A week's (unpaid) vacation

Yesterday's post showed how 2008s record layoffs, which are supposed to be saving weakened companies cash is also costing them in productivity and even sales. I had no idea when I wrote it that I'd be getting another example just hours later.

Gannett Co., the newspaper publisher that is also my former employer, is furloughing all -- that's right all -- its employees this spring. We're talking a week's mandatory, unpaid leave.

I haven't seen yet how much Gannett expects to save from the furlough but for a company its size tens of millions is a safe bet. But the reaction of some of my old buddies shows that in some respects the move is folly: in the words of one former Gannetter, another example of the newspaper business putting a band-aid on a gaping wound.

Last year, while I worked for Gannett in Cincinnati, there was a round of buyouts. Painful, employees were told, but necessary to avoiding layoffs. It worked, until the layoffs came. Still, this should be the end of the pain, management said. By then, I was moving on but those left are now figuing out how to replace a week's income and wondering how long this will stave off the next cut, the one that will see them on the unemployment rolls.

A few folks I talked to yesterday said they would spend their week off looking for a new gig; if any of them are lucky, the company loses good people who might have been valuable to a turnaround effort. Those who remain won't be all that excited to be there, what with being a week poorer and all. Quality and morale will suffer.

The economy notwithstanding, what company can truly afford that?

Layoffs are strangling those who still have jobs, too

In 2008, US companies laid off more people than they had since the 1940s, and the evidence is everywhere. I didn't have to look, for example to the latest layoff numbers to figure out it was happening, I just kept in touch with my friends.

Last year this time, no one I knew had lost their job; as of now, I know at least a dozen, including personal friends, former co-workers and mentees. I know at least one person who was given the reprieve of keeping a job but had to swallow a pay cut. In New York of all places.

But this post isn't about the unfortunate ones who lost their jobs, it's about the misfortune of those who have kept them -- and by extension why all the layoffs will ultimately come back to cost the companies who are looking for savings from the cuts.

I had the following gchat conversation yesterday with a friend (name withheld for obvious reasons), who works for a very large company that, like many others, laid off several hundred people at the end of last year:

Friend: i feel like my job is pushing me to my limit

me: cuz of the loss of people
Friend: it's just 13 days in to the new year...7 work days in to the new year and i want to jump off my balcony

that is how stressful my job is

i resigned from my part time hustle yesterday because the full time job has become bodily consuming

Friend: i worked sunday 5pm - 3am...got home and got a nap because i then worked for 8am-8pm straight...and i mean straight...i didn't leave my couch to even get a glass of water

i didn't even turn on the tv and i was at home

me: smh
that's bad
Friend: literally i was busting ass for 12 hours straight yesterday
me: that sucks
i hope it gets better for you
and soon
Friend: it wont

2009 is bound to get a lot worse b4 it gets better

That conversation (edited slightly and used with permission, of course) shows how when major layoffs happen, workloads don't lessen. By cutting workers, companies are trying to get the infamous "more with less" -- that is steady or rising productivity from a smaller, cheaper workforce. But there are limits -- to how much one person can do with eight hours and two hands and to an employee's body, psyche and motivation level. Cut too deep into the bone and you wind up with, at best, a demoralized workforce and at worst, an unhealthy one.

In the best case scenario, angry workers just aren't as given to producing as much or as good as their bosses would like. In the worst, stressed-out, fatigued workers are prone to health problems that could increase sick days and increase employers' insurance premiums. What's worse is that remember, companies laid off more people last time than they have in more than 60 years, leaving, potentially more angry, disaffected and overloaded workers than at any point in time since that period as well. Not a good thing.

Another important point: all the layoffs are hurting not just productivity, but the spending power of even those who still have jobs as well. Look at what my friend says: she quit her part-time job because of the workload she's gotten from her full-time one. Less income, less spending, again multiplied by the millions.

What to do with all this cash?

What would you do with a boatload of cash? Sit on it? Pay off some debt?

That's the good problem one reader asked me about earlier this week:

I am sitting on a decent amount of cash right now. I have some consumer (credit card) debt but at very low interest rates, like 1.9% and the highest 7.9%. I also have one zero rate card that I am going to pay off. I also have a car loan with about $15K left at about 6%.

I have twice as much cash as consumer debt and theoretically I could pay it all off today but that would leave no cushion. I've lost about 15% in the market - so not so bad compared to a lot of folks. I had been putting aside money for a [home] down payment, but [my job] is talking layoffs. I don't think I'll be targeted…still I am cautious.

What would you do?

Well, since you asked: I wouldn't worry about the losses in the market that much, especially if the hits you've taken are in a retirement account and you're under age 40. You have time for those investments to come back from the grave.

As far as the cash, it's great that you have a lot of cash saved up (I wish I did!), but all that credit card debt isn't good. Take a glass-half-empty approach: on one hand, you have twice as much cash as you do debt. On the other, if you're laid, off you could wind up spending half your cash reserves on debt, leaving you with much less of a cushion than it looks like you have.

What I'd do is find a comfortable balance between paying off as much of the credit card debt as you can while keeping six months to a year of cash in case your job gets funky. If possible, pay off the highest-rate card completely, keeping in mind that credit card companies are under duress and are jacking up rates even on good customers these days.

Don't worry about the car note since as long as you're making regular payments and not falling behind, the lender can't jack up the rate. Lastly, start putting your feelers out about a new gig! If you're safe, that's good, but knowing your organization is shrinking should be motivation enough to see what else is out there, just in case.

Good luck.

The layoff ax is falling hard

This economy is really starting to hit people where it hurts: at work.

A few months ago, I knew many people who were cutting back on discretionary spending but most of them weren’t worried about their jobs. No one I knew had lost his or her job.

Unfortunately yesterday, two people I know were laid off. They worked in different states and at different companies. And that's hardly the end. The company I work for is planning to lay off 10 percent of its workforce. I read yesterday that Fidelity Investments in Boston is planning a major layoff. Those folks would join the hundreds of thousands already laid off this year

To be on the safe side, Single Ma, who writes the Fabulous Financials blog, says she's beefing up her emergency fund to cover her for a full year. Good idea if you can afford to do it.

Are you worried about your job right now? And if so, what kind of contingency plan do you have in place to make sure you're alright if you lose it?