Recession’s effects on small vs. large companies: some evidence in support of the Classical view of self-correction

Mar 03 2009

Recession’s effects on small vs. large companies: some evidence in support of the Classical view of self-correction

Published by Jason Welker at 7:09 am under AD/AS Model,Classical economics,Cost-minimization,Costs of production,Keynesian Economics,Labor Market,Macroeconomics,Recession,Wages

Why Are Large Companies Losing More Jobs Than Small Ones? – TIME

This is a fascinating, short article from TIME. Before reading it, see if you can answer the multiple choice question below:

Q: Why do small companies lay off proportionately fewer workers during a recession than large companies?

A) Because small firms are less likely to be in the industries hardest hit by a recession (such as manufacturing)?
B) Because small firms are less focused on maintaining profits to satisfy greedy shareholders?
C) Because small companies are able to hang on to employees and even hire new ones during a recession because of all the talent being laid off by big firms.

Still thinking? Well, it’s likely that all three are true to some extent. But it’s the third one that seems most intriguing as a student of economics. Here’s what the article says:

…small companies hire disproportionately more early on in an economic recovery because it’s easy for these firms to find good workers while unemployment is still high—and easy for workers to come across small companies since there are so many of them. Once the economy is chugging along at full-steam and the labor market is tight, larger companies regain the advantage, since they’re likely able to offer more money—and poach from smaller outfits.

Seems pretty straight forward, right? Sure, but the fact that small firms are likely to hire when unemployment is high supports one side in a long-running economic debate over the economy’s ability to “self-correct” in times of recession.

As any student of Macroeconomics learns early on, there are two dominant theories of macroeconomics, both which are represented in the aggregate demand/aggregate supply diagram that we learn and use in AP and IB Economics.

The two models below represent the two opposing views of macroeconomics. First we see the Keynesian model, which shows that when overall demand in an economy falls, unemployment increases drastically and output tanks, plunging the economy into a deep recession. This is primarily because of the “inflexible” nature of wages, meaning that even when unemployment rises, workers are unwilling to accept lower wages and firms therefore are unwilling to hire more workers.

According to Keynesians, the only way to get the economy out of the recession is by increasing overall demand through heavy doses of government spending (case in point, the $775 billion stimulus in the US).

Next is the Classical AD/AS model with a vertical long-run aggregate supply curve. The implication of the vertical AS curve is that regardless of the level of overall demand in the economy, output will always return to the full-employment level, and thus unemployment will always return to its natural level. The major assumption underlying the Classical model is that wages are in fact flexible in times of recession. As unemployment rises, workers will accept lower wages since they’d rather be making less than making nothing at all. As wages fall firms will begin hiring more workers, increasing overall output and decreasing unemployment until full-employment output is restored.

The implication of the model on the right is that government is NOT needed to get the economy out of a recession, because it will self-correct due to the new hiring and production by firms in response to falling wages in the labor market.

The reason this article stood out to me was that it seems to offer some evidence in support of the flexible-wage, Classical model of macroeconomic self-correction. There has been surprisingly little talk among news anchors, pundits and politicians about the likelihood of the US or ANY economy suffering in the global slowdown “self-correcting” as the Classical model would suggest it should. But the fact that small businesses are less likely to lay off workers in a recession and more likely to begin hiring them due to the large number of workers being laid of by big companies offers at least an inkling of evidence in support of the Classical model of flexible wages and macroeconomic self-correction.

Discussion Questions:

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?
What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?
When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

842180 responses so far2009-03-02+23%3A09%3A47Jason+Welker

842180 Responses2009-03-02+23%3A09%3A47Jason+Welker to “Recession’s effects on small vs. large companies: some evidence in support of the Classical view of self-correction”

# Marc Lemannon 04 Mar 2009 at 10:20 pm

Larger corporations probably lay off workers instead of shutting down whole factories, because workers are not a long-term investment like factories; companies that lay off workers can keep all their plants open, and make them more efficient, and if they have to hire again, it is much less complicated than re-opening a factory.

Companies that are publicly traded face more problems during recessions, because they are supposed to take all actions, on behalf of what is best for the shareholders, which puts pressure on companies to reduce as many cost as possible to satisfy the shareholders. Smaller or privately owned businesses do not face these problems, because they do not have this pressure of satisfying the shareholder.

I believe that after the recession people will be working for smaller companies at first, because they will have been hired by the smaller companies that were in search of talent, when many people lost their jobs. But gradually, the "self-correction" model will also attract people back to the larger corporations, which pay more for the talented workers. There are pros and cons of working at either smaller or larger companies, but I would rather work at a larger corporation, because of the better known name of the company, and because of the higher wages. Having a well known company name is also beneficial in getting talented workers; it works just like having a known brand. An example of this is Google, their workers have many benefits (live on campus for free), and with this, and their well known name, they are able to attract the best workers.

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# Helen Poxonon 05 Mar 2009 at 5:22 am

I think that Large companies lay off their workers instead of closing down their factories because by cutting down the amount of workers they will have less costs to pay. Therefore they reduce their costs in proportion to the reduction in there turn over. This helps to maintain their profitability. This might only hold out a couple of months but this could lead to them gaining some profit instead of none at all. As mark said it is also less complicated to keep them open so that they can try and get themselves as a company to a efficient level so that if they do want to start hiring workers again its less complicated for them.

In times of recession all companies face problems such as; not being able to generate enough revenue to cover their costs. Publicly listed companies face the most problems during recession because as things start to slow down they have to move quickly if they are to prevent their costs out weighing their revenue. Publicly listed company have to work within rules and regulations with respect to laying people off. Smaller companies that are not publicly listed can move much quicker as they are normally laying off less people not governed by the same rules and regulations. At the same time publicly listed companies have to please shareholders who are less willing to continue to provide their capital if they see that a company is having problems maintaining its profitability. During recession if a publicly listed company loses money this will reduce its capital base and therefore its solvency ratio. Privately owned and smaller companies are the opposite to this because as Mark says they do not have to satisfy shareholders.

I think that when the recession is over and both smaller and larger companies have survived that more people will go back to working for the bigger companies. This is because larger companies can provide more opportunities and incentives for people. Also people will generally perceive larger companies as providing greater security and long term survival. As the article states that smaller companies do better during recession because they are able to get hold of talented workers who are currently jobless but once the doors of more money and better opportunities occurs workers leave smaller companies for larger. I'm not really sure if smaller companies are going to do better after the recession i think they might for the first year or two but once workers know for certain that the recession seems to be over I think they will go towards the larger companies. As the article states the government doesn't seem to interfere with the recession because it will eventually "self-correct". I think that I would rather work for a larger company because it gives you more incentive to work. A job in a large company is more of a long-term opportunity than one in a small company.

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# Nickon 05 Mar 2009 at 10:19 pm

The answer to number one is simple, it is because in the short run their is only one variable resource and that is labor. They are unable to shut down factories and sell capital as they would only be able to do that in the "variable" plant period, as at the moment the resources are fixed into the productions of those goods and services. large public companies that are listed on stock exchange market would be first hurt in times of recession as they rely on the selling of stock. stock is a form of investment in a company. if you are buying stock you are almost investing in a company, therefore if people begin to sell their stock they are effectively taking money out of a company. Privet companies have actual investors, maybe one or 2 separate individuals that count for a large amount of money supply in the company. I would rather work for a small company, this is because you are more informed and contracts are often better in small firms and safer.

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# Christian Evertzon 13 May 2009 at 4:51 pm

1. Due to a decrease in demand, a company has to reduce supply in order to cut production costs. In the fixed plant period however, which is the period where plant size is fixed, the company can only adjust its varibale resources such as labour. Thats why laying off workers is the first thing companies due when they experience a decrease in demand.

2. A publicly traded company is owned by many investors who ideally expect high returns from the stocks they buy. In a recession, they fear that the value of their stocks decreases and therefore in some cases withdraw their investment from the company. Furthermore, the publicly traded company will face a public dispute with unions if they want to lay off workers.

3. When the recession is over, small companies are able to higher a lot of workers, since unemployment is quite high and the workers are willing to accept lower wages. However as stated in the article, when the economy is at full steam again and the labour market is tight, then large companies have the advantage of offering higher salaries to workers so that they can lure them away from small companies.

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# Gabrielon 13 May 2009 at 4:52 pm

Corporations lay of workers before they lay of land or capital because it is the fastest way of getting rid of cost, this is why it is called the short run or fixed plant period. There is not enough time for firms to sell land or capital but they do have enough time to lay off workers or decrease productivity by granting less hours.

In a recession a publicly traded company has a lot more pressure because of the fact that they sell stocks, therefore they are basically owned by a lot of investors. If they are losing their stock money then they will obviously not be happy. The company will be forced to face a fall in demand, because investors and consumers involved with that company will see the decrease in value and will not be as willing to consume or invest.

After a recession is over smaller firms tend to higher workers faster than big firms for several reasons. Firstly there are many more of them, and it is easier for unemployed workers to find them. Secondly they are willing to accept lower wages. Once some time has passed, then large firms will have an advantage since they will be able to offer higher wages and attract more workers towards them.

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# Theresa Mehlon 13 May 2009 at 5:20 pm

Why is laying off workers the first thing big companies do when faced with falling demand for their products?

A firm’s goal is always to maximize their output. When aggregate demand for the products in the economy falls, the total spending on goods and services declines. A fall of aggregate demand will shift the curve to the left which will signify decrease in real output. When is demanded in an economy, therefore less is produced. When production declines, less has to be produced. Therefore less workers are needed. Companies will therefore lay off workers when falling demand occurs.

Why don’t they shut down factories instead?

If they shut down the factory the factory in harsh times, no profit will be earned. Also, like Marc said closing and reopening are complicated processes. As unemployment in recession is very high firms can be sure that after a recession is over the spots will be filled again. Therefore when aggregate demand will rise again and firms will supply more, they will employ these workers again.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded companies want to satisfy their shareholders which are only interested in their stocks if their profit of these shares remains great. Therefore the pressure of firms to stay in profit is greater than of firms that do not have these shares. The great firms will be worth much less if they loss their shareholders. Small firms therefore do not have this pressure influencing their decisions during a recession.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

Like Mark I am the opinion that more people will be working for smaller companies when recessions have occurred, since like the article stated “it’s easy for these firms to find good workers while unemployment is still high—and easy for workers to come across small companies since there are so many of them”. But of course in the long run process, when the economy will have fixed itself these once dismissed workers will be employed in the larger companies again.

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# Maren Rackebrandton 13 May 2009 at 8:23 pm

When the demand of a product falls then companies reduce their supply of the product, because less is bought. When less output is produced, less workers are needed for the production of these goods and therefore workers are laid off. Also due to the less demand the firms get less money and as a result can't pay the wages for all the workers.

The goods still should be produced, just in smaller amounts. So the facotries can't be shut down. Also it is easier for firms to cut on their workers rather than closing factories. After a recession it is easy to employ people, but it might be complicated to reopen a factory that was shut down.

A publicly traded company has many investors, due to the sold stocks. In times of a recession those stocks go down and the more the stocks fall the more likely the investors sell them to get as much money as possible. So when all the investors sell their stocks the company has no money left and therefore is likely to become bankrupt. Small companies on the other hand do not have as much investors and therefore are not as likely to become bankrupt as big firms.

I think after a recession more people would work for small companies than before, because according to the article small companies hire workers even during a recession because big companies laid off these workers who might be workers with good skills. It is hard to say which one I would rather work for a big or a small company, because they both have good and bad sides. The big companies might have higher wages, so it is more attractive to work there. On the other hand during a recession there's a great possibility that you get fired. A small company might not have as high wages, but during a recession the job that you have is pretty "save", because it does not affect the small companies as much.

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# Aleya Thakur-Weigoldon 14 May 2009 at 12:37 am

1. In a recession the demand for certain products usually decreases which means that the companies will have less profits. They will have less profits but not none, this means that they can still afford a certain number of workers but maybe not as many as before. This is the reason why companies start laying of workers but they won't shut down completely because there is always a glimpse of hope that the economy will recover (like it usually does).

2. Small companies are usually not as involved in public trade but they concentrate on their personal benefits, whereas bigger companies have many other parties involved in their business. In times of a recession the stocks that these big companies hold might loose their value which forces companies to sell them as quickly as possible. In a recession this is not always possible though, because few people are willing to buy worthless stock. Small companies won't have this problem because they do not hold so many stocks.

3. It is hard to say whether more people will work for small companies or bigger companies. According to the article the economy will recover because smaller firms will start hiring people again because there is a higher supply of skilled workers, this will reduce unemployment and larger firms will start hiring more people as well. At first more people will be working for smaller and privately owned businesses but once the economy is up and running again, more people will start working for larger companies because they can offer more. I am not sure if I would rather work for a small company or a big corporation, if I had gotten a job in a smaller company I would probably stay there unless I got a better job option in a different company.

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# Laura Perezon 14 May 2009 at 1:44 am

1) A pubicly traded company has more trouble during a recession because it has to struggle to maintain the high wages they offer their workers while a small firm does not have as much pressure in this area. This is because they normally offer lower wages and with the recession comes lower price levels. Workers will be more attracted to a smaller firm with its wages rather than the lowering wages of a large firm. During recession, people do not want to spend and instead start saving their money. A pubicly traded company will suffer during times of recession because the public is scared to invest since they do not trust the economy. This company will not get a lot of investors during these times because of the lack of confidence, one of the determinants of investment.

2) When the recession is over there will probably be a similar number of workers working for small firms than there was before the recession because, as the article states, large firms have the advantage of offering higher wages. The extra workers the small firms gained during the recession will be more attracted to these larger firms. If the larger firm offers a higher pay, which is usually the case, then I would probably rather work in the larger company, as any rationale employee would, although it all depends on the situation and the atmosphere in both.

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# Rocio Perezon 14 May 2009 at 1:53 am

Shutting down factories would result in a drastic decrease of output as well as firing workers, whereas JUST laying off workers would also decrease their costs of production but continue the production of goods. Going back to microeconomics, in the short run (variable plant period) firms will change the variable resource which is labor, and in the long run (fixed plant period) firms can close down factories.

In times of recession, people's confidence in the economy decreases along with the investors who buy stocks in large firms. They therefore withdraw their investments leaving and could lead to bankruptcy.

According to this article, during a recession, smaller firms hire more workers as the unemployment level is high and they are more likely to come across decent workers, so if they are coming out of a recession these firms will probably have a good amount of workers. However, in periods of healthy economic activity it is in people's interests to work for large companies who offer lower wages due to economies of scale.

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# Younes Huberon 14 May 2009 at 3:11 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Laying off workers is a company's initial reaction to a decrease in demand. This is so because that is the only reaction a company can have in the short run since it is the quickest way to reduce costs and decrease output. In the long run however, they may need to shut down factories.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Since a publicly owned company is owned through shares it is owned by multiple people and hence suffers under the pressure of each one. Also, if the investors see that the company is doing badly, many of them may decide to sell their shares. This could prove to be a precarious situation for the company because if everybody wants to sell their shares at once they will eventually be worth less.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that more people will be working for smaller firms because the people will be desperate for any decent job, and because small firms are more numerous and easier to find, they will higher more workers than large fimrs. I however, would rather work for a large firm, because in the future they will be able to pay better than the small firms and hence, since I will already be employed I will not have to fight for that job.

