The impact of layoffs

Summary

This script discusses the historical impact of technological advancements on job displacement, particularly in agriculture and customer service sectors. It highlights the short-term pain of job loss and the long-term benefits of increased efficiency and the need for humans to find new ways to contribute to the economy. The script also touches on the challenges companies face in balancing profits and shareholder value, often resulting in layoffs when revenue is down. It emphasizes the reactive nature of such decisions and the difficulties of rehiring and training new staff when business picks up.

Takeaways

• 🔧 Technology has historically displaced jobs, as seen in the agricultural industry 100 years ago where machinery and automation led to redundancy among manual laborers.
• 🏗️ In the short run, technological advancements can cause job loss and economic pain, but in the long run, they can lead to more efficient and optimized human work.
• 🛒 The automation wave has reached customer service and sales, with digital ordering, self-checkout, and offshoring reducing the need for human interaction in these roles.
• 📉 Despite the benefits of automation, rapid displacement can lead to unemployment and a period of adjustment for workers to find new employment.
• 💼 Sales roles may still require human interaction, especially when products are complex or require a convincing sales pitch, indicating that not all jobs can be easily automated.
• 💡 Companies often automate to reduce expenses, which can improve their financial appearance to shareholders and potentially boost stock prices, even if it means job losses.
• 📊 Layoffs are a reactionary measure often taken when a company's revenue is not meeting expectations, and cutting costs is seen as a way to improve profit margins.
• 🔄 The process of laying off and rehiring employees can be costly and time-consuming, involving training, onboarding, and dealing with the effects of turnover.
• 💼 Companies are cautious about layoffs as the rehiring process can involve higher costs due to market rate salaries and the loss of experienced staff.
• 📉 Stock prices and shareholder value often take precedence over employee retention, especially in times of financial stress for the company.
• 🤔 The decision to lay off employees is not taken lightly and is often a last resort when other measures to improve financial performance have failed.

Q & A

How has technological advancement historically impacted job displacement?

Technological advancements have historically led to job displacement, such as in the agricultural industry 100 years ago where machinery and automation replaced manual labor, forcing people to find new employment.

What is the short-term impact of technology displacing jobs on the affected individuals?

In the short term, job displacement can be detrimental as it results in loss of income and the need for individuals to find new ways to support themselves and their families.

What is the long-term perspective on technology displacing jobs?

In the long run, job displacement due to technological advancements is generally seen as beneficial as it leads to optimization and efficiency, with humans being reallocated to more productive roles.

How has automation affected the customer service and sales industry?

Automation has significantly impacted the customer service and sales industry by reducing the need for human labor through digital ordering, self-checkout systems, and offshoring, leading to a decrease in traditional customer service roles.

Why might a company choose to automate customer service or sales processes?

Companies may choose to automate these processes to cut expenses, improve efficiency, and allow customers to access services more easily, ultimately reducing the need for a large workforce in these areas.

What role do salespeople still play in the context of automation?

Salespeople are still necessary, especially when dealing with complex products or processes, as they can provide personalized follow-up and assistance to close sales, which automation may not fully replicate.

What are the consequences for a company if it lays off employees too hastily due to poor financial results?

Laying off employees hastily can lead to a loss of valuable human capital and the need for extensive recruitment and training processes if the company needs to rehire when business picks up again.

Why might a company resort to mass layoffs or firings?

Mass layoffs or firings often occur when a company's revenue has decreased and they need to cut expenses to present a better financial picture to shareholders, even if it means losing valuable employees.

What are the challenges a company faces when it needs to rehire after a layoff?

The challenges include the time and financial cost of recruiting and training new employees, dealing with market rate salaries, and the potential loss of institutional knowledge from the previous workforce.

How does the need to maintain or boost stock prices influence a company's decision to lay off employees?

The pressure to maintain or boost stock prices can force a company's management to prioritize cost-cutting measures, such as layoffs, over retaining staff, as it directly impacts their performance evaluation and shareholder value.

