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Layoffs or Pay Cuts: Which is best? : Planet Money Companies hammered by the economic collapse due to the coronavirus pandemic are being forced to make a hard choice: lay staff off or cut their pay.
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Pay Cuts Vs. Layoffs

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Pay Cuts Vs. Layoffs

The Indicator from Planet Money

Pay Cuts Vs. Layoffs

Pay Cuts Vs. Layoffs

  • <iframe src="https://www.npr.org/player/embed/854889059/855066846" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
A sign is seen at the window of a closed J.Crew store near Rockefeller Plaza on May 4, 2020 in New York City. - US clothing retailer J. Crew filed to begin bankruptcy protection proceedings Monday, after reaching an agreement with major creditors on a $1.65 billion debt restructuring plan, the company said in a statement. (Photo by ANGELA WEISS/AFP via Getty Images)
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ANGELA WEISS/AFP via Getty Images
A sign is seen at the window of a closed J.Crew store near Rockefeller Plaza on May 4, 2020 in New York City. - US clothing retailer J. Crew filed to begin bankruptcy protection proceedings Monday, after reaching an agreement with major creditors on a $1.65 billion debt restructuring plan, the company said in a statement. (Photo by ANGELA WEISS/AFP via Getty Images)
ANGELA WEISS/AFP via Getty Images

Thanks to the COVID-19 pandemic, and the lockdowns that have resulted from it, many companies are making a lot less money. Now they're looking to cut their costs, including labor costs.

And when it comes to that choice, they generally have two options: lay people off or cut their pay (or some combination of the two). In past recessions, they generally resorted to laying people off. We have seen a staggering number of layoffs in this recession. But many companies this time have opted to go the other route, and cut pay instead.

Today on The Indicator, we ask why it is that companies opted to lay people off in past recessions; and why they're shifting their tactics this time round.

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