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# jabbobbon 14 May 2009 at 3:38 am

1. Ceteris paribus, if demand for a company’s good decreases, production (supply) has to be lowered in order to lower production costs. Since land and capital are more of a long-term investment than labor, factories lay-off workers. If demand was to increase again, it is easier to hire workers than building or re-opening factories.

2. A publicly traded company will always try to satisfy its shareholders and attract more. In a recession, people are less likely to invest in a big company because the danger of losing asset-value is much greater than in a stable economy.

3. According to the article smaller companies hire workers during and after the recession, because the bigger firms fired skilled workers that are of use for the smaller companies. I don’t know enough about this topic to say if I would work at a big or a small company. But if skilled workers from big companies get jobs at smaller firms I would probably work at a big company, become a quality worker and not have to worry too much about the next recession.

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# Nicholas Burnhamon 14 May 2009 at 4:32 am

What a great example of how workers can simply leave large firm should their wages drop. Their fallback plan would evidently be to get jobs from these smaller companies, because they aren't hit as hard by the recession. I'd like to note that there could be a cycle forming here: recession is periodic, first of all. When the recession hits, larger companies will suffer a deal more; lose workers, lose support from the stock market etc. The large companies that cant handle the pressure will collapse, the ones that can will shrink. Smaller companies seem bigger, and with better labour options they are more likely to grow. So Big companies shrink and small companies have the potential to grow. In some cases I'm sure there is almost a full reversal of roles. It's also interesting to note that because the bigger firms react faster to the recession, the small firms profit for all the new available labour, usually before the recession really takes its toll on the small companies.

Shutting down factories is essentially the same as cutting jobs, isnt it?

And once the recession ends, you would obviously jump aboard with the big companies, because they are going to be more likely to sustain quick, large growth.

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# Finlay Smallon 14 May 2009 at 5:09 am

The reason why Companies lay off workers before they start to close down factories, like many people said is due to the Fixed Plant period, in which Labor is the the only cost that is variable, and land and capital is fixed. In the long run firms will be able to shut down factories if need be.

I think that the pressure that the Public Traded companies face compared to that of small firms is extremely large. Public Traded companies are owned by many investors and all of them are expecting large returns. They chose to invest in company X because they expected Company X to have greater returns then Company Y, and Public companies need to respect the investors by increasing profit etc. In a recession the pressure is far greater on the large firms because they are not only expected to survive and make profits but increase year by year. While small firms during the recession have only one goal and that is in fact survive.

At first it will seems that more people will work the Small firms due to availability of firms and workers, but as the world recovers and companies like GM and Ford open up again to take back the thousands of workers laid off then the big companies will again have more over the small firm.

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# Helene Gleitzon 14 May 2009 at 5:42 am

Because there is a decrease in demand, firms will produce less of a product. They will reduce supply in order to minimize their costs, and one of their main costs is labor. It is a “quick” way to decrease costs which is why it is called the short run. They would not shut down factories because it is a huge step from laying off a certain amount of workers and it is more of a long term solution to a falling demand for the product.

Publicly traded companies want to satisfy their shareholders and have a certain responsibility to make the right choices for their shareholders. They have faith in the company which puts pressure on the firms and they have to make sure they make as much profit as possible. A small company on the other hand, does not have investors and does not have the same pressure put on by the shareholders.

I think that small companies will be able to hire more workers right after the end of a recession because workers are desperate to find jobs and would rather be making a little money than none at all. They will therefore accept lower wages, which are often provided by small companies. As recovery progresses, and the economy returns to full employment, bigger companies will be able to offer higher wages and will be able to employ the majority of workers.

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# Dominic McNameeon 14 May 2009 at 6:03 am

Large firms will lay off workers before shutting down plants as labour is a short term variable resource whereas plants are not. Also, if the firm shuts down a plant without laying off workers they will have a large number of employees with nowhere to work.

Publicly traded companies have to do what will please the shareholders. This might not necessarily be what is best for the company in the long term.

Immediately after the rescission is over/recovering more people will be working for small companies, but in the long term I think it will return to what it was before.

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# Alex Hanon 14 May 2009 at 7:15 am

1) At the momment the recession starts, firms cannot shut down factories and close lands because it takes time. However something they can do immediately is firing workers.

2) Large firms are owned by many share holders, so it is in the firms best interest to keep all these share holders satisfied so that they do not harm their reputation. Facing bankruptcy would result in depts and legal issues with all the share holders.

3)In a healthy economy, large firms will be most attractive…. However during a recession, smaller firms are better off.

This might be a farfetched guess but it might be that during the recession, the smaller companies grow and the larger companies shrink. After the recession, the smaller companies would become larger companies that attract workers.

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# Bastion 14 May 2009 at 9:35 pm

Firms need to cut the supply to lower production costs, because there is a decrease in Demand. During the fixed plant period, companies can only alter their variable resources, like labor. From this we can conclude that companies fire workers when there is a decrease in demand. The reason laying off workers is the most effective action to take when faced with falling aggregate demand, is because when the recession is finally over, it is easy to lure the unemployed people to your firms with low wages.

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# Benji Rosenon 15 May 2009 at 12:07 am

1.Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

the workers

2.What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

3.When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

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# Benji Rosenon 15 May 2009 at 12:13 am

AAAH it always does that to me, I press enter to make a new paragraph,and it posts it. ok: no more paragraphs… Workers are being layed off by big companies in times of recession since they are a quick way of cutting costs, they would keep them if they could lower the wages, but since legislation and contracts prevent them from doing so they must fire the workers. They do this, over shutting down factories, since this way they can attempt to keep the supply as high as possible, with less workers working harder, whilst not loosing the investment in capital they have made by buying the factories. The Big publicly traded companies have the pressures from their investors to deal with in times of recession. Their profits go to investors, so if the investors do not receive any money, since there are no profits, then they put preassure on the company. They could even start selling their stocks, lowering the value of them. When the reccession is over, more people will work for small companies, yet they will soon be headhunted by the larger coorperatoins and we will see a distribution of labor much like it was before the recession. The small companies will also compete hard against each other and the big firms and go bankrupt easily, leaving much of their labor force available for the larger companies to aquire.

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# Amit Zaidenbergon 15 May 2009 at 6:53 am

Big companies lay off workers when the demand for their products fall because they will supply less and workers is a variable that can be changed within the fixed-plant period, thus quickly correcting their overstocking issues.

Publicly traded companies face investors and keeping the appearance of a healthy company as well as approval of a board. Small, privately owned companies have much quicker reaction times and are able to make important decisions quicker as a result.

When the recession is finally over i think a large influx of small companies will be the result and many more people will be in small companies. These comapnies will proabably end up merging or being bought and turning into a large corporation but that will have to be years after the recession is over. I would rather work for a small company because it is easier to pprove how essential you are and there are larger chances of being noticed in a small company.

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# Simon Strongon 16 May 2009 at 5:23 pm

1. A company will lay off it's workers in the short term because we would be in that, the short term (or fixed plant period) where only the labour resources, workers, are variable and can be adjusted to minimise costs.

2.A publicly traded company has to answer to it's shareholders, and so there is an increased pressure put on the firm, but also in times of a recession many people fear losing all their money so they sell their shares which leaves the publicly traded company with a deficit of capital for investing. A privately owned company does not face this problem, as generally the only way they'll lose all capital is if the owner decides to close the business.

3. At the end of the recession I think we will see a lot of small businesses hiring people from the major firms, but in times of economic growth I think it is better to work for a larger firm as there are more opportunities for promotion and higher wages.

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# John Lyons-Harrisonon 04 Nov 2009 at 10:41 pm

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

1. It's easier and quicker to lay off workers before selling off factories. Laying off workers is cost-efficient and usually the first step for firms in trouble. If there is less demand for the product, then less workers are needed to produce the amount of the product demanded, however small. Selling factories is a last resort because more of the product can't be produced without factories.

2. A publicly traded company that sells stock is under pressure to satisfy their shareholders, which influence their decisions. Privately owned businesses can make their own decisions without regard for anyone else because no one else has a stake in the company.

3. When the recession is over, people will want to work for larger companies because they percieve larger companies as having more job security, higher wages, and more opportunities for career advancement.

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# John Lyons-Harrisonon 04 Nov 2009 at 10:45 pm

Response to #2 Aleya Thakur-Weigoldon

Also, big companies have to worry about satisfying their shareholders, and their policies and decisions are influences by people who own stock in the company. Privately owned businesses have no such problem.

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# Alison.ecslb.f09on 05 Nov 2009 at 11:11 pm

1.Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

The first thing that big companies do when they are faced with a falling demand for their products is to lay off some of their workers. They do this rather than shut down their factories because factories can often function passably with a reduced level of employees, and it is significantly easier to hire new employees than it is to reopen a closed factory.

2.What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A company that sells stocks to investors faces added pressures during a recession because it has the need to maintain a healthy appearance so that the price of its stocks doesn't plummet. The only way to do this is to keep the shareholders happy, which might not be beneficial in the long run. On the other hand, a small, privately owned business does not sell stocks to investors, and thus it is able to look only at the beneficial options for the business, rather than the needs/wants of the shareholders.

3.When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

During and immediately following the recession smaller companies will be able to higher highly skilled workers that larger companies laid off. However, once the recession is over the larger companies will be able to draw many of these workers back with a larger salery. Immediately following the recession, there would be more people working for small companies than before the recession.

Personally, I would rather work for a small company than a large one, because it would be more intimate. I like to know the people for which I am working, and I would be better informed on important issues.

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# Alison.ecslb.f09on 05 Nov 2009 at 11:24 pm

Response to Helene Gleitz:

Smaller companies will be able to increase thier workforce during the recovery period, due to the high level of unemployment. Later, as the economy recovers further, the larger companies will be able to offer higher wages and and will be able to "employ the majority of workers". However, the question must be asked – is it possible for smaller companies to benefit in the long run from a recession due to their increased level of employment? It can be argued that workers may be more happy working with small firms, and less trusting of larger firms, and thus small business will benefit. On the other hand, it can be said that once the recession is on the mend, larger firms will be able to draw the workers back with higher wages than the small businesses offer.

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# jiyoon.ecslb.f09on 05 Nov 2009 at 11:26 pm

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

- I think it was probably the corporations of the lay off workers instead of failing down the whole factories, the reason why is that the workers are not a long term investment like factories. People who work there can make more efficient work, get more profit and higher the workers for not re opening the factory. Re opening the factory will be very complicated and difficult because it’s a lot of work. As we have learnt that when the demand of a product falls then companies reduce their supply of the product, because less is bought. Obviously, when less output is produced, less workers are needed for all the factory work.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

- Usually the small companies are not as engaged in public trade in contrast; they concentrate on their personal benefits while bigger companies have many other parties involved in their business. According to the article, a publicly traded company is owned by many investors who ideally anticipate high returns from the stocks they buy. In a recession, they fright that the value of their stocks decline and because of this in some causes pull out their investment from the company. What is more, the publicity traded company will face a public dispute with unions if they want to lay off workers.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

- It is not a quiet easy decision to prefer for which companies we want to work for whether it’s smaller and bigger. This however, based on the article, the economy will pull through because small firms will start engage people again due to their higher supply of skilled workers, this will lessen unemployment and larger firms that will start hiring more people as well. On the other hand, in my opinion, more people will start working for larger companies because they can benefit more, which means, in larger companies, although they have more work, they can get higher payment and can the company can be run well for long time. However, if I were had to work in a small company because I had no money or ability to be employed in a big company, then I will still work in a small company until I am employed to a larger company.

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# Leyre.ecslb.f09on 05 Nov 2009 at 11:31 pm

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

When the demand is falling in a big company, the first thing that happens is that the company starts to lose money. So, since it is losing so much money, instead of just shutting down the company which would make the chances of recovery zero, the company fires a small amount of workers, so they balance the amount of money being lost because of the falling demand, by not having to pay for the work of so many employees.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

That a publicly traded company might risk that the investors deny any stock, and so the economy does not depend on that publicly traded company, but on the companies it ‘publicly’ works with. On the other hand, a privately owned business does face the problems in a recession, but it is not affected by other companies.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that when the recession is over, people will start to work for smaller companies, although as the article says big companies will have an advantage on the economy, as they can provide better salaries. However people will prefer to work with smaller companies as these will have a higher guarantee of stabilizing the jobs. I would also decide to work in a smaller company after the recession.

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# jiyoon.ecslb.f09on 06 Nov 2009 at 2:59 am

To Leyre

Leyre, I read your answers to the questions. It was nice to read, thank you. Now, I think I need to make some few points that you missed to write. For question 3, I think you need to state why not most of people wouldn’t work in big companies. That would make more sense of you explaining the reason. Also, when you said according to….. it is important to put quotation if you are quoting someone’s writing. However, I’ve seen new good answers probably at some points I was wrong as well. Good work!

JiYoon

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# Raphael.echl.f09on 06 Nov 2009 at 6:51 pm

to John Lyons-Harrison

I agree for the two first questions, but for the third one don’t you think that in the short term small companies will have more than before.

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# Celine.ecslb.f09on 06 Nov 2009 at 9:50 pm

Response to Alison.ecslb.f09:

Alison,

A point that you mentioned in the answer to your third question that I thought was interesting is that the larger companies will be able to attract more people will higher wages. I’m not saying that this is right or wrong, I’m just thinking about the potential circumstances after the recession. I think that in a way, the larger companies will be able to pay more because they have higher funds, but I think that many big companies will be skeptical in regards to the amount of money they spend on salaries (and bonuses! an attractive factor for many), because this overspending is a part of the reason that caused the current crisis and they probably will be very cautious in dealing with this is the future since they don’t want their companies to return to bankruptcy the way that they did before…
So, I think that this will be an interesting turnout after the recession!

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# Raphael.echl.f09on 06 Nov 2009 at 7:45 pm

1. Big companies are more likely to lay off workers first instead of factories because if the demand decrease less will be needed to produce but not nothing so the factory is still needed to produce a little. And after a recession it is easier to find workers again instead of a factory.

2. In PLCs there are shareholders who want to get profit, so there is a lot of pressure from them. in privately owned businesses the owner can make decision like he wants. there are always a lot of shareholders and all of them want something slightly different so it is harder to satisfy them.

3. I think that just after the recession a small firm is more likely to have more workers than before as big companies lay them off. But over a period of time it will loose workers because big companies can offer more than small firms, so they will go to big firms.

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# Celine.ecslb.f09on 06 Nov 2009 at 10:41 pm

1) Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

There can be many reasons that the first thing big companies do is to lay off workers. Firstly, with the falling demand for their products, there is less revenue coming in and it isn’t as profitable for them to have the same amount of works than it was before, when the demand was higher. A point that the article, “Why Are Large Companies Losing More Jobs Than Small Ones?” (Time), mentioned about why this could be like this is because large companies have more pressure from all of their shareholders, to keep profits attractive, and to do this, a decrease in workers is the fast way of doing so. It can also be that the large companies suffer more than the smaller companies because of their area of work, which might be affected more greatly than others.

The big courses don’t just shut off their factories because that would be stopping production completely, and thus there wouldn’t be any revenue coming in at all. The factories still need to be producing to meet the demand, as small as it might be.

