Why Companies Slash Headcount and Not Salaries

Why Companies Slash - It's been highly publicized that Wall Street is bracing for another significant round of layoffs In fact some banks including

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It's been highly publicized that Wall Street is bracing for another significant round of layoffs. In fact, some banks, including Credit Suisse and Barclays Capital, have already begun to show hundreds of bankers the door. This latest round of cuts follows a similar one enacted a couple years back in the immediate aftermath of the financial crisis of 2008. And, again, as Wall Street (as well as firms outside the banking and trading world) stand on the threshold of wide-sweeping job cuts due to another dip in the economy, the question arises: why not just cut back on salaries instead of jobs? The two-part answer is rather simple, and well known among managers nationwide, especially among those who've ridden several up-and-down business cycles. The first part has to do with morale. That is, it has to do with keeping morale high, or, at least, preventing it from falling into the sewer. Which is typically where it ends up when a pay cut is enacted by management. When salaries and/or bonuses are slashed, employees, though their anxiety about losing their jobs is lessened,
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This note was uploaded on 01/13/2012 for the course 620 300 taught by Professor Gordon during the Fall '10 term at Rutgers.

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