How Layoffs Affect Standard of Living

Lay-offs come in many forms. Retrenchment, shutdown, redundancy, and the like allow companies to lay off employees for justifiable reasons. No matter how justifiable the reasons may be, the effects of these lay-offs affect the people’s overall standard of living. As global financial recession continues to affect a number of industries, and subsequently companies, many are forced to resort to drastic means in order to survive. Employees are almost always the first assets to go.

But it is not only the laid off individuals who are affected by this phenomenon. Almost every citizen suffers from the effects of the low buying power of the citizens of its country.

What does standard of living mean? Standard of living means the amount of income needed to provide for the needs of a household or an individual in a certain town or city. Standard of living varies between different places, as cost of living is measured to determine the amount of income that a household should earn in a day and/or in a month to maintain a quality of life, able to buy and enjoy necessary items, pay bills, and the like.

How do lay-offs affect your standard of living?

  • Trickledown effect. If the public's buying power is reduced, surviving companies suffer reduced sales. For most people, no income means an inability to buy goods and other essential items. As this happens, companies suffer from low income, thus profit.
  • The middle class become poor and the poor become poorer. The term poor is relative, but for the sake of discussion it will be referred to as inability to buy food three times a day and presence of high loan amounts (e.g. credit card, mortgage etc.) with no source of income to compensate payment. As income decreases, other unnecessary expenses have to be neglected. Thus, households who used to belong to the middle class are now forced to spend on essentials and payment of loans. Sometimes budgets become too tight so that even loans are not paid for. The effects are even worse on the poor, who become poorer as jobs become ever more scarce. Think of single parents. How can they even afford to provide for their children’s needs?
  • High cost of commodities. You may be wondering how prices increase over time? Especially at a time when income decreases and the economy loses its financial power. This is called inflation. Among other causes, inflation happens when there is a scarcity of products. Typhoons and other major disasters can significantly reduce the supply of valued items, thus allowing vendors to increase the cost as demand goes up.

Layoff in all forms has become a way of life for businesses as they struggle to survive in the ever-changing global market. Lack of proper preparation and future planning can definitely make affected employees unable to cope with the local standard of living.


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