2) What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company has the pressure of keeping their investors happy, and thus still involved in their company. Many big companies rely greatly on the support from their shareholders, and if these people extract from their positions, the company will loose funding, credibility, and support from many people that help them be as successful as they are. Small, privately owned businesses, because of their size, don’t usually have these share holders, since they’re not public organizations, and thus have less pressure to upkeep their positions.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

Because of this big scare, I think many people will transfer to smaller business where they feel that they’re jobs are more secure. The opportunity cost would be the possibility of lower wages than if they were working for larger companies, however, they are trading this factor in for a potentially longer lasting job. I think because of the circumstances I would have better chances with working for a smaller company, however, hopefully by the time the recession is over, the larger companies will continue working the way they did before, so it won’t be too risky working for them.

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# kerstin.ecslb.f09on 09 Nov 2009 at 4:23 am

Why is lying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

I think companies have a simple reason for lying off workers, first thing when a big company is facing a recession. The demand is decreasing, as people are usually trying to save their money in a recession. The big companies therefore gain less revenue, therefore profit decreases too. When demand is low, less workers are needed “anyways” to produce less output and firing workers is the easiest way for a firm to reduce costs. Also, it might be harder for a smaller firm to fire workers, because the smaller the firm, the more likely it is that they are already working at their minimum workforce, because the revenue simply doesn’t allow anymore workers. The likelihood is greater in bigger companies. Big companies don’t simply close a factory, because some demand is still present, although it is not as much as it used to be. The firm would shut off part of their revenue completely, thus decreasing profits even further.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company faces problems with shareholders. Generally, shareholders put money into the company by buying shares; they invest. If the company makes profit, they sell their shares again (which have gained in value), which means the shareholders have made money through the company making profit. In a recession, a companies shares are of low value, because less people invest in the companies, thinking that the company might make a loss, (or that their shares might become worth even less than currently). Therefore a publicly traded company has lots of pressure from the shareholders, because if the company is not performing well, nobody will invest in it, whereas the privately owned business does not face this problem, since people cannot invest in them.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that it will regulate itself, but that overall a little bit more people might be working in smaller companies. As read in the article, smaller firms might even hire more people during a recession. I would prefer working in a small company, firstly because it is more personal, but also because the job would probably be more secure than in a big company.

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# kerstin.ecslb.f09on 09 Nov 2009 at 4:36 am

To Leyre:

I agree with your third point that people will probably want to work in smaller companies, seeing as their working place is more secure, even though salaries are smaller.

However, you mentioned in your second point that a privately owned company faces the same problems as a publicly traded company. I don't agree with that. The PTC depends on people that buy their shares, so that money can be invested in their company. The shareholders own the company, and if nobody wants to own part of the company no investment is taking place. The PTCs depends on shareholders AND customers. However, in a POC, nobody is buying stock, so the company is not dependant on shareholders, only on customers. I think that this might suggest that overall POCs might lose less money in a recession that PTCs??

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# diana.ecsl1.f09on 09 Nov 2009 at 8:44 am

1. Large companies can afford to lay off workers. Shutting down the factory would mean having no profit whatsoever. At least with layoffs companies can maintain profit even if it means sacrificing a fraction of the work force. Wages also happen to be inflexible; if wages were to be decreased, workers would rather be laid off than receive lower pay.

2. Publicly traded companies worry about being severely affected by recessions due to manufacturing purposes. Additionally, there is a great pressure to maintain profits because of share holders. Inflexible wages are a critical issue as well because this means there will be difficulty in maintaining the work force.

3. At the conclusion of this recession, I think the public would be more inclined to work for smaller companies than larger ones, myself included. Though wages may have to be reduced during economic strain, better that than being laid off and having no income altogether. Small, privately owned businesses care more about the well-being of their workers than maintaining profit. Furthermore, they are able to hire the people that big businesses get rid of because wage inflexibility does not serve as an issue. Lastly, small companies do not have to worry about share holders. I would definitely feel much more secure as an employee of a smaller business

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# diana.ecsl1.f09on 09 Nov 2009 at 8:46 am

To Celine:

I totally agree with your third answer. I find it interesting that you mention opportunity cost; that never crossed my mind. That's a great way to look at it.

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# diana.ecsl1.f09on 09 Nov 2009 at 8:49 am

To Alison:

You made a few good points regarding question 3. It really is all a matter of time. Like you said, initially people will shy away from working for larger corporations because of fear. But they will eventually be drawn back by larger salaries. I agree that working with a smaller company is more of an intimate experience. The environment is vastly different from the impersonal one at a very large firm.

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# victor.ecsla.f09on 09 Nov 2009 at 8:20 pm

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

It is easier to lay off some workers and try to sell products even though it will be in a smaller scale. Instead, if they shut down the factory, there is not a way to get out of the ''recession'' or keep producing.

2. What pressures does a publicly traded company(one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded companies have pressure because they need to satisfy shareholders. Privately owned business can take decisions regardless for

anyone else.

3.When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

After the global recession small companies will have fewer workers than before the recession. This is because the small companies cannot offer the work security that a large company can offer. I would rather work in a large privately owned company because the work security is higher.

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# victor.ecsla.f09on 09 Nov 2009 at 8:23 pm

To Raphael.echl.f09:

I disagree with you on the last answer. You said that there will be more workers in a small company. I think that in a recession the smaller companies are the first companies to shut down due to the decrease of demand, on the other hand, large companies are more likely to get through the recession without shutting dowm.

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# Katharine.ecsla.f09on 10 Nov 2009 at 2:13 am

Laying off workers is the first thing big companies do when faced with falling demand for their products because it is easier and still allows them to produce the product and hopefully earn a profit. If companies shut down factories, there would be no source of income at all for the company, however if they lay off workers at the factory, the company can still produce.

A publicly traded company faces the problems of investors selling off their shares of stocks in the company because the recession could cause them to lose the money in their investments. A small, privately owned business does not face these problems because they do not have to worry about whether or not their investors will back out and sell their shares. A publicly traded company faces the pressure of having to do what is in the best interests for their shareholders and they must do the best to maximize their profits and the value of their stocks.

When a recession is over, more people are likely to be working for small companies. I would personally rather work for a small firm, because layoffs are less likely and companies don’t have to act to benefit their shareholders the entire time. Small firms are also more likely to be able to hire or keep employees.

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# Katharine.ecsla.f09on 10 Nov 2009 at 2:14 am

Response to John Lyons-Harrison

It is much easier for big companies to lay off their workers before shutting down factories as you said. It is much more cost-efficient and still allows the company to earn money and produce the product. Shutting down, as you said, is the last resort because nothing is produced. I disagree with your statement that people will want to work for larger companies when recessions are over. The likelihood of being laid off or fired is higher with larger companies, yet with small companies, they are more likely to have the ability to hire and pay better wages during the recovery period after a recession.

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# Jack.ecslb.f09on 10 Nov 2009 at 3:10 am

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Laying off workers is the first thing that companies consider when there is falling demand for their product as it potentially can accomplish two goals:

• The first goal is to reduce costs, this is the most obvious concern and the most obvious and simple solution is to reduce wage costs by reducing staff numbers. This enables the company to function for longer on a smaller income.

• The second goal is to ultimately increase demand on the product once again, enabling an increase in price. A potential strategy to do this is to reduce production. The result of which being an increase in the proportional demand to the supply therefore enabling a rise in price.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publically traded company relies on the money of investors to grow and prosper. During times of recession the willingness and ability to invest can be drastically reduced as we are seeing in today’s global markets. This is also coupled with the change in emphasis being selling rather than buying (in terms of stocks) therefore the drastic fall in price of the stocks would have its resulting effect on the value of the company and therefore its borrowing ability. These unfortunate would not be felt by a privately owned firm.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I do think that more people will be working for small firms than there was before the recession, however I do think that this will be merely temporary, as in the long term I believe every industry will eventually fall to a global monopoly. I’m basing this theory on the idea that collectivized, massive companies have the potential to run more efficiently and produce at lower costs than a network of small business. Therefore in theory a network of small businesses will always loose out to large companies. This trend is seen best in the food retail market. The reason that I believe more people will be working in small firms after the recession is the fact that large companies that were previously thought to be “Too big to fail” have been devastated and there could be a fearful atmosphere surrounding them.

I would personally like to work in a small firm rather than a large one as I would be attracted to the ability to grow and expand the business exponentially which would not necessarily be possible at a large firm.

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# Jack.ecslb.f09on 10 Nov 2009 at 3:15 am

To: victor.ecsla.f09

I disagree with your final answer, as you said the publicly traded company has to satisfy their investors, often with massive jobs cuts in times of recession. So can it therefore be said that large publicly traded companies can offer higher job security than private firms?

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# michael.ecsla.f09on 10 Nov 2009 at 9:16 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

This is a less drastic reduction in production (and thus in profit) and is much easier and more feasible to do.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company has to report to their shareholders and explain why profits are down, but small companies are only accountable to themselves.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

More people will be working for small businesses, as jobs will be easier to get there in harsh times. I would rather work for a large firm, as there are more promotion opportunities and higher salaries.

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# michael.ecsla.f09on 10 Nov 2009 at 9:17 am

To jack.ecsla.f09:

No, publicly traded firms have less job security as people must be fired to reduce costs and satisfy the shareholders.

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# theresa.ecslb.f09on 10 Nov 2009 at 12:19 pm

Laying off workers is the first thing big companies do when faced with falling demand because it provides a way for the firm to downsize without drastic effects. If instead they closed down factories or plants then when the economy gets better and the demand increases, it takes a lot less time, effort, and money to hire employees rather then buying back a factory and starting it up again

In times of a recession, large publicly traded companies face pressures created by their investors which smaller private companies do not. A large company who is founded on investments from other people is continually under pressure from those investors who want as much profit as possible, because naturally they want to be making as much money as possible. This pressure incited by investors is not prevalent in smaller, privately owned companies.

When the global recession is finally over, I think smaller companies will slightly be less employed. Because no large firms are hiring in the recession, if someone wants a job the only place to go is smaller companies. When this changes and large companies are hiring, they probably will have higher wages then smaller companies so some people will leave the smaller for the larger but I think most of the people who will start to work for the larger companies are those who are unemployed now, because of this I think that smaller companies will still have about the same amount of people working, but maybe slight less, accounting for those who are ambitious.

It depends on whether I would want to work for a smaller company. If I wanted to make this company be my career I would want to work at a larger company because there probably is more room for promotion, however, if I just wanted a job then I might prefer a smaller company because in times of recession I would most likely have more job security.

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# theresa.ecslb.f09on 10 Nov 2009 at 12:25 pm

To victor.ecsla.f09

While larger companies might have the upper-hand surviving a recession, when a larger company downsizes during the recession, they layoff large amounts of people while a smaller companies downsizing might be one person or so, larger companies layoff exponentially more people so I don't know if your job security would be higher at a large company. Even if large companies don't layoff as frequently, they layoff more, which more than compensates for the times when they don't layoff.

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# derek.ecslb.f09on 10 Nov 2009 at 3:06 pm

When the demand of products fall, the derived demand of workers will also fall and this would either decrease the wages of workers or decrease the amount of workers employed or both. This will then decrease the motivation of workers and workers will ‘lay off’. However, the company will not shut down factories because the cost of re-setting the factory will be high when the recession period is over and big companies have the financial resources to keep the factory during recession. However, by keeping factories the company receives pressure from share holders as there are additional costs to run the company and the share price is likely to drop. This makes the liability and credit of the company likely to decrease and makes the company harder to fund from banks or other firms and makes the company in a more difficult situation. This creates an endless spiral of bad sales, lower wages, lower output, lower share price, lower liability and worse sales. This is the reason of many people working in big companies changing jobs to small companies after recession periods as they realized that the big companies have too much burden on them.

To Leyre:

Your answers are great and I absolutely agree with your response, especially in question 3. Workers do not just look at their wages, but many things else, such as fringe benefits, having a closer relationship with his/her teammates and a lower chance of being fired.

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# courtnei.ecslb.f09on 11 Nov 2009 at 12:59 pm

Laying off workers is the first thing big companies do when faced with falling demand for their products because it is the fastest, easiest and least permanent way to cut costs. When demand declines, the necessary workforce declines and workers in big companies become expendable. It's very easy to fire people, and equally important, it's very easy to hire people back. Consider what would happen if demand rose again quickly after a major decrease. If the company had shut down some of its factories, it would be unable to profit from this rise in demand. If it had previously simply laid off workers, the company could hire new people and would be back in business much faster.

The direction of a publicly traded company is influenced by many shareholders, while the direction of a small, privately-owned business is controlled by one individual or a single group of individuals working toward similar ends. Unlike publicly traded companies, no one invests in private companies, so they receive no external pressure. Publicly traded companies rely on shareholders for investments so the company can continue to expand. In times of recession, these companies are hit hard when the values of these shares go down or when shareholders buy out in fear of losing money in the company. Furthermore, because they involve many shareholders, the company is pulled in many directions and must satisfy the demands of these shareholders or else they will lose investments.

Toward the end and immediately after the recession, I think more people will be working for smaller companies than before for the reasons outlined in the article. In times of economic hardship, small companies are less likely to lay off workers because their workforce is smaller by nature. Also, they are then able to scoop up talented ex-workers of large companies who have been laid off. However, as the economy begins to pick up, I think things will even out and eventually bounce back to the way they were before. Eventually, large companies will attract more talented workers with higher wages. I personally would prefer to work for a smaller company because I would rather a closer, more intimate working environment.

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# courtnei.ecslb.f09on 11 Nov 2009 at 1:08 pm

To michael.ecsla.f09:

I agree that publicly traded companies cannot offer greater job security in times of recession. Being publicly traded, they must bend to the will of their shareholders to appeal to investors and are much more likely to lay off workers when demand falls. After all, a larger component of a big company's workforce is devoted to making huge profits than in a small company, in which most of the workforce is devoted to keeping the company afloat financially. Workers are much more expendable to a large company than to a small company and therefore way more likely to be let go at a faster rate when demand goes down.

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# kaitlin.ecslb.f09on 11 Nov 2009 at 1:32 pm

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

-When companies have to cut the budget, they lay off workers instead of shutting down factories because in most cases, factories can be operated with less people. The factories are what actually make the good, so therefore the company is still able to produce the same quantity as before, yet they don’t have to spend as much on making it.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

-Publicly traded companies rely greatly on their investors for the funding of their company, and when a recession hits and the investors withdraw from that company, the company then loses its funding which leads to bankruptcy of the company. However, most small or privately owned businesses do not rely on investors for funding so they do not have to deal with the sudden loss of funding.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

- When the recession ends, I believe that more people will be working for smaller companies, so that they have more assurance in the security of their job. I would prefer to be apart of a small firm as well because, then I am more so guaranteed my job, and I have a better chance for a higher income.

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# Bryan Robinsonon 17 Nov 2009 at 7:57 am

Bryan Robinson

The reason for big companies laying off workers instead of shutting down factories is that they want to be ready in the case of a drastic improvement in demand for their product. Also laying off workers is a quicker way to cut costs plus the company already owns the building in which the factory is located.

