economic hardship mediates the adverse impact of unemployment on various other outcomes, in particular, on mental health (Kessler, Turner and House 1988).
There is a great deal of evidence that job loss and unemployment produce significant deterioration in mental health (Fryer and Payne 1986). The most common outcomes of job loss and unemployment are increases in anxiety, somatic symptoms and depression symptomatology (Dooley, Catalano and Wilson 1994; Hamilton et al. 1990; Kessler, House and Turner 1987; Warr, Jackson and Banks 1988). Furthermore, there is some evidence that unemployment increases by over twofold the risk of onset of clinical depression (Dooley, Catalano and Wilson 1994). In addition to the well-documented adverse effects of unemployment on mental health, there is research that implicates unemployment as a contributing factor to other outcomes (see Catalano 1991 for a review). These outcomes include suicide (Brenner 1976), separation and divorce (Stack 1981; Liem and Liem 1988), child neglect and abuse (Steinberg, Catalano and Dooley 1981), alcohol abuse (Dooley, Catalano and Hough 1992; Catalano et al. 1993a), violence in the workplace (Catalano et al. 1993b), criminal behaviour (Allan and Steffensmeier 1989), and highway fatalities (Leigh and Waldon 1991). Finally, there is also some evidence, based primarily on self-report, that unemployment contributes to physical illness (Kessler, House and Turner 1987).
The adverse effects of unemployment on displaced workers are not limited to the period during which they have no jobs. In most instances, when workers become re-employed, their new jobs are significantly worse than the jobs they lost. Even after four years in their new positions, their earnings are substantially lower than those of similar workers who were not laid off (Ruhm 1991).
Because the fundamental causes of job loss and unemployment are rooted in societal and economic processes, remedies for their adverse social effects must be sought in comprehensive economic and social policies (Blinder 1987). At the same time, various community-based programmes can be undertaken to reduce the negative social and psychological impact of unemployment at the local level. There is overwhelming evidence that re-employment reduces distress and depression symptoms and restores psychosocial functioning to pre-unemployment levels (Kessler, Turner and House 1989; Vinokur, Caplan and Williams 1987). Therefore, programmes for displaced workers or others who wish to become employed should be aimed primarily at promoting and facilitating their re-employment or new entry into the labour force. A variety of such programmes have been tried successfully. Among these are special community-based intervention programmes for creating new ventures that in turn generate job opportunities (e.g., Last et al. 1995), and others that focus on retraining (e.g., Wolf et al. 1995).
Of the various programmes that attempt to promote re-employment, the most common are job search programmes organized as job clubs that attempt to intensify job search efforts (Azrin and Beasalel 1982), or workshops that focus more broadly on enhancing job search skills and facilitating transition into re-employment in high-quality jobs (e.g., Caplan et al. 1989). Cost/benefit analyses have demonstrated that these job search programmes are cost effective (Meyer 1995; Vinokur et al. 1991). Furthermore, there is also evidence that they could prevent deterioration in mental health and possibly the onset of clinical depression (Price, van Ryn and Vinokur 1992).
Similarly, in the case of organizational downsizing, industries can reduce the scope of unemployment by devising ways to involve workers in the decision-making process regarding the management of the downsizing programme (Kozlowski et al. 1993; London 1995; Price 1990). Workers may choose to pool their resources and buy out the industry, thus avoiding layoffs; to reduce working hours to spread and even out the reduction in force; to agree to a reduction in wages to minimize layoffs; to retrain and/or relocate to take new jobs; or to participate in outplacement programmes. Employers can facilitate the process by timely implementation of a strategic plan that offers the above-mentioned programmes and services to workers at risk of being laid off. As has been indicated already, unemployment leads to pernicious outcomes at both the personal and societal level. A combination of comprehensive government policies, flexible downsizing strategies by business and industry, and community-based programmes can help to mitigate the adverse consequences of a problem that will continue to affect the lives of millions of people for years to come.