What are the potential long-term effects of rapid technological displacement on the workforce?

Rapid technological displacement can lead to a large number of unemployed individuals who may struggle to find new employment or occupations that allow them to maintain their quality of life, potentially leading to social and economic challenges.

Outlines

00:00

🤖 Automation and Job Displacement

The first paragraph discusses the historical context of technology displacing jobs, starting with the agricultural industry a century ago. It explains how the introduction of machinery made manual labor redundant, forcing workers to seek new employment. The speaker acknowledges the short-term pain of job loss but argues that in the long run, technological advancements are beneficial as they optimize human work. The paragraph also touches on the current impact of automation in customer service and sales, with digital ordering and self-checkout systems reducing the need for human interaction. The speaker notes that while this can lead to unemployment, it can also drive people to find more productive ways to contribute to the economy. However, they caution that rapid automation without adequate support for displaced workers can lead to social and economic issues.

05:02

📉 Corporate Layoffs and Economic Reactions

The second paragraph focuses on the recent layoffs at Intel as a response to poor financial performance. The company's decision to cut costs by reducing its workforce is presented as a short-term solution to appease investors and maintain stock prices. The speaker points out the risks of such reactionary measures, as a sudden upturn in the economy could leave the company understaffed and scrambling to recruit and train new employees. They also discuss the challenges and costs associated with hiring new staff, including the time and expense of onboarding and training, as well as the potential loss of valuable experienced employees. The paragraph concludes by emphasizing the difficult decisions companies face between maintaining a workforce for potential future needs and the immediate pressure to cut costs and boost shareholder value.

Keywords

💡Technology Displacement

Technology displacement refers to the phenomenon where technological advancements lead to the replacement of human labor with machines or automation. In the video, this is discussed in the context of historical shifts, such as in agriculture, where machinery made many manual jobs redundant, forcing workers to find new forms of employment. The speaker highlights that while this displacement can harm workers in the short term, it often leads to long-term benefits through increased efficiency.

💡Automation

Automation is the use of machines or technology to perform tasks that were previously done by humans. The video explains how automation has significantly impacted industries like customer service and retail, with self-checkout lanes and digital ordering systems reducing the need for human workers. This shift can improve efficiency for companies but may also lead to job losses for employees.

💡Human Capital

Human capital refers to the economic value of a worker's experience, skills, and abilities. The video discusses how technological advancements can make human capital redundant, as machines take over tasks that humans used to perform. This displacement forces workers to seek new roles or acquire new skills, which can be challenging in the short term but necessary for economic progress.

💡Economic Efficiency

Economic efficiency occurs when resources are allocated in a way that maximizes productivity and minimizes waste. In the video, the speaker argues that technology and automation, while displacing workers, ultimately lead to greater economic efficiency by allowing machines to handle repetitive tasks, freeing humans to focus on more complex and creative work.

💡Mass Layoffs

Mass layoffs refer to the large-scale termination of employees, often as a response to declining revenues or economic downturns. The video highlights that companies may resort to mass layoffs to reduce expenses and improve their financial standing in the eyes of shareholders, even though this can have negative effects on both the workforce and the company's future operations.

💡Shareholder Value

Shareholder value is the financial return that shareholders receive from their investments in a company. The video emphasizes that top management often prioritizes actions that enhance shareholder value, such as cutting costs through layoffs, even when these decisions may negatively impact employees. This focus on profits and stock prices is a driving force behind many corporate decisions.

💡Offshoring

Offshoring is the practice of relocating business processes or services to another country, typically to reduce costs. The video mentions offshoring as part of the broader trend of using technology and automation to cut costs, including the outsourcing of customer service roles to countries where labor is cheaper. This practice contributes to the displacement of domestic workers.

💡Market Rate

Market rate refers to the prevailing salary or wage that workers can expect to earn for a particular job in a specific market. The video discusses how companies may pay long-term employees less than the market rate due to small, incremental raises over time. However, when hiring new employees, companies are often required to offer market rates, which can be higher, leading to increased costs.