A publicly traded company suffers from the loss of investors in a recession that a small business would not. The traded company may lose shareholders because of financial issues or the shareholders may have doubt that the company will return to its once great investment and the shareholder would sell their stock. This is not a problem for small private companies because with a single investor he has invested so much money to start they don’t want to waste it.

When the recession is over I believe that there will be more people working for the small companies to start, if the self-correction theory holds true however many will then start to leave small business because of the temptation of high wages.

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# Bryan Robinsonon 17 Nov 2009 at 8:05 am

Re: Christian Evertz

I agree with you 3rd comment because at the start of the economic upturn the small businesses will have many workers that have been hired during the recession but once the economy is good again and large companies have regained their financial security they will have the ability to raise wages and hire more workers.

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# Laith Charleson 17 Nov 2009 at 10:13 am

The third comment you made is very interesting, and something I hadn't considered myself. These higher level employees being let go will settle for the lower wages that some of these smaller companies are offering because bottom line they need some kind of income irrelevant of how low it can be in comparison to their old salary, they cannot pick and choose in times of need. Another thing that springs into my mind is that in smaller companies employer to employee relations develop, thus, their is a more emotional tie between the two making letting somebody go a last resort. In many respect the smaller companies for the most part are more considerate to the welfare of their employees.

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# Olajumoke.ecslb.f09on 18 Nov 2009 at 1:16 pm

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

I believe that governments lay off workers due to the fact that because they are less willing to take a wage cut, getting rid of workers serves as an incentive for workers not to complain. Plus, shutting down factories are much more drastic measures when laying off a few workers will keep productivity higher than shutting down the factory and will create better incentive for workers.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

One of the problems that a publicly traded company faces is that it needs to find a way to produce the same amount consistently or else investors will remove their money and put it somewhere else. Small, privately owned businesses do not have to worry about keeping a consistent sale number as most demand will rise and fall depending on the time of year etc.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

Most people would probably work in a large firm as the huge spike in money will re-attract those who had been unemployed or working for small companies. I would rather work for a small company because there is a greater job security.

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# Olajumoke.ecslb.f09on 18 Nov 2009 at 1:24 pm

response to kaitlin.ecslb.f09

Kaitlin, i agree with a lot of the points you raised but in the case of your second answer, wouldn't there actually be more investors because the prices would be lower? I think the real problem is that it would be more competitive because investors are in a more powerful position in relation to decisions.

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# ben.ecsla.f09on 19 Nov 2009 at 1:58 am

Laying off workers is a the first step for lager companies to take because it makes the slowdown process gradual, as opposed to a big jump that might be seen if an entire factory was shut down. Companies can find ways to run factories will fewer employees, while at the same time decreasing production costs due to wages. If a company were to shut down an entire factory, their production costs would decrease, but so would their production rate. Also, if the economy were to quickly take an upturn, it would be easy for the company to re-hire employees, so the solution is a less permanent one than shutting down a factory.

A smaller company in a recession can be more concerned for it personal survival in a recession. A small company does not have the pressures of a publically traded company such as investors to please. Companies that are publicly traded face more problems during recessions, because they are supposed to take all actions, on behalf of what is best for the shareholders, which puts pressure on companies to reduce as many cost as possible to satisfy the shareholders.

The reasons that smaller companies are faster to hire back at the end of a recession are: the company can recover faster due to its small size, there are a great number of small companies, and the hiring of a single employee for a small company is a much bigger deal for a small company, so they will usually take an active role in pursuing the best workers. I would actually prefer to work for a larger company directly after a recession, because the publicly traded company’s stocks are usually predicted to rise, and the stock options and more opportunity for advancement along with a more stable a secure future make a larger company more attractive.

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# ben.ecsla.f09on 19 Nov 2009 at 1:58 am

To courtnei.ecslb.f09

I think that your point concerning the ability of companies to hire people again after the economy takes an upward turn is a very important one. Companies want to make a profit in the short term, but also have to think in the long term as well.

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# Victoria.echl.f09on 04 Mar 2010 at 8:01 pm

1.Laying off workers is the first thing big companies do when faced with falling demand of their products because this way the company can reduce its losses in the short run and make the best out of the situation. The only people that will be needed are the ones that make things. Specialized people will not be of such an importance anymore. If they shut down the factory instead they will have only losses.

2.Public traded company face pressure in times of recession that small, privately owned business doesn’t. This is because in Public traded company they have to satisfy the shareholders so that they gain profit from their shares. And they wouldn’t want to lose their shareholders as in recession people will not invest in big companies, as the risk that they lose everything is much greater than with a smaller company.

3.I think that when global recession is finally over, people will want to work for smaller companies as it is more stable in the economy and the risk is lower to lose everything than in a big company if any thing happens. I would rather work for a small firm as it is more secured that I will keep my job and that the business will still be ok incase anything happens. An other reason is because after recession their will probably be a lot of changes happening in big firms and they will have to reorganize them selves while in small firms that haven’t been so affected it will be more normal to work their and the company will probably have a chance to build up a little more.

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# Victoria.echl.f09on 04 Mar 2010 at 8:06 pm

to Olajumoke

I really like how you thought about the fact that laying off workers is "better" than for example cutting wages as if they would cut wages all the employees will not want to work that much anymore for less money and that might result into people protesting against this and it might make everything worse for the firm.

Vica

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# Masaya.echl.f09on 06 Mar 2010 at 10:02 pm

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Laying off workers is the first thing large corporations do when faced with falling demands for their products because it is the most convenient and easiest way to reduce cost for production, instead of searching alternative methods for production – labor is a variable cost. They do not shut down factories because hardly any profit would be made without producing their goods and the firm must at least continue making profit to keep on operating.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

The pressures that publicly traded companies face in times of recession is the pressure from the people who hold portions of the firm’s ownership – the share-holders. Because firms are given ‘prices’ in the stock market, through the investor’s trade, when the firm is failing during an economic recession, these shareholders will sell off the ownership, which consequently, devalues the firm’s price.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

When the global recession is over, I think fewer people would be working for small companies because as the economy ‘self-corrects,’ people would be more attracted to large corporations that provide higher wage than smaller corporation. If it were myself, I would be working in a large corporations because it would look better in forms for applying

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# Masaya.echl.f09on 06 Mar 2010 at 10:06 pm

Victoria.echl.f09>>

You've mentioned in question 3 that small companies have less risk of losing everything but I don't understand why large corporations would losing everything. The large corporations would steal the jobs away from these smaller firms, after its recovery from the recession. Just think about it. Small shops in the neighborhood are losing their jobs because large-scale super-markets is being operated everywhere – no wonder why small firm have more risk of bankruptcy.

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# Trevor.echl.f09on 07 Mar 2010 at 11:42 am

These big companies lay off their workers because of the costs associated with it. These workers are more likely to earn better wages at large companies than at smaller companies. This costs the large firms money. So what they do is shed some of these workers to relieve themselves. It’s not as smart to shut down a factory because it is a piece of capital that can once again be a valuable asset when consumer demand comes back up. Workers can be fired and hired easily. Factories can’t be opened and closed with the same kind of ease.

It faces the pressure of being able to convince its investors that things are peachy and going well. It has to have conferences of investors where it presents business forecasts and why everyone should keep their money in. With small businesses this can all be done among the staff and owners. There doesn’t need to be any high-flying graphs or analyses to restore confidence in the business.

Yes, I think the Times article makes the point very clear that this will be the case when the recession is over. I would rather work for a larger firm. My main goal would be to work very hard to make it to a position where I would not be as expendable to the company. I would be able to survive the business cycles. And with a larger business, there would be more opportunity to rise up and eventually become very successful.

Trevor Tezel

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# Trevor.echl.f09on 07 Mar 2010 at 12:01 pm

Vica,

So when you say “specialized” do you mean administrative? Because I see what you mean there. We sometimes see jobs that are occupied by people whose sole purpose is to “oversee” or “supervise.” I think in a recession some of these positions are expendable. But besides that, workers just are often paid too much to be kept on the roll. With factories, there are so many other long-term factors to consider. It is very difficult to reopen a factory during a recovery if it’s closed during a recession. It’s an amazing source of capital that should not be given up haphazardly.

Trevor Tezel

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# Meiling.echl.f09on 07 Mar 2010 at 10:48 pm

1. The modern worker is probably the most expensive factor of production (referring to skilled and educated people in developed countries).

The reason for this is simple: We are human, not lifeless objects. In business terms, this means we need healthcare, insurance, incentives like cars and housing/education subsidies, free lunches and so on. We are expensive to keep and we need to be treated nicely, so in most industries today we use up the most revenue per unit.

A warehouse or a factory is an investment, so is machinery, but the flow of human capital through a company is exactly that, a flow – not permanent, and plenty more where we came from. In a recession, keeping the same amount of workers – the primary variable cost, is far more expensive than keeping a factory open – a fixed cost which will remain the same regardless of output. Thus the tendency to lay off workers in a recession.

2. A publicly traded company must declare its finances to the public, in addition to being listed on the stock exchange. In times of recession if the company is facing difficulties this will have to be declared to the public, and poor results could result in the share value falling as people frantically sell. Also, fear of a recession could have people selling their shares anyway, regardless of whether or not the company has been badly affected by it. The value of the company depends more on the fear caused by the recession than by than potential or real facts. Small businesses are not listed on the stock exchange and do not have to declare their finances, so they do not have to share how well or badly they are doing, so as long as a good service is maintained, so is confidence in the company. Also people have no personal interest in how well the company is doing because they don't own part of it.

3. I think that many workers in massive corporations, like General Motors, view themselves as just-another-cog-in-the-wheel. There is no bond between employee and employer, and I think the massive lay-offs and reductions made by large companies as a result of the recession will reinforce this belief. In small businesses, employees are valued more and have a direct interest in the success or failure of the company as they know that this is a result of their own efforts.

Consequently there could be a shift towards working in small businesses where employees will feel more secure. However, at the end of the day, it is the big companies than can afford high pay with large perks, so I think it largely depends on the values of the worker in question. Also they are the largest employers, and desperate people have little choice.

For me, I would rather work in a small firm, knowing that in a recession I would probably still have a source of income, rather than live it large at a big company and then come to work one day and find that I have no job. Of course, what I value would depend on whether I had a family, a mortgage and so on.

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# Meiling.echl.f09on 07 Mar 2010 at 10:55 pm

Dear Trevor,

At you comment about how you would prefer to work for a large company, I agree with you in that you would probably have better pay and more opportunity to move up in the corporate world. But in a large organization, there is a very large hierarchy, and during a recession, whole ranks of people can be wiped out, no matter how high up they are in the hierarchy. When there are many people working the same job as you, even if it is high ranking like a director or something similar, you can be laid off easily. I think a big problem here is that the management does not see people as people, but rather as units that can be removed when no longer necessary, whereas in a small company, the skills of each individual hold real value in the company. There is no solution to this problem, and I'm not suggesting it is better to work for a small business rather than a big one, of course, but just something to think about.

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# sara.echl.f09on 08 Mar 2010 at 5:31 am

1. Laying off workers is the first thing big companies do when faced with falling demand because if there are less workers, there are less costs because the company spends less money on paying their employees and can put more money into increasing the demand for their product either though advertising, lower prices, or new additions to the products. They don’t shut down factories because the process of shutting down a factory is a much more complicated process and keeping the factories open can be beneficial after the company has brought itself to an efficient level.

2. Publicly listed companies are under more pressure because have to please shareholders who are less willing to continue to provide their capital if they see that a company is having problems maintaining its profitability. Privately owned and smaller companies do not have this problem because they do not have to satisfy shareholders.

3. When the recession is over, smaller companies will be able to hire workers because there will be a lot of unemployed people desperate for work who will settle for lower wages. As the economy increases however, people will turn to bigger companies because they offer a more secure job with bigger wages.

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# sara.echl.f09on 08 Mar 2010 at 5:38 am

Meiling,

I agree with what you said about workers using up the most revenue per unit, we need a lot of taking care of when we work for a company. That is why when companies get rid of workers, they get rid of a lot of the company costs.

Sara

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# Jacob.echl.f09on 08 Mar 2010 at 6:54 am

When demand goes down, fewer consumers are going to spend with that company, which means the company is going to lose revenue. So in an effort to maximize profits, the company will have to cut costs. Laying off workers lowers costs without ruining the production. Shutting down factories can cut a lot of costs by shutting down factories, but it only hurts production further and the company suffers.

These companies are pressured to only do things that help their investors because it keeps their stock prices high. Smaller firms do not need to worry about this because they probably just trying to get as much revenue as possible.

It would really depend on how the global depression ends. For example, if a global leader issues a bill that promotes small business then more people will be working in small businesses. If Obama lowers the corporate tax and thousands of jobs are created and America’s economy becomes stable when they start exporting instead of importing, then the world’s economy will follow and most people will be working in factories. I personally would rather work in a large one simply because there is usually more job security depending on the industry. There is less individuality but as long as the paycheck comes in I’m happy.

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# Jacob.echl.f09on 08 Mar 2010 at 7:01 am

Sara,

I think if the economy is out of a recession, it will because unemployment is down. So after the recession, unemployment will not be as much of a problem, so I agree with what you said about the shift in jobs. Smaller companies can offer short term jobs, but when on the rise, capitilism will do its thing and larger corporations will grow.

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# Marrissa.echl.f09on 09 Mar 2010 at 12:45 am

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

The reason that Big companies lay off workers is because if there are less workers, there is less money used to pay them. If a company needs more money, they take off extra workers so that they can have extra money that they used to pay that worker with and yet they still have the necessity of workers to keep the companies going. Small businesses are less likely to lay off workers in a recession and more likely to begin hiring them due to the large number of workers being laid off by big companies.

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# Marrissa.echl.f09on 09 Mar 2010 at 12:51 am

Jacob I agree what you say about cutting off workers when recession seems to hit, I find that A smaller company that ends up hiring those laid off workers have 2 endings to the recession story; 1 they can end up getting more profit because more people can work, or they plummet to their death because too many workers just didn't help the money issues, leading them to shut down. Ide rather work in a big industry too.. more money

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# Dennis.echl.f09on 09 Mar 2010 at 1:50 am

1. Companies would rather lay off workers than shut down the entire factory because there is a much lower cost to them to do so. Companies can easily fire workers when a recession is setting in and then re-hire more workers post-recession rather than dealing with shutting down and restarting the entire factory. Also, shutting down the factory would entail losing almost every worker anyway, so when restarting the factory, they will have to re-hire more workers.

2. The pressure faced by publicly traded companies is enormous because the investors like to see results if they are to keep their financial support with that company, whereas private business owner only work to satisfy themselves and can make decisions on their own without a board of investors and similar complications.

3. Post-recession, I think that a larger number of people will be working for large companies than small ones because the larger companies will be able to provide many more benefits and higher salaries to their employees. I would personally rather work for a small company because there are more personal interactions between people and you work for somebody that actually exists rather than some random man in China.

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# Dennis.echl.f09on 09 Mar 2010 at 1:55 am

Sara,

I see how you think that workers will turn to smaller companies after a recession, but don't you think that workers will be more interested in the higher wages large companies are willing to offer now that the recession is over and they are again hiring? I'm not sure if I'm correct in my assumptions, but I'm thinking that people will be drawn to the stability of a large company after a recession.

