IMO, any profitable unit of labour should be kept, unless a firm faces a serious crisis of some sort.
If the firm's costs rise to a level which calls for laying off labour, then it would be rational to get rid of the least productive units first. Normally, you remove those who represent a higher cost to you than the revenue they are generating.
But I see more and more evidence that this is not either the short term or medium to long term strategy for firms today. To the extent that I ve looked at dynamic models for profit maximization, it has been argued that under cost benefit analysis, you should keep the parts of a firm that generates positive profit and reform the parts of the firm that generates 0 or negative profits.
So unless your company faces some difficulties that are to be considered serious, I think this whole cutdown is moronic.
if we also look at company value - then as ERIKK says, customer relations are worsened, which is reflected in company value declining. Thus the medium to long term impact of such a reduction can actually have net negative impact, even though wage cost is reduced.
From a personal POV, this sucks Beam. I know labour market is somewhat better for skilled labour than for unskilled labour, but I do hope you work something out.
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