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New Research Finds Layoffs Make Employees More Likely to Quit Future Jobs

By Wisconsin School of Business

August 18, 2016

The trauma and disruptions that come from a job layoff have been well researched—everything from depressed lifetime earnings to reduced physical and mental well-being. But there has been virtually no research examining the behavior of layoff victims when they land a new position and return to work.

In an effort to understand how layoffs influence victims’ subsequent work behaviors, a team of researchers from the University of Wisconsin-Madison’s Wisconsin Business School examined the impact of layoffs on voluntary turnover. Charles Trevor, professor of management and human resources and chair of the department, together with Ph.D. student Paul Davis, and Ph.D. student Jie Feng found that, all else equal, employees with a layoff history were more likely to voluntarily leave organizations.

With layoff victims representing an increasingly large proportion of the workforce, this change in behavior of laid off employees becomes relevant not only for the organizations that engage in them, but for future organizations and employers of laid off workers, given the costs of turnover for employers.

“Our analysis suggests that layoffs influence voluntary turnover primarily by weakening the psychological ties that layoff victims form with post-layoff employers,” says Trevor. “This is consistent with the business press frequently characterizing layoffs as leading to a free agent mentality, where the workforce is made up of a significant group of employees with low levels of commitment and loyalty to the employer.”

Since 1994, Bureau of Labor Statistics data reveal that U.S. employers have laid off over 30 million employees. The WSB researchers found that the influence of layoffs on voluntary turnover is substantial and persistent:

  • Relative to their likelihood to quit 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.
  • For those who accumulate multiple layoffs, each additional instance of a layoff increases the likelihood of quitting, although at a declining rate.
  • A history of layoffs increases both the likelihood that employed individuals will seek out alternative employment and that they would quit to accept unsolicited job offers.

These findings apply specifically to layoffs in which business-level concerns motivated the reduction of some, but not all, employees at a particular workplace. It did not consider layoffs that resulted from office and facility closures or employee dismissals for cause.