-Dennis-

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# Mattea.echl.f09on 09 Mar 2010 at 5:01 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

After laying off workers, a firm can still produce and make a profit. If they close factories, this is not possible. By getting rid of some workers, and giving remaining workers more hours, the company can save money without greatly reducing profits.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

They must continue to make profits, despite the recession. If they don't, investors will not continue their investments, and the firm will suffer. A smaller, private business does not have this pressure.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

More people will probably work for smaller companies, because smaller companies hire more early in a recession while unemployment is high and the best potential workers are available. I would prefer to work for a larger company, because there are more benefits (such as health care) and higher pay.

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# Mattea.echl.f09on 09 Mar 2010 at 5:07 am

Dennis,

You mentioned that more people would work for large companies because of more benefits and higher pay. Yet you also said that you yourself would prefer to work for a smaller company because of personal interactions. Are these personal interactions really worth a smaller paycheck and having to buy your own health care? While I can see the appeal behind personally knowing your boss, I think that the benefits from a larger company outweigh the potential benefits of a smaller company.

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# chamonix.echl.f09on 09 Mar 2010 at 5:55 am

1. Firms are more likely to lay of workers than to shut down factories because it is much cheaper to fire people than to close huge factories. In a time of economic downturn, it would be difficult to sell the factories. Also, in the case of economic recovery it is easier to replace workers than production sites.

2. A publicly traded company will probably experience many people attempting to rid themselves of stocks in poor economic times. This would mean less money invested for the firms' uses. Smaller businesses are generally not publicly traded and therefore are not subject to direct impact by the fluctuations of the stock market.

3. I think that after the recession more people will be working for small businesses as they would have been hiring during the recession. I personally would rather work for a large firm as the work has more lasting, global impacts than in most small firms.

Chamonix

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# chamonix.echl.f09on 09 Mar 2010 at 6:01 am

Meiling,

You said that you would rather work for a small company because it will give you job security in a recession. Do you think that this is worth it even if that small business would probably not offer such strong health care benefits, promotion opportunities and high wages as a job at a larger firm? In your opinion, is it more secure to often have the means to look after yourself and your family well or to always have a job that will sometimes offer you the means to do so? I that sometimes it is hard to work for a very small business because its needs are constantly changing.

Thanks for raising these great questions!

Chamonix

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# marcelo.echl.f09on 09 Mar 2010 at 8:18 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Yeah, well, as everyone else has said, shutting down factories is not a very good option, since it will make the firm lose its whole business. By firing workers, however, it is reducing its production costs, and successfully managing some revenues, at least, which would not be possible if the whole factory was shut down. Furthermore, as Chamonix said, it is easier to replace workers than to re-open a whole factory. And anyways, when closing down a factory, the firm is still firing all of its workers.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

The problem with publicly traded companies is that they are 'sponsored' by investors, who are usually not part of the company itself. Thus, if the investor sees he is losing his money, since the company entered the recession in a bad position and is crashing down, he will stop sponsoring it. Therefore, the publicly traded company has a great interest in not losing money during a recession, or it will sink even deeper. With a small business, this does not happen, since there are no external investors, so no outer pressure; the only pressure is from the members of the firm who do not want to lose profits.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that, awkwardly, there were will be more people working for small companies. One would expect, as Dennis said, that people would be in the search for more money, and better and more benefits; however, as these workers had been originally layed off from large companies, I believe they will seek safety more than quality, since they will not want to go through all they went during the recession again. Me, I hope I never have to make such decision, but in case I do, I would choose the large firm, since, although the risk is high, the benefits in general are high as well, and sometimes you must take risks to achieve something. In a small company, I will hardly achieve anything. In a large one, if I work hard, I might get promoted someday…

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# marcelo.echl.f09on 09 Mar 2010 at 8:27 am

Dennis,

You make indeed some good points, especially in question 2 where you make it so clear. And, yes, for question 3 I thought at first that people would prefer to join large companies because of the benefits. However, then I realised that these type of companies did not offer the 'stability' you spoke about; as I said in my comment, it was those firms who fired them. Thus, I do not think people would want to risk themselves again, and will instead aim for a smaller, but more secure firm.

In addition, you are right, sometimes it is good to know who you're working for. I saw a movie once, where a guy was working for a firm, and without knowing it he was doing illegal moves. Anyways, what I mean is that large firms sometimes get involved in white-collar crimes, and everyone involved in the company can be found guilty, even if they did not know.

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# Ralph.echl.f09on 14 Mar 2010 at 6:20 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?
Laying off workers is a very cheap offer, and a recession is only temporary and it wold be a waste to sell of an asset which when the recession is over could be used to cope with the initial aggregate demand before the recession struck. This is only temporarily and the company will know when the economy starts to recover there will be plenty of workers out there to re-employ and get back to business.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?
A publicly traded company needs to have a good image, and show that it is reliable and trustworthy. People invest to make a profit, and not to lose. A privately small owned business effects the owner and won’t affect the profit of other owners. At worst the recession might cause this small privately owned business to fail and there would be less competition for the publicly traded company.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think it depends on how affected the people were by the recession. You would have to put yourselves in their shoes to decide. As well how affected they were, also what type of market they were in..financial, manufacturing etc.

Me preferably I would probably want to go back to a large company, as I agree with Dennis that there are more benefits and higher wages to be found at larger companies. However when a recession occurs its a great time to start a business, your business can grow immensely with all other business recovering from the recession. Great business opportunities can arise and the small business owner could sell of his business.

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# daniel.echl.f09on 14 Mar 2010 at 4:53 pm

1.Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

from the responses we can see the preveling view that workers are laid of because of the fact that they are a varible cost. this means that they are able to get rid of these workers alot quicker than selling a factory and during a economic ressecion we can see that this wouldnt be easy to sell as all business are in the same situation. Buildings are classifed as assets and can be put off against debt by reducing there assets they are reducing the size of the business and also captitial within the business is more plausible to get rid of workers. Keeping factories also means that they are able to re hire and have the factories readt for when the business starts to buy a larger work force.

2.What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

There are many factors that the publicy traded companies neeed to worry about comapred to smaller businesses. The plcs need to consider the wants and needs of there stock holders they need to keep a good profitablity margin as to intice buyers and keep the stock holders. During these times we will see less people likely to invest we can see how the bankc have consderable reduced its investements and this is cause for concern for these types of business compared to the other businesses. We see that the smaller businesses dont have to satify theses needs as the onwer has control and the risk and so he is the only one effected and he can make changes also we see that normally small business look to breakeven where as larger firms look to increase profits.

3.When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

This question is very dependent on the person and also what market that they are in and what the businesses offer. I think there maybe a small rise in the employment in the smaller business but as the article shows we can see that this will re adjust very quickly as people want to go back to bigger companies.

personally i would rather work for the larger business as they will offer me more through there benifit regimes and also through the wages that they will offer to me. Larger firms are less risky than the smaller businesses and also there is more oppertunity for promotion and vertical movement in your job in the bigger firms.

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# daniel.echl.f09on 14 Mar 2010 at 5:03 pm

Hi marcelo

great responses to the wuestion although i disagree with the answer you take in the final question that the bigger companies are more risky. i feel that the larger firms are much more safer to work for as they will never close down or go bankrupt as they are a much larger firm and so if you are laid off then you will be made redundent and will be paid for a period of time where as if a small business does the same you will recieve no money and there fore i think the larger firms are much safer to work for than the smaller firms and they are able to offer you alot more as worker than any of your smaller comapnies. none the less i agree with all of your answers

Dan

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# Catherine.echl.f09on 15 Mar 2010 at 8:35 am

1.) When a big company faces falling demand for their products, the first decision is to lay off workers rather than to shut down the factory. This is because when a firm lays off workers but still has a functioning factory, it can still produce its product, and therefore make a profit in the future. When workers are laid off, the firm will have fewer expenses, and will therefore have the potential to make a profit even in times of hardship.

2.) During a recession, investors often pull out their shares in a company. Also, prices of stocks fall during a recession, so a publicly traded company ends up being worth less – a lot less. Since a small, privately owned business does not have multiple, large-scale investors, it will not have to deal with massive financial losses in times of a recession. Of course, the losses will still occur, but not on such a large scale.

3.) I think that when the recession is over, more people will be working for small companies – although this depends on the market that the statement refers to. Large companies often have to have large layoffs, whereas small companies are able to hire new people sooner in a recession.

I would rather work for a small firm, simply because of the environment that tends to define small firms. They are more personal than large firms, and I feel like I would like that when working closely with people. While large firms may offer better benefits and wages, I would value the social setting of my workplace over potential pay.

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# Catherine.echl.f09on 15 Mar 2010 at 8:40 am

Hey Dennis,

I like that in your response to the first question, you mention that it is easy for large companies to re-hire workers in the future. I think there will always be people to fill such positions, especially with the rising unemployment rates that occur during a recession. I also agree with the point – you make in response to the last question that you would rather work for a smaller company than for a large one. I completely agree here! I think small companies are much friendlier, and I think I would enjoy more of a laid back environment in my workplace.

- Catherine

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# elijah.echl.f09on 16 Mar 2010 at 12:30 am

1. The reason large companies do not first shut down factories but instead fire workers is that in fact many of the large facilities they operate can be run by less workers than are present, with extras only there as a safety. This procedure eliminates inefficiency at the risk of danger. Additionally assuming a decrease in demand, having a worker sitting around a factory has maintenance costs, whereas an empty building not as much. Additionally workers are easy to re-hire as an economy rebounds, but the price of the building (which would have been traded at a loss) is not. In short economically speaking the building is better able to hold its long term value and has less need for maintenance.

2. A publicly traded company faces pressures from its stock holders to continue to turn a profit. As these stock holders have invested in the company, they then expect results and through a board of directors can even succeed in firing critical CEOs and other executives. A privately owned business can just endure th recession or depression by learning to deal with reduced profit margins or perhaps even trading at a loss off a small bit. Due to the fact the owners have complete control there is no pressure for them to continue to turn the same levels of profit they did before an economic down turn or what no.

3. When the global recession is over I would argue that more people will be working for small businesses as with the ending of the recession entrepreneurship will be at a high mark leading to the founding of many new business. This leads to small businesses being established and then hiring new and talented workers. The larger companies will still have to balance their books and make sure everything works out but he smaller ones can immediately see what is wrong and hire to correct it. I Personally would prefer to work in a small business seeing as it is a ore relaxed and personal atmosphere whereas a large business can sometimes be stifling with its corporate culture.

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# elijah.echl.f09on 16 Mar 2010 at 1:34 am

Catherine,

I definitely agree with you with regard to the importance of a work culture and not just the sole benefits of wage or salary. Regarding the second question I never even thought of directly pulling stocks which farther contributes to the issue as well as places more pressure on the economy. It seems that the pressure of the stock-market can even cause companies to commit fraud and such. It's Ironic that in an effort to ensure their own wealth, investors doom others.

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# Issa.echl.f09on 17 Mar 2010 at 7:41 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Laying off workers is the first thing big companies do when faced with falling demand for their products because it is the easiest. Laying off workers doesn't necessarily mean greatly decreasing output if he factory can be operated with less people. Also, laying off workers is a quick and immediate way to save money, whereas it would take longer to save money from shutting down a factory, since the costs are fixed.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded companies face the pressure to show profits and to save as much money as possible in times of recession, because they have shareholders who are all looking for their money. The shareholders care more about the worth of their stock then about the company in general, because the money aspect is all that they are involved in. This is different from a privately owned business as the owners are more interested in the ultimate survival of the firm and the overall well being of the firm instead of its dollar worth.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

More people will be working for smaller companies, because there will be more small companies to work for and more small companies hiring than large companies. I'd rather work for a large firm, because although it might lay off more workers in hard economic times, it is generally more stable than a small firm

-Issa

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# Issa.echl.f09on 17 Mar 2010 at 7:49 am

@ Elijah,

I like how you explained why more people work in small companies after recession. The point you brought up about large companies needing to balance budgets etc. before hiring, while small companies can be more aggressive and respond faster is an interesting one. It highlights the inefficient bureaucracy that accompanies bigger countries. I reminds me of the diseconomies of scale that we discussed in microeconomics.

-Issa

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# Laura Yilmazon 19 Mar 2010 at 10:25 pm

1. Corporations lay of workers before they lay of land or capital because it is the fastest way of getting rid of cost, this is why it is called the short run or fixed plant period. There is not enough time for firms to sell land or capital but they do have enough time to lay off workers or decrease productivity by granting less hours

2. A publicly traded company is owned by many investors who ideally expect high returns from the stocks they buy. In a recession, they fear that the value of their stocks decreases and therefore in some cases withdraw their investment from the company. Furthermore, the publicly traded company will face a public dispute with unions if they want to lay off workers.

3. It is hard to say whether more people will work for small companies or bigger companies. According to the article the economy will recover because smaller firms will start hiring people again because there is a higher supply of skilled workers, this will reduce unemployment and larger firms will start hiring more people as well. At first more people will be working for smaller and privately owned businesses but once the economy is up and running again, more people will start working for larger companies because they can offer more. I am not sure if I would rather work for a small company or a big corporation, if I had gotten a job in a smaller company I would probably stay there unless I got a better job option in a different company

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# Laura Yilmazon 19 Mar 2010 at 10:39 pm

sara,

i just love how you said that people will be desperate for jobs when the small industries start hiering people. But i think it is quite true. people a desperate now. The will be even more desperate in a future.

Laura

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# Armando.echl.f09on 24 Mar 2010 at 3:51 am

1. Laying off workers is the first thing big companies do when faced with falling demand because if there are less workers, there are less costs because the company spends less money on paying their employees and can put more money into increasing the demand for their product either though advertising, lower prices, or new additions to the products. They don’t shut down factories because the process of shutting down a factory is a much more complicated process and keeping the factories open can be beneficial after the company has brought itself to an efficient level.

2.A publicly traded company is owned by many investors who ideally expect high returns from the stocks they buy. In a recession, they fear that the value of their stocks decreases and therefore in some cases withdraw their investment from the company. Furthermore, the publicly traded company will face a public dispute with unions if they want to lay off workers.

3. More people will be working for smaller companies, because there will be more small companies to work for and more small companies hiring than large companies. I’d rather work for a large firm, because although it might lay off more workers in hard economic times, it is generally more stable than a small firm

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# Armando.echl.f09on 24 Mar 2010 at 4:06 am

Hey Laura,

Well, obviously any country after an economic recession is dying to hopefully find a job, as well as the countries aim to reduce unemployment, in order to stabilize the economy.

Armando

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# Eline.echl.f09on 24 Mar 2010 at 12:43 pm

1) Companies are more likely to cut down on labour than shut down their factories, this is because wages tend to be "sticky" as workers will not accept lower wages; labour is a variable cost, a cost that changes with the output, and therefore when less output is needed (as there is falling demand) companies would cut down on workers. The factories, on the other hand, are part of the companies' fixed costs, the costs that remain unchanged regardless of the output, and when not closed down can always be used again when demand rises. Clearly it is a more profitable solution for big companies to fire the increasingly demanding workers instead of closing their factories.

2) Big companies are highly reliant on the revenues of selling stock to investors as the huge amounts invested in this enable these companies to maintain their economies of scale. As investors are unwilling to invest in businesses with low profit, the companies will be under pressure to maintain their normal profits during a recession and will need to fire workers for this. Otherwise their reputation will be damaged and, with fewer investors, they might go bankrupt.

