Russell Lynch: Wielding the jobs axe? Spare a thought for the survivors

Jobs figures showing a 9000 fall in employment in the quarter to November suggest that a solid five-year run for the labour market is finally running out of puff. But the lesson for employers from economists is that if you have to fire people, be careful how you do it.

The impact of “survivor syndrome” on employees who manage to escape mass culls — lower productivity, increased levels of absenteeism and the like — has long been suspected. But two economists, Frank Drzensky and Matthias Heinz, devised an experiment that appears to give credence to the theory. Their findings are published in the latest Economic Journal.

The game involved splitting participants into groups of bosses and three workers, who had to perform a simple online task in two separate sessions.

But when bosses were given the option (and financial incentive) to “sack” a worker at the end of the first session — and the two remaining employees were told of their decision — their performance fell by as much as 43% compared with a decision to fire made by drawing lots.

The productivity fall-off is strongest for survivors who treat the employer’s decision as a method of increasing profits at the cost of the workers — much more so than when workers “buy into” the decision, or if the employer is forced to fire somebody.

Above all, bosses considering mass lay-offs should be wary about how the decision is perceived by the remaining workforce, the experts conclude. So employers should pretend it’s a “last resort” — even when it isn’t.