💡Revenue

Revenue is the total income generated by a company from its business activities, such as sales of products or services. The video explains that when a company's revenue declines, it may be forced to cut costs, often through layoffs, to maintain profitability and satisfy shareholders. This focus on revenue as a key metric drives many of the decisions discussed in the video.

💡Onboarding Process

The onboarding process is the procedure that new employees go through when they join a company, including training, system access, and integration into the workplace. The video notes that laying off employees can lead to difficulties if the company later needs to rehire, as the onboarding process for new hires is time-consuming and costly, potentially hindering the company's ability to respond quickly to economic recovery.

Highlights

Technology displacement has historically affected various industries, such as agriculture 100 years ago.

Advancements in agricultural machinery led to redundancy of human labor and forced people to seek new employment.

Short-term job loss due to technology can hurt individuals but may be beneficial in the long run by optimizing human work.

The rapid pace of automation can result in unemployment if people do not find new employment quickly.

Customer service and sales have been significantly impacted by digital ordering and self-checkout technologies.

Offshoring and internet automation have reduced the need for human involvement in sales and customer service processes.

Sales may still require human interaction for convincing products or complex processes.

Companies often automate to reduce expenses and improve efficiency, impacting customer service and sales roles.

Displaced workers need to find new ways to contribute to the economy after job loss.

Mass layoffs often occur when company revenue decreases, leading to cost-cutting measures.

Cutting costs can improve a company's financial appearance to shareholders, even if it means losing valuable employees.

Layoffs can be a reactionary measure to immediate financial pressures, with potential long-term consequences.

Rehiring after layoffs is a time-consuming and costly process, including training and onboarding new employees.

Companies may avoid layoffs if they foresee value in employees for the near future, due to the difficulty of rehiring.

Hiring new employees often requires paying market rates, which can be higher than keeping long-term employees.

The decision to lay off employees is often driven by the need to protect profits and shareholder value.

Top management is graded on profits and shareholder value, which can lead to prioritizing these over employee retention.