3) During a recession there will be deflation that will cause cheaper labour to exist so smaller firms will find it easier to hire labour and therefore there will be more people working for smaller firms untill the recession ends. However, the end of the recession would mean larger companies would be starting to heal and will soon enough have enough money to buy back labour at higher prices.

Whether to work for a small or big firm is not the easiest of questions and I'm not sure I can make up my mind about this – on one hand it is easier to prosper and be promoted in big firms, but at the same time big firms are very impersonal and while within small firms problems can be discussed easily, with the large firms it is practically impossible to meet up with everybody…though to be honest I would rather work in a large company, though it really depends on what kind of "big company" – if it is a multinational I would not work for it.

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# Eline.echl.f09on 24 Mar 2010 at 12:53 pm

Hey Marcelo,

Great point about how by closing the factories the companies would be laying off workers anywhay, it is very logical yet so many people failed to notice that point, including me…

I agree with your point on large firms being more risky; large firms will, after all, have no problem in firing a few people now and then to cut down their costs while small companies will tend to be more reluctant to do so, what with the closeness of the employees. Very insightful post and thanks again for your sharing your logic!

-Eline

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# Nabil Elbehrion 30 Mar 2011 at 3:36 pm

In the short run the only variable factor is labor meaning that the cheapest and most economical answer would be to lay-off workers instead of closing down an entire factory. This maintains their profitability. Factories are larger investments than labor so in Public corporations where the main priority is too be profitable Factories are more important than workers. Publicly-traded corporations’ main goal is, as I stated previously, profitability, while on the other hand small businesses priority is sustainable growth. This allows small businesses to keep workers while large publicly traded corporations must get rid of them. Initially after a recession more people will be working in small companies, but as recovery continues more people will work for large companies because they are more profitable. I would rather work in a small corporation because I would feel that I have more control and responsibility than say working in a large corporation although more profitable.

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# Nabil Elbehrion 30 Mar 2011 at 3:38 pm

@marcelo.echl.f09

I like your point that closing factories would lay-off workers anyway, very logical in most cases. Also your points on external pressure between small and large companies is very well-said, do you think one is better than the other for the economy of a nation?

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# Fabian_MontoyaFendton 31 Mar 2011 at 2:32 am

This occurs due to diseconomies of scale. As long as the overall economy is ok, companies grow and grow until their staff is so large that it becomes very beurocratic, parse. Meaning that there are lots of people for a task that can be carried out by a smaller group of workers. Large companies are more likely to do this as their main goal is to produce more and thus sell more. When they are hit by the crisis due to the inefficiency of having lots of workers they seemed obliged to downsize as a safety measure in order to safeguard their profit levels, by decreasing production costs. Moreover, a large company has a large role in a community it can not fire indiscriminately and everyone is watching their moves plus the stockholders are very sensitive about what is said about said company because they are its investors and don’t wish to loose money. On the other hand a smaller privately owned company is not subject to such pressures because the owner directly controls what will happen and does not have to report to anyone or achieve someone else’s interest. When the recession is over, more people will be working for smaller companies as big inefficient companies have downsized and smaller companies try to become more efficient in order too come our stronger out of the crisis. I personally would rather make the decision of working for a big company or small one depending on the type of industry as being in a smaller company in one industry may be risky but in another industry be highly profitable. The same with large companies happens.

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# Fabian_MontoyaFendton 31 Mar 2011 at 2:36 am

@Armando.echl.f09

True, however remember also the country is looking to a decrease in unemployment b/c of all the social & health implications this has amongst its population.

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# KangSan Keumon 31 Mar 2011 at 5:21 pm

1. Big companies lay off workers because they want to minimize losses. They do not shut down factories because the supply has to decrease to create a new equilibrium. If the factories shut down, they lose all the sunk costs and all the other fixed and variable costs. The cutting of laborers also happens because the large companies workers are inflexible and they want the same wage while the economy is rapidly crashing. If the cutting of workers is successful, the firm will be able to recover and take more advantage in the long run.

2. The pressures are that the stockholders want to keep getting higher returns every time. In a recession, the stock prices will go down and hence they will lose their investments. To avoid that they would sell their stocks and they could not fire workers as there would be rebellious unions. Small privately owned business do not have unions nor have to deal with losing stocks.

3. There would be more people working for small companies than before the recession because the small firms have the power to negotiate with the prices and be a more flexible price setter. In the long run, I would rather work for a small firm as a small one has a more stable job and more personal attention.

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# KangSan Keumon 31 Mar 2011 at 5:22 pm

@Fabian

I agree with most of your points. There are very detailed explanations there. However, I would rather work in a small firm for the benefits of flexible work time and the flexible personnel.

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# kote.zon 31 Mar 2011 at 5:53 pm

Blogosphere

• Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Big companies are usually publicly traded and therefore more under pressure to satisfy profit demands of their shareholders who care about getting dividends. Therefore when economic recession hits big companies try to cut their costs fast because their sales are falling but they want to maintain same levels of profit as before recession. Cutting costs by laying off workers is much easier and faster than closing down factories because fixed assets are taking much longer time to sell especially when a firm is under time pressure. So workers of large companies are under high risk of losing their jobs during recession.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned usiness does not?

Publicly traded company usually belongs to 100 or even 1000 share holders most of whom are only interested in success of the company as long as it makes enough profit to pay large dividends they are less interested in management of the company or company internal culture and they don’t care too much about employees of the company because they don’t know them. Therefore when economic recession occurs shareholders still put a pressure on the company to remain profitable and pay dividends. Therefore large companies are often forced to cut costs aggressively and easiest way to do it laying of workers.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

As the article suggests when economy starts recovering from recession small companies higher more than larger companies because people who are unemployed are more willing to except lower wages and small companies have large choice of highly qualified employees who are looking for jobs, Larger companies are more reluctant in hiring workers because of the greedy shareholders. However as a country fully recovers from recession and starts rapid expansion larger companies would have an advantage over smaller companies in hiring workers because they can offer them larger salaries and benefits. So overall when economy is booming more people are willing to work for larger companies than smaller.

Part 2

For me it depends on 2 factors first if you know your work well it will be more profitable to work for larger companies I would save money and during recession I wont fell bankrupt in addition it will be easy for me to find a job in a small company. But If I have a family ( I am considering the same that I know my work well and I save money ) I would work in a smaller company cause its Safe and I wont be afraid that my children will be left without home and food. (in bed times)

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# Francisco_Jose_Carilon 31 Mar 2011 at 9:34 pm

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

It is the first thing they do, precisely because they don't want to shut down their factories. By decreasing their number of workers they make up for the money lost in profits and at the same time reduce output, in order to catch up with the lower demand. By shutting down factories, they loose all their money and throw their money into the trash (opportunity cost).

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

When a company is control/influenced by investors, it is pressured to get bigger/get big profits because that is why investors are injecting their money into the company for them to do just that. If the company looses its investors it will loose its core amount of money.Therefore it will shut down. When the company is provatley owned, the workers/bosses dont need to prove anything to anyone, and can do whatever they want.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I believe that the second it is over, there will be more people working for small companies than big companies, but with time that will change, and the big companies will win the job-race again. I will rather work for a big company because it allows for the worker to rise a lot if he is good. A Normal worker, can become CEO if he works a lot and has a lot of luck.

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# Francisco_Jose_Carilon 31 Mar 2011 at 9:37 pm

To Kang San Kuem

the ideas of Unions did not occur to me. When a big company workers join they can apply a lot of pressure to the big bosses, making it more difficult for them to fire people. The problem with this is that if the firm has to let go a lot of people in order to survive, it will do it, union or no union.

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# Nicole_Sonderegger_Non 31 Mar 2011 at 10:00 pm

• Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

A drop in demand means that the revenue, and hence profit, that a firm receives, decreases as people purchase a smaller quantity than before and price decreases. This means that in order to avoid losing money, firms fire workers who they do not desperately need so that they can cut costs by not having to use their money to pay the wages of these workers. Shutting down a factory would mean a much bigger level of unemployment and no source of income for both the factory owners and all its workers. Shutting down a factory also means completely giving up and thinking that the recession will never end. Big companies have hope that the economy will recover and so they try to become more efficient during the years of recession to remain afloat, and then once recovery comes, they can begin hiring people again and become successful companies once more.

• What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company faces the pressures of losing money from its investors if it fails to produce and sell as much as the investors (or part-owners) expect or demand. If the firm loses money, shareholders also lose money. This means that publicly traded companies are pressured to reduce costs so that they can continue to operate efficiently. Small, privately owned business are not at risk of losing monetary support if they begin to make smaller profits because they are independent. If such a business loses money, then only its participants lose money because there are no shareholders.

• When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that more people will be working for small companies than for large ones for several reasons. First of all, when the recession began, large firms were among the first to start cutting costs by firing large amounts of people. This means that workers fear and are more certain that if a recession occurs again, large companies will not hesitate to fire them. Because of this fear, many people will search for jobs in small companies which have perhaps held on to more employees or which delayed firing people for a longer period of time. More people are also likely to be working in smaller companies as these are among the first to start hiring people during the recession. I think that I would rather work for a small firm just because a job in such a company is usually a lot more stable as one’s position is more valuable. Instead, in a large firm, one can easily be replaced and not be missed.

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# Andres_Finol_Rodriguon 01 Apr 2011 at 3:37 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Because they have excess supply and are losing money because of the wages which are a fixed cost. Shutting down their factories would lead them with a lot of supply that would never be used and the company could still be run with fewer working and make a profit.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

The pressure of the investors. Many will pull out of the company and the stocks will plummet, leaving the company bankrupt.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

More, because before the recession, many people were working in large companies, however, during the recession many people would leave.

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# Andres_Finol_Rodriguon 01 Apr 2011 at 3:38 am

To Nicole Soneregger

-I agree with what you said about working in a small firm, as it is more stable. I would do the same.

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# Nesibe Z?rzak?ranon 01 Apr 2011 at 8:30 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

In short run, the only reaction that a company can take is to reduce from short-term investments and cutting down amount of workers will have less costs to pay. In short run; only variable that can be changed is labour. To change capital requires time and more effort and recovery from it is almost impossible. Due to falling demand , it is necessary to reduce suppy by cutting down costs such as wages for workers.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded company will suffer more of recession simply because they have to form plans, make decisions in order to keep the sharehorders and that put pressure on them to reduce as many costs as possible. Investors are also problem. Investors expect high returns from stocks they put money on, in cases such as recession, those investors may withdraw their investments.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

First, people will work for small companies because they look for specilization in the time of recession. However, also " self-correction" persuades people to go for large companies because they value and pay more for them. I personally would work for large company because of its brand-effect and fame and also it offers facilities of better working condition and being known which is an incentive to work.

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# tiffany_williamon 01 Apr 2011 at 7:56 pm

1.Since laying off workers will lead to decrease in costs, big companies may think this will be a good choice to keep the profits high instead of shutting down the factories. Receiving more profits may help them to maintain the costs and economy for the company until the demand is balanced again, the company may try to recruit back the employees. Although it may takes time, but shutting down the factory and developing another new one may take even a longer time.

2. During recession time, investors may withdraw their investments since the economy is not in good terms and money or cash is needed for other necessities.

3.When the global recession is finally over, fewer people will be working in small companies since there are many empty slots for employees to work in large companies because during recession there are possibilities for some firms to have to fire some employees to lower down their costs. Large ones have more advantages. Because there are security and safety such as pension and hygiene is better in quality.

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# tiffany_williamon 01 Apr 2011 at 7:58 pm

@# Meiling.echl.f09

yes, i agree with your answers.

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# Manuel Ron 02 Apr 2011 at 5:56 pm

1.Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

I supose it is because laying off workers is a short way to end some loses and does not necesarily mean decreasing drastically the production, also because workers can be employed again without high investments once the recession has ended and there is a situation of recovery. Instead closing the factories means a great end of production which will need an investment if the company wants to produce as it used to before the recession.

2.What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

once the AD starts to fall the big companies are likely to lose more buyers than small ones, this is because big companies(which represent a percentage of the market, although is really small, but significative) need more demand to maintain their structure and as the demand decreases their demanders will, instead small companies have less buyers, and when recession comes the lose of some of the can be replaced by the new demand of those who used to buy the big companies products.

3.When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

Big companies can offer greater salaries, so more people will be willing to work for big companies, anyway small ones represent a bigger percentage of the economic activity, so more people will work for them, I would like to work for a small company as the situation there must be differen, you may have less payments but the familiarity of workers is greater.

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# Manuel Ron 02 Apr 2011 at 6:00 pm

To: Nesibe Z?rzak?ran

Don´t you think big companies would also would lay off workers as closing factories would mean that during a recovery situation the company would have to invest again on factories in order to increase it´s production?

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# Dilan_Guneson 03 Apr 2011 at 12:59 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

In a recession situation the consumers’ demand decrease due to that the companies’ profits decrease too. Less profit will only work for a smaller amount of workers that’s why companies lay off workers at such times. They can shut down the factory but this will mean not “less” but “no” profit.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded companies have some responsibilities to inventor which puts pressure on them. Those kinds of companies have a big amount of stock but in a recession time the stocks worth less or worth nothing for the inventor. Besides, there is not such a pressure on small firms because they are not considered as important as the publicly traded companies and do not have such big stocks.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

In my opinion, in case of any other recession situation people will prefer to work for small companies. On the other hand, people would think that the big companies recover themselves and workers might get more money than the ones working in the small companies. If I need to talk about myself after answering the two questions above I would work for small company and guarantee my job even though there is a recession.

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# Dilan_Guneson 03 Apr 2011 at 1:04 am

To: Aleya Thakur-Weigold

Actually our answer for the third question is so close I thought that people will prefer the big companies and also it is so logical that you have stated that you will stay in a small company but until a better offer from another company.

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# Sondos2on 03 Apr 2011 at 10:21 am

• Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

All firms have one objective: profit/utility maximization. This means that their revenue must exceed their investments in the factors of production. During recession, when big companies are faced by falling demand for their products, they lose profit. In order to counter this, and fight in order to maintain their profits, the only factors of production that they can manipulate in the short run are labour and materials. Therefore, it’s in the large company’s favor to lay off workers, thus investing less in at least one major factor of production; labour; in order to maintain profitability. This way, the big companies, although not accumulating as much profit as desired, do gain some nonetheless. Conversely, if the factory were to completely shut down, this would eliminate all possibility of profit gain during recession, which is certainly not favorable. Moreover, once the period of recession is over, it would be much more costly, time-consuming, and a much more laborious project to re-open the factories.

• What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company is a company whose shares of common stock are held by the public (several shareholders) and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. During recession, falling demand on nearly all levels for normal and superior goods decreases the demand of investors for stock which then reduces the demand for publicly traded companies’ stock who then would have to reduce investment in their factors of production in order to maintain their profits, and at times may even be obliged to shut down completely. It’s important to note that certain corporate structure changes and amendments must be brought up for shareholder vote, meaning that before any decisions are made, the numerous shareholders of publicly traded companies must be consulted and must agree upon the actions to be taken during a recession. This can be a time consuming process, and to the detriment of the company during recession. Moreover, publicly traded companies are also required to spend more for certified public accountants and other bureaucratic paperwork requisite of all publicly traded companies under government regulations, and it’s therefore more difficult for them to fair during recession than private companies. All this paperwork may lead to leakages of information concerning the publicly traded companies to their competitors, a disadvantage that these companies have with regards to privately owned firms, especially during recession where all are fighting to survive.

