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Companies 'fire their best workers during recessions'

High-skilled – but high wage-earners – are among those most likely to be let go, finds Columbia University research.

Image: Andrey Popov via Shutterstock

IT MAY SEEM counter-intuitive, but some of the first people to get let go in a recession are the smartest, hardest-working people. This counters the common idea that lower-skilled, lower-quality workers are the first to be let go and have the hardest time finding a new job.

Columbia University’s Andreas Mueller took a deep look at the data, and found that the unemployment pool shifts towards high-wage, high-skilled workers in recessions, and that they, have just as hard of a time finding a job as low-wage workers during recessions.

Among the people most likely to be let go are those with high wages compared to others with the same experience and education. They’re most likely paid more because they’re the most productive, but still get fired at higher rates.

A possible explanation is that higher-paid workers are overpaid or just got lucky. In another study (these are based on US figures), Mueller found that highly paid people with higher IQs, more proven ability, and higher non-cognitive (personality and emotional) scores are still more likely to be laid off. The highest-quality workers make up a higher share of the unemployed than is usually thought.

The biggest explanation, according to Mueller, are the credit crunches that result from recessions. Firms understand that their best workers will be essential to recovering and would like to keep them, but lower revenue and tight credit sometimes leave them with no choice but to fire some of their best people.

All of this goes to emphasize the point that recessions are actually one of the best times to hire, if you can afford it.

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- Max Nisen

Published with permission from:

Business Insider
Business Insider is a business site with strong financial, media and tech focus.

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