Transcripts

all right so technology displacing

people um it happens basically

throughout history you look back 100

years ago it was agriculture you know

technology advancements in that industry

had displaced a lot of people so people

that relied on being part of the

agricultural system and working with

their hands probably uh most likely were

displaced because Machinery came in

automation of certain parts of the

process made a lot of that human capital

redundant and so people were forced to

find something else to do so in the

short run that hurts the people right

because they lose their job or they they

lose their money and they're going to

have to find a way to support their

lifestyle or their family or whatever it

is in the long run it's usually a good

thing because it means that the

technology is better and it's um uh you

want to optimize what humans are doing

so if a machine can do something that a

human does and it can do it well then

all things being equal you want you know

you would prefer probably for the

machine to do it now when that happens

too fast though you you end up with a

lot of unemployed people or people that

don't have a use because they haven't

found new employment yet so it's it's

been happening with uh kind of customer

service and like you know think of like

grocery stores or restaurants with all

the digital ordering and the order in

the kiosk and the self checkout lane and

the offshoring of customer

service and the internet has been able

to automate a lot of the processes

involving sales and uh customer service

so that real people don't really have to

do that function uh anymore now

sales is still something where unless

you have just such a convincing product

or such an easy on-ramp process you

probably still need to have some amount

of

salespeople um you know to to follow up

with people and to try to make the sale

but customer service and even just basic

sales type stuff can probably and it's

already happening where it's being

automated or it's just they're they're

cutting out the the the real person so

the company is uh cutting the expense of

paying these real human work ERS and

they're automating it or they're

building in technology that makes it

easier for customers to get what they

want and then the company doesn't have

to pay or they have to you know they get

the advantage of having less uh customer

service people or less salese or less

people on their payroll so if that's

done well it's probably a good thing for

the company uh like I said it hurts the

employee because they lose their job or

they maybe get cut back on their hours

but ultimately in the long run it's

usually the most efficient thing because

it means that the people that got

displaced now have to find a new

productive way of contributing to the

economy but like I said if that happens

if that happens too fast you end up with

a lot of people that have nothing to do

or there's no real Avenue of where

they're going to go find employment or

an

occupation um where they can be where

they can maintain their quality of life

life so that's kind of what's been

happening um you know with people

getting fired or laid off because the

the company the company's profits the

company's results don't look as good as

they did a year ago or two years ago and

so if the company can't show that

they've made more revenue or

more well they can't show that they've

made more Revenue right so what they do

is they cut the

expenses that way it looks like they

have a better profit or less of a

loss if they were growing and the

revenue was there then they probably

wouldn't cut back on any or they

wouldn't cut back on a lot of positions

but a lot of times the mass layoffs or

the mass firings happen

because they happen because the the

revenue is not there it's dried up and

now they have a bunch of overhead that

they still need to pay and they have no

new revenue or they have lessened

revenues so in order to paint a better

picture they say hey we cut we can't

show you that we've grown our Revenue

cuz you can see that we haven't but what

we can do is cut our expenses so we

don't have to pay out as much now we

might lose human capital and we might

you we might lose some support roles and

people that uh were valuable to our

company but you know we want to we want

to show shareholders and we want to uh

you know try to boost the stock price or

make the stock price be not as impacted

to the negative and so that's what a lot

of the companies are are doing I think

intel was down very big last week I I

didn't look to see if it rebounded

significantly but they laid off a bunch

of people and probably just because the

numbers were not good and they uh their

only way to show investors that they

were focused on it was hey we're going

to cut our expenses like big time we're

going to lay off a bunch of these people

and you know resize the company that we

have to fit what the current economy

is all those reactions though um are

very it's very reactionary when this

happens because things can change pretty

quickly so if you lay off a bunch of

people and then in six months or a year

you know things start to pick up again

well now you just lost 10,000 employees

or 12,000

employees and now you have to now you

don't have the people so now you have to

go you know hire a bunch of people you

have to put them through the the

onboarding process you got to train them

for a period of time you got to deal

with the turnover of people quitting you

know starting quitting you know all the

it most jobs there's like quite a bit of

stuff that has to happen you got to get

training you got to get logged into like

all the right systems with it they have

to give you the equipment so it's a big

process to hire new people on in a uh in

most companies so you you don't really

want to let people go if uh if you don't

have to because it's hard to bring them

back and then when you do bring them

back you typically have to pay people at

the market rate um if you're hiring them

you can't continue to pay if you've have

if you've had employees that have been

in a company for 10 years uh often times

you can get away with paying them less

than market rate because you're just

giving them a very small raise every

year but if you're bringing on a new

person and you're negotiating a new uh

you know salary with them or whatever

they're going to expect that they get

paid the market rate because it's a new

job it's you know they're they're

they're they're having that conversation

right now and uh you're going to have to

pay most likely a higher price so it

also involves dealing with you know

interviews and having to interview a

bunch of people and that takes time away

from the current employees that are that

are already there so companies don't

want to lay people off especially if

they can see that they have value or

will have value in the near term because

in order to bring people back it's just

it's a very uh time intensive

process and if you need a couple

thousand people that's going to take a

good amount of time and money and energy

to uh bring them all back or to bring

hire new people so um let me know what

you guys think on it I don't think uh

you know I don't think they make these

decisions lightly but you know if things

aren't looking good and they can sense

that their stock price is going to be

really negatively impacted then they

they have to you know their hand is kind

of forced to do things uh because

ultimately it's about the profits of the

company and about the shareholder uh

value that's how the top management

people get graded so they're going to

put that ahead of you know a lot of

times they're going to put that ahead of

keeping people on staff right they're

going to they're going to lay off people

if it's better for the uh for the share

price so

let me know what you think subscribe see

you on the next one