• When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

The article read above stipulates that “small companies hire disproportionately more early on in an economic recovery because it’s easy for these firms to find good workers while unemployment is still high—and easy for workers to come across small companies since there are so many of them. Once the economy is chugging along at full-steam and the labor market is tight, larger companies regain the advantage, since they’re likely able to offer more money—and poach from smaller outfits.” From this I can assume than in the short run, following a recession, more people will be working for smaller companies than before the recession since many will be looking for jobs as soon as they can so as to earn a sustainable level of income. In the long run, however, as the article states, larger companies offer more attractive job proposals and so perhaps fewer people will be working for small companies than before the recession. Or not. It really depends…

As for myself, I would prefer working for smaller companies than for larger ones, despite their generous salary offers. First of all, job stability is one aspect I would greatly consider, and smaller companies have greater promise of offering this stability since during recession, as the article states, they lay off a proportionally smaller number of workers than larger companies. Maintaining the same job in the same company for longer would increase my chances of a promotion, and possibly a higher salary. This small company may also, one day, grow and by then I would have a relatively promising/stable position which I would profit from, as well as a generous income.

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# Sondos2on 03 Apr 2011 at 10:22 am

Comment to kote.z:

I found it interesting that you pointed out how time, during recession, is a crucial aspect to consider; companies wanting to find the fastest possible way they can regain/uphold their profits, lay off workers and invest less in raw materials for production and so on. This would surely be a much easier process than closing their companies down which is time consuming, perhaps even costly (with all the necessary paperwork for the process). Also, at such times, it becomes increasingly difficult to sell the company and/or the capital, and so the shareholder of the company has no way of maintaining profits or at the very least the promise of profit in the future unless labour is diminished.

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# caroline_mooneyon 04 Apr 2011 at 4:39 pm

Laying off workers is the first thing a company does because thy are hit harder by the recession than smaller rate companies. And as well th larger companies do not necessarily need the lower class workers yet smaller companies take this as an opportunity to find good workers that will be paid for less. A larger scale company is more well known and more workers will apply and while all may be qualified some just stand out more than others. Big companies do not shut down factories because it would affect the supply of the company whereas firing workers does not affect output.A larger company feels more pressured because a larger population is dependent on it. The decision they make will affect many others whereas smaller companies may only be affecting a small amount of people. When the recession is over, smaller companies will be more eager to higher so at first there will be more workers there but larger companies who are willing to pay higher wages will soon gain the advantage.I would rather work for a small firm because although the wages may not be as high as a big firm if a recession were to hit I would feel safer with my job at a small firm.

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# caroline_mooneyon 04 Apr 2011 at 4:44 pm

@Dilan_Gunes

I very much like your answer to the second question. Larger companies have more responsibilities and are therefore feel more pressure when making big decisions. Also, I agree with you at choosing to work for a small company for those reasons. I think lower wages would be worth it if it meant you were keeping a steady job. What did you mean when you said "in a recession situation". Is that a recession in general Im assuming or one with specific effects on large or small companies.

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# AbhinavSahon 04 Apr 2011 at 5:53 pm

Laying off workers is a short-term, quick solution to relieve cash flow difficulties. Selling a factory would take time and would halt production completely; however, production can still continue with fewer workers.

A publicly traded company has the added responsibility of having to please and satisfy shareholders during a crisis. A small, privately owned business does not sell shares to public investors and is not at risk of shareholder withdrawals.

When the recession is over, and the economy is functioning efficiently, larger companies would employ more people. This is because they can offer higher wages and because their functioning requires more staff (compared to smaller businesses who can function with few numbers). Working for a large company is more secure than a small one; the article states that small firms are volatile and insecure. In addition to this, the higher monetary rewards make a larger company more attractive to work for.

Response to Sondos:

Sondos, I had overlooked the requirement to refurbish factories and production facilities after the recession. It is indeed a time consuming and laborious task, and would also require significant investment post recession. Assuming the firm is in an unhealthy condition coming out of the recession, this need for investment would only increase costs further and further jeopardize the financial health of the business. On the other hand, labour can be employed with relative ease; thus, it is more effective to lay off workers during a recession than close down factories.

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# Juan_Manuel_Arguedason 05 Apr 2011 at 3:21 am

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Because laying off workers will mean that the products will have greater quality due to the fact that the ones produced will be less. This is because if there are less workers, less products will be manufactured, but the quality of these products will increase. They don't shut down the factories first because they have to see if the laying off of workers will gain some of the demand in the market.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

The pressures that a publicly traded companu face in times of recession that a small, privately owned business does not is the fact that the publicly traded company is very big. recession is when it is in an economic decline. If the company is small, then the unemployment wouldn't be so big, but if it is a publicly traded company, then the unemployment will be much bigger, and much more instable for the company.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that there would be more people working for small companies than before recession because people will know that there could be another recession, so to avoid another big one, they would be working for a small company, were it affects much less. I would rather work for a small company to avoid all these problems of global recession, or even the own market's recession.

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# Juan_Manuel_Arguedason 05 Apr 2011 at 3:27 am

@caroline_mooney

I completely agree with one idea of yours that said that as well the larger companies do not necessarily need the lower class workers yet smaller companies take this as an opportunity to find good workers that will be paid for less. I agree completely with this idea now that it would be simpler for a small company to find good workers that will be paid for less now that the low class workers would be taken by the large companies, since they are paid much less.

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# Daniella_Majlufon 05 Apr 2011 at 3:48 am

1. Laying off workers is the first thing that bog companies do when faced with falling demand for their products when their losses are too high. What they want to do with this is minimize those losses. They don’t shut down factories instead because they first need the supply to decrease and then they will have a new market equilibrium. Shutting down the factory would be a great loss for the owners since they’d lose many costs, especially the sunk costs.

2. The pressures that a publicly traded company faces in times of recession, which a privately owned business doesn’t are that, obviously, during a recession, investments will be lost due to the lowering prices. They wouldn’t be able to dismiss workers because these workers have unions in case something unjust is done to them and they would need to sell their stocks. Privately owned businesses don’t have unions (the workers) and losing their stocks is not something that they really need to worry about.

3. When the global recession is finally over I think that more people will be working for small companies than before the recession because small companies are more flexible when setting prices. I would prefer to work for a small firm since it is more concentration on the individual workers and the jobs are more stable.

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# Daniella_Majlufon 05 Apr 2011 at 3:52 am

@ Andres_Finol_Rodriguez

I agree with you with the first answer when saying that shutting down the factory would leave them with a lot of supply that would never be used, therefore it would be useless. You also mentioned that the pressure that a publicly traded company faces is the pressure of the investors. I agree with that.

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# Haleigh_Eppleron 05 Apr 2011 at 4:43 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Firms are interested in maximising profits. Faced with falling demand, a factor of production must be decreased to decrease the total cost of producing the remaining goods. The amount of capital used will therefore decrease; however, the capital decrease is proportional to the decrease in demand resulting in the same overall loss of profits. In order to return profits to the level prior to falling demand, a different factor must be cut. The only other available factor, in the short run, is labour. Therefore, the workforce will be downsized thereby reducing the marginal cost. Closing a factory would also decrease the operating expenses; however it is not practical in the short run. First off, the machines and the land of that factory are still taking money from the company. It is also not lucrative to sell those pieces of capital in a bear market because it will be done at a loss; however, downsizing a workforce always has the same value. There is also the ability to rehire workers upon a change in demand, while repurchasing land may be subject to different regulations and vastly higher prices depending on the market. The labour market has a fairly constant price despite the economic climate.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

The pressure of a publicly traded company stem from the loss of investment in the form of stock as well as the loss of demand for the product. The demand for the stock is driven by the profitability and stability of the firm. If the firm has lowered demand, then there will be lowered demand for the stock resulting either in stagnation or in decrease in stock values. A decrease of stock value means the firm has less money to invest in itself and increased research as well as the need to please the stockholders. It becomes important to raise the stock prices to provide stability as well as money to invest.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

In the short run, the small businesses will be employing a larger percentage of the work force due to their willingness to employ people earlier on in recovery than a larger firm; however in the long run, more people will be employed by the large firms due to the higher wages and better benefits such as health care and retirement.

Personally, I would prefer to work for a small business as I cannot expect to make a large sum of money, am not concerned about benefits, and need a more flexible schedule. In general, a small business is more able to work with a changing schedule, like that of a students, because of the familiarity with management.

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# Ozge_Elif_Ozeron 05 Apr 2011 at 12:28 pm

1.Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Since there is a decrease in the demand, the company should reduce supply to decrease the production cost. In the short period, laying off workers is the quickest and easiest way of cutting production cost. Thus, big companies first choice is laying off workers in a situation of decrease in demand.

2.What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company which is selling stocks to investors faces more pressure than a privately owned business in a recession, because they need to satisfy their consumers and make decisions in order to keep their consumers. This will also help in the long run. That is the main difference that they are going to face. Privately owned business will not consider shareholders’ needs or wants.

3.When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I believe that when the global recession is finally over, more people will be working for small companies because the risk in the small companies will be less than in the big companies in the case of a new economic crisis. I would choose to work for a small company because big companies will be affected by crisis more and they will be in a process of recovery while in the small company everything is stable.

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# mboadeon 05 Apr 2011 at 6:29 pm

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

The laying off workers is the first thing big companies do when they suffer a fall in their demand because they need to reduce costs and they do need to reduce their output. They do not shut down the factories because in the long run the costs of shutting down the factory are hire than reducing the amount of workers and output. Also they have some costs related to capital that continue even though the factory does not produce anything.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company in times of recession has the pressure of the investors. In the recession the investors want to see a stable company with profit-earning capacity. A privately owned business does not suffer this because the profit-earning capacity only matters to the owner of the company.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why

When the global recession is finally over fewer people will be working for small companies. This will happen because the bigger companies will try to take employees from the market provoking a decrease in the workers from the small business. I will rather worker in a large business because I will have the possibility to improve my working position something’s that could be restricted if I work for a small busienss.

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# mboadeon 05 Apr 2011 at 6:32 pm

Hi, Ozge_Elif_Ozer I disagree con choosing a small company to work rather a big company because in the long run you will have more possibility to improve as a professional and economically speaking in a big company than in a small company. Maybe at a certain moment you could loose your work but some time later the economy will improve and you will be back in the professional market.

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# tomoya_sekineon 05 Apr 2011 at 7:50 pm

1. Well I think that big companies lay off workers when they face falling demand for their products instead of shutting down factories is because it is less time-consuming and less money would be spent shutting down factories. At the same time big companies are able to cut down their fixed costs (salaries) by laying off workers when demand for their products are low. As we all know, when demand is low, there will be less profit as less people are buying it. Therefore big companies are likely to make a loss or not make as much profit. And at the same time I believe these companies still want to keep producing so that when the demand is back up again, they are able to keep selling. As it is said in the article above, once the economy is normal again, big companies have the advantage, as they are able to employ specialists by offering more money (it would be easier for the companies to lay off workers and acquire them again after the fall in demand ends).

2. I am not entirely sure to what the correct answer to this question is but from my knowledge I am suggesting that since publicly traded companies are large, communication and such could be a problem and these large companies are not very flexible. Therefore they cannot adjust their price levels and output of stocks to the recession, whereas small businesses/companies are flexible as they are privately owned (and are able to provide personalized services). Another reason could be that large publicly traded companies are more exposed to outsiders, which allows others to takeover the publicly traded companies.

3. After the global recession is over, I would imagine more people working for smaller companies as it was explained in the article above that larger companies would lay off workers during recessions, and small companies would pick/employ the specialists needed for their companies right after the recession due to the high unemployment rate. However after a while, these workers would most likely work for larger companies, as larger companies are able to offer more money. I would rather work for a large firm (although money really is not the biggest factor for me) simply because larger firms are more stable. Small firms or privately owned businesses tend to have less capital; therefore if they acquire debts and such, it is paid from their own money as well. However if/when large companies face debts, the money is taken out from the initial capital instead of the shareholders/workers personal money/asset.

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# tomoya_sekineon 05 Apr 2011 at 8:01 pm

To Dilan_Gunes

For your answer to the first quesiton.. I don't think shutting down the factory would lead to no profit or a loss (could be) as the companies would most likely still have excess supply. The demand is only decreased, not completely depleted.

I like your opinion about how you guarantee your job in a smaller firm compared to a larger firm.

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# Frederico_Con 06 Apr 2011 at 12:29 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

This is most likely, because the laying off of workers, is seen as a temporary issue; it is easier and cheaper to re-hire labour, than it is to start a factory up again. If the company lays off a worker, they reduce the production by a small amount, whilst if they shutdown the whole factory, not only do they lose the infrastructure, as they further lose the employees as well (cutting down on production by a lot more).

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

The public company, must provide revenue for their stockholders, whilst the private business only needs to pay off the employees and make enough for the owner to be able to lead a normal life.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think more people will be working for large companies, this because it is these monoliths that drive today’s economy, and thus they are the ones hiring the most, at the best prices. Also people do not usually plan for recessions, thus they do not take into account the fact that they have a safer job at a smaller company.

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# Frederico_Con 06 Apr 2011 at 12:35 am

@mboade

I agree entirely with all your points, although the reasons for the last one differ, you talk about the prospect of moving in the career ladder, whilst I talk aboul the wages; which one would you think is more motivating (according to some research money is only a motivator up to a certain point)?

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# Nicole_Sonderegger_Non 06 Apr 2011 at 12:40 am

@frederico_C

Although it is true that people do not plan for recessions, I think that right after one has occured, people are a lot more conscious about the possbility of losing their job again. Because of this awarness, many are more likely to look for jobs in smaller companies because they tend to be safer and more stable.

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# Talia_Greeneon 06 Apr 2011 at 3:14 am

Factories are necessary for a firm to make a profit. If they close factories, they cannot operate and make a profit. If they lay off a few workers, they can still operate and make a profit.

The success of a private business relies only on the owners. The success of a publicly traded company, however, relies on the success of a stock. Its stock will only be successful if the investors can see high levels of sustained growth as well as many other factors.

I think that the larger companies are more likely to be able to last through the recession, and so more people are likely to be working for them after the recession. The recession will have forced many of the smaller businesses with fewer resources and less adaptability to close. I would rather work for a large business, as it is more stable and has the resources to provide me with more benefits.

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# Talia_Greeneon 06 Apr 2011 at 3:17 am

@ tomoya:

I agree with most of your points. However, I think that because large businesses are so much more stable, they will be employing more people after the recession. I think that the recession will cause many small businesses to close, leaving the larger ones the main employment option after the recession.

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# Huanni_Wuon 06 Apr 2011 at 6:31 am

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

This question recalls the knowledge about break-even and shutdown points. We know that companies will cease production below the shutdown point and make a profit above the break-even point. When the companies are facing with falling demand in the short-run, it is likely that they are in between of the break-even and shutdown points. That means these companies are making short-term losses, but the profits made from their production are able to compensate all of the variable costs and even part of the fixed costs. At this time companies will continue production, because if they don’t, they will lose more.

In order to minimize the losses, companies usually tend to reduce their fixed costs. As labour is one of the major fixed costs of companies, and is relatively easy to be reduced, so laying off workers becomes the first things big companies do when attacked by falling demand.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

1. In times of recession the demand of a publicly traded company decreases proportionately larger than a privately owned business.

2. The fixed costs of a public limited company are much more than that of a private limited company. This makes the former faces more difficulties when trying to reduce its loss.

3. A public limited company faces pressure of living up to the expectation of its shareholders. This makes it harder to make changes. In order words, it is less flexible than a private limited company.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

When the global recession is over, big companies start to regain large demand and this allows them to hire more employees. The talent people who work for small companies previously will be willing to accept higher wages offered by big companies and alternatively work for them. I would prefer working for big companies in times of recovery simply because wages would be higher.

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# Deepa_Johnon 06 Apr 2011 at 6:46 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Laying off workers is the fastest thing to do in a short run. It helps reduce cost and decrease output. Shutting down of factories is more of a long run procedure. Factories cannot be shut down immediately.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

During a recession customers are not attracted to big companies as it is more capable to lose money that way. A public owned company is owned through shares by multiple people.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

In my opinion during a recession smaller companies hire better work force because larger companies tend to fire skilled workers which means there are more skilled workers in the market for smaller companies. I would most probably work for a big company because I can improve my skill and techniques and if you work for a bigger company it will be better in your resume if you ever get fired and look for a new job.

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# Huanni_Wuon 06 Apr 2011 at 6:46 am

@ Helen Poxon,

Great answer for Q2, I’ve never thought of that much…but it’s true that in times of recession big companies experience decreased solvencies.

For Q3, besides the higher wages, you offered more explicit advantages of working for big firms. Indeed, wages should not be the only thing employees concern, job security, working environment, opportunities are as well important to workers. And your balanced discussion of both sides is to be appreciated.

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# Deepa_Johnon 06 Apr 2011 at 6:47 am

@Huanni:

Good Answers!

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# Asucan_Odcikinon 06 Apr 2011 at 10:12 am

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

The main reason for this situation is about money. Laying off workers is much more cheaper than shutting down a business. Also for a firm keeping money flow is very important so if they shut down they cannot earn money which means they cannot have any income. Also when they shut down it will lead more unemployment than laying off workers which can cause a big problem for a country’s economy. Also by laying of workers firm would decrease its fixed cost which can make it survive more and overcome the recession that they experience because falling demand as all firms have hope to overcome some crisis like this.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

When there is a recession publicly traded companies will suffer from production as they can have the risk of not being able to meet with their investors’ expectations. They need big profits to produce and meet with the demand. The main reason for it is traded companies are dependent to investors. On the other hand, a privately owned business is independent so they do not have any risk of losing money as they have a chance to make little profits unlike publicly traded companies.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think more people will want to work for small companies. When recession occurs large companies will suffer more than small companies. Because they are already making large profits and they need to keep making large profits to continue its productivity and business. So the first thing they will do is decreasing the number of workers. On the other hand, small firms can overcome the recession having less damage than the large companies most importantly without firing workers. I would rather work for a small firm in the recession time because I would have a less chance to lose my job in a small firm during the recession. If I would work for a large company I would be fired most probably. Also small firms can benefit from recession as large companies get into economic troubles at that times which make small firms more likely to be better than large firms.

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# Asucan_Odcikinon 06 Apr 2011 at 10:15 am

@Ozge_Elif_Ozer

I totally agree with you about your second answer. As publicly traded companies have shareholders they will suffer from recession more because it means they are dependent to somebody. On the other hand, as you said privately owned business does not need to consider shareholder's situation which give them an independent business policy. So they will not suffer from recession as much as publicly traded company does.

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# Bryan_DiLauraon 06 Apr 2011 at 10:32 pm

* Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Wages is often times a company's biggest expense. When faced with falling demand, in the short run, it is easier for a firm to just cut a few people who don't do too much and compensate with everyone else until the recession goes away. This is much easier than shutting down factories or other things because they mainly affect the long run, and statistically, the recession will eventually go away, so really for big firms all they need to do is "weather the storm" so to say.

* What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded companies face a lot more pressure than private businesses in the times of a recession. This is because of the fact that they need to meet the expectations of the shareholders of the company. If the company isn't growing, shareholders won't want to stay with the firm, and in the end the firm will end up losing lots of money. On the other hand, a private business only is concerned about the people directly involved in the business, ones that actually have some physical investment in it. They will fight to keep the business alive more than a large publicly traded company.

* When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that when the recession is over there will be significantly more people working for small companies than before the recession, for at least a little while. The small businesses can pick up the employees during the recession, and often they will try to stay with a company. Before the recession, they may have been working for a large company, but because of the recession, they were laid off, so they took their talents to a smaller business. So, for at least a little while, there will be more people in smaller businesses, until the bigger businesses can come in and offer significantly more money.

Personally, I'm not sure which one I would rather work at. I like the personal relationship that one gets when working for a smaller company, as it makes them work harder. Like if anyone has ever seen the movie Office Space, they will understand where I am coming from. However, bigger business are more often able to pay more, so like I said before, I'm not really sure.

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# Bryan_DiLauraon 06 Apr 2011 at 10:36 pm

@Deepa_John

I think that your idea about how smaller companies are able to hire during a recession is very valid, however it can only last for a little while. When larger companies (with much more money) come along, they will be able to buy the employees back from the smaller companies.

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# Noah Flanikenon 07 Apr 2011 at 5:09 am

-Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

When companies face falling demand for their products, they will try and cut costs to save money. Companies are more likely to lay off workers than close factories as their first means of saving money. This is because it is much easier to rehire workers once the economy begins to recover, than it is to buy a factory and set it up. It is more expensive to buy back that factory they sold when the economy went south.

-What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

When the economy goes into a recession, publicly traded company will face the problem that stock-owners are less confident. Publicly traded companies rely on their investors to pay for their costs and to keep the value of the company high. When the economy dies, these investors will lose confidence and sell their stocks before the value of the stock drops. Everyone starts selling their stock and the company’s value will drop. A privately owned business does not rely on investors’ confidence to keep the value of the company high.

-When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I think that smaller companies will have more people working for them when the recession is over. This is because, as the article points out, smaller companies will be able to hire more people for less as workers are fired from larger companies during the recession. If anything, I think that the number of workers working for a small company after a recession will not be lower than before the recession. I think that there are advantages and disadvantages to working for a smaller or bigger company. If my work is harder to get rid of in a company I would prefer to work for a larger company. This is because they are less likely to lay me off and once the recession ends they will be more likely to raise my salary more. On the other hand, a smaller company will provide more security if the work I do is less of necessity.

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# Noah Flanikenon 07 Apr 2011 at 5:15 am

@Frederico C.

For question three you say that it is safer to work for a smaller company yet more people will be working for larger companies in the end. I am not sure if I am not understanding correctly but it seems like you are contradicting yourself somewhat.

Noah

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# Merve_Akp?naron 07 Apr 2011 at 7:56 am

When we look at a factory at a time when recession exists, we may see some precaution that the factories take. In the recession time the demand decreases; so the companies try to decrease production. In order to decrease production, they reduce supply. As a result they cut the production costs. This time is called fixed plant period. In that time as we can understand from its name the plant size is fixed. Therefore the companies can only alter its variable resources. In that case their variable resources are labours. That is why laying off workers is the first thing companies due when they experience a decrease in demand.

In the recession time, the companies will have some problems such as covering their production cost because of insufficient revenue. Also in that time the companies are laying off the workers. It can cause a problem. For example workers unions can be formed and complain to the owners of the companies.

After a recession period, the companies will start to take some workers to their companies. Also the workers can accept the fewer wages. In my opinion working for small firms are more logical; because after the recession time, workers have to work harder than ever. And the big companies have severe criteria. I mean you have to work hard and you will get a small amount of money. These are the same conditions for both small and big companies. But in the big companies you have a fear to be dismissed. That is why small companies are better than big ones in a recession time.

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# Merve_Akp?naron 07 Apr 2011 at 8:03 am

@Asucan_Odcikin

Hi Asucan, I completely agree with you, especially with your third answer. I also believe that people would prefer to work with small companies. But you look it in a very different way; and I think it is more logical. I said the working conditions will be hard so people would prefer the small ones. But you said small companies can recover the bad effects of the recession easier. And I think it is completely right.

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# Behiye_Ilkay_Dasdemion 07 Apr 2011 at 8:20 am

• Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

The big companies lay off workers, so the wages will fall; because when there is a decrease in demand, less profit is made. Therefore, the cost of production would decrease for the company by laying off workers. As it falls, the company would be more likely to do some profit and hire more workers as the time passes. Moreover, they don’t shut down, because in economy, there is something called as “self-correction” which means that even some other powers don’t intervene in the situation, the recession would be overcome by the time. “Shut down” is done when there is no way back to get out of the recession. The economy would correct itself and the recession would be recovered.

• What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

During the recession, since the firms cannot make much profit, they try to lower their cost of production to overcome the problem. That is why; the publicly traded company would sell less stock because the other firms would be less willing to get the stocks. Since the investors would not buy the stocks just like before the recession, the publicly traded company would have some problems with making money. This means that the other shareholders would make less money. That is why; it would be challenging for them to operate efficiently with less profit, so the shareholders would give up supporting the company. The shareholders would want to use their money efficiently in some other works. However, privately owned business does not have shareholders, so that even it experiences some problems with making profit in recession time, there is not a possibility to lose the support of company. The company would deal with the recession by itself and would not face the possibility to lose its monetary source.

• When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

When the global recession is finally over, more people will be working for small companies; because during the recession, the big companies would lay off some workers which may be qualified and talented- the big companies would not want to lose profit. Since those would not want to be an unemployed, the small companies would offer them less wages to obtain a job. That is why; the small companies would have more workers when the recession is over. However, when the big companies again start to make profits, they would offer jobs to those people who it laid off. Moreover, I would like to work for a small company because I don’t want to get unemployed in recession in a big company. I think that working in small company would be more permanent rather than working in a big company.

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# Behiye_Ilkay_Dasdemion 07 Apr 2011 at 8:24 am

@Merve_Akpinar

I totally agree with you, especially on the issue to have a job in a small company. Working in a small company is more stable.

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# Deniz Kapanogluon 08 Apr 2011 at 11:36 am

1. Big companies, in times of falling demands of their products, decide to lay off their workers, because it is the fastest and easiest way they have in order to diminish their spendings: with less "extra" workers they have to pay less wages. The proposal of shutting down factories is farfetched, because by closing a factory there would be no production taking place, while in a factory with less workers production would still take place but at a smaller rate than before.

2. In times of recession a publicly traded company would have to face a decrease in the value of its stocks, while a privately owned business would not have to worry of that aspect, because it would only make profit on the products they sold.

3. As soon as the global recession is over, there would be less people working for large companies, and more people in smaller companies because of the fact that those that were sent away from large companies would now work for the smaller companies. I would prefer to work in a smaller company because if there was a period of recession, there would be less chance for me to be kicked out of my job, because smaller companies would only be willing to take more people or not change the number of workers at all.

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# Bahar Erdo?duon 09 Apr 2011 at 9:06 am

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

The reason for laying off the workers is that shutting down a business is the last thing that a firm may want to do. Laying off workers is cheaper than shutting down a business.Moreover, earning money is the first aim for a firm and if the firm shut down they cannot earn money and it will end up with no income. Also by laying off some workers firm will decrease its fixed cost so that it will give more time to firm for having profits and overcoming the difficulties have solutions for falling demand.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded companies can have difficultied about not being able to satify the investors. They need big amount of profits and demand.They are dependent to investors.However privately owned business can have small amounts of demand and profit and it can be enough for the business.So that they are independent to investors.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

In my opinion people will want to work for small companies, because when recession occurs large companies will suffer, as I mentioned in the second question, more than small companies. Because they can survive with big demand and large profits. They can continue with big profits not with less than that.So the first thing they will do is laying off the workers when a recession occurs.It will end up with unemployment. Small firms may have less difficulties when the recession occurs.And people will want to work at these small companies because they won’t lay the workers off when the recession comes. I would work for a small firm in the recession time because during the recession the possibility of losing my job is less.

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# Bahar Erdo?duon 09 Apr 2011 at 9:08 am

@Behiye_Ilkay_Dasdemir

I agree with you that I would also work for a small company because the chance of losing the job you had is less. I prefer not losing my job. It is more safe to work for a small company during recession.

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# Won_Woo_Choion 09 Apr 2011 at 7:50 pm

• Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

A couple of reasons are mentioned in the article. 1. Because of the tendency of the big firms being in harder-hit industries during a recession. 2. Because big companies are greatly influenced by their shareholders. Both of these reasons compel the large companies to somehow continue making profit. However, during a recession, the demand for their product/service decreases, therefore decreasing profit. In order to balance the loss, the company can tap the cost of production of the good to decrease spending. Since it is not feasible to compromise the quality of their goods/services, it is easiest to lay off more workers and decrease the cost of labour. On the other hand, shutting down factories will have further consequences because it will mean that production will be halted. Although the company will not have to pay for its workers then, there will be no source of income for the company as well, leading to decreased net profit.

• What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Investors and shareholders are extremely profit motivated and they will try to maximize profits of the large companies to which they hold considerable shares in.

• When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

Small and large firms both have their advantages and disadvantages. Small firms tend not to lay off workers as the large firms do. However, small firms are by nature very volatile and do not have the stability of a large firm, hence the term “too big to fail.” Nevertheless, the fact that large firms are willing to fire their workers in a recession makes people think again before applying for positions in big firms. But as for me, I would still work for a large firm instead of a small firm after the recession because of the higher pay and stability of the big firms during a non-recession period.

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# Won_Woo_Choion 09 Apr 2011 at 7:52 pm

@Deniz Kapanoglu

hmm, but how does the decrease in the value of the stocks in the publicly traded firms affect their rate of laying off workers?

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# Michael_Mayeron 10 Apr 2011 at 3:49 pm

Discussion Questions:

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead? What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Because big companies depend heavily on the value of their stock, and if they do not somehow keep their debts low, people will begin to sell off their stocks because of “underperformance”. So, companies choose to lay off workers to decrease their company’s costs as much as possible. Ironically, by firing their employees, businesses likely will subject themselves to underperformance that might lead to true depreciation in the value of their stocks.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

There will be more people working in smaller firms, because the smaller firms do not have the same type of political pressure that the larger firms do (that is, they are not expected to produce a certain profit each year). I would rather work for a small firm, because I could trust that my job is more secure, and that I would not get shafted by a giant, shortsighted company endeavor.

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# Michael_Mayeron 10 Apr 2011 at 3:50 pm

Response to won woo:

Do you not think that small companies are interested in profit as well? And, don't you think that larger companies would be worried about losing long-term profit by laying off employees?

-Michael

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# Mehmet_Mert_Sumaon 10 Apr 2011 at 5:25 pm

1. It would be ridiculous for a large company to shut down its factories rather down laying off workers because laying off workers is a pretty good option reduce costs and survive in