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Faculty Insights

Individual Layoff History Impacts Voluntary Turnover

By Paul R. Davis, Charlie O. Trevor, and Jie Feng

October 24, 2014

If you’ve ever been laid off, you’re probably familiar with some of the trauma and disruption that a layoff can bring—researchers have documented depressed lifetime earnings, reduced physical and mental well being, and undermined work attitudes among those who have suffered a layoff. But even as Bureau of Labor Statistics data reveal that U.S. employers have laid off over 33 million employees since 1994, virtually no research has addressed the behavior of layoff victims upon reemployment. In a first step toward understanding both whether and how layoffs influence work behaviors, we investigated the impact of layoffs on voluntary turnover. Our findings indicate that a layoff history is positively associated with this behavioral outcome, meaning that after a layoff, employees are more likely to leave organizations voluntarily, by quitting.

What We Found

The influence of layoffs on voluntary turnover is substantial and persistent. Our analyses indicate that, relative to their quit likelihood in pre-layoff employment, individuals are 56 percent more likely to quit (any job) following their first layoff and are 65 percent more likely to quit the job that immediately follows a layoff. And for those who accumulate multiple layoffs, each additional instance increases the likelihood of quitting, although at a declining rate. After the sixth layoff, the point at which additional layoffs did not influence quit behavior, the decision to quit is about six times more likely than it is in the pre-layoff period.

These findings apply specifically to layoffs in which business-level concerns have motivated the reduction of some, but not all, of workplace headcount (i.e., we did not study workplace closures). Additionally, employee dismissals for cause (e.g., for theft or poor performance) that were not part of a broader downsizing effort were not considered.

Our results demonstrate that employee quit behavior is evolving as a function of the downsizing strategies that are now standard business practice. The behavioral change that we document, given that layoff victims represent an increasingly large proportion of the workforce, amounts to a material change in the talent pool upon which virtually all organizations rely. Because voluntary turnover is notoriously expensive and, in the aggregate, a critical predictor of a variety of organizational performance outcomes, our findings therefore suggest that layoffs are relevant not only for the organizations that engage in them, but for all organizations.

What Explains the Layoff Effect?

We examined whether our behavioral findings might be attributable to a decline in job quality or employee job satisfaction following a layoff, but only about 10 percent of the effect could be explained by these factors. Instead, our analyses suggest that layoffs influence voluntary turnover primarily by weakening the psychological ties that layoff victims form with post-layoff employers, freeing these workers to pursue alternative opportunities. For example, we found that a history of layoffs increases both the likelihood that employed individuals seek out alternative employment and the likelihood that they quit to accept unsolicited job offers. This pattern of results is consistent with the lay business press’s frequent characterization of layoffs as precipitating a free agent mentality, leaving the workplace replete with employees with low levels of commitment and loyalty to the employer.

Implications of Psychological Attachment

Given that the broad and generally indiscriminant reach of layoffs affects tens of millions of American workers, the study speaks to the potentially highly consequential effects of institutionalized downsizing on the subsequent stability of the modern American workforce. However, there remains much to learn about the influence of layoffs on voluntary turnover (e.g., whether the strength of the effect is affected by the individual’s specific layoff experience or by the treatment given by the post-layoff employer). The psychological attachment rationale developed in our work provides a general theoretical foundation for the study of these important questions, which, in expanding our knowledge base, will provide practitioners with the perspective needed to guide their approach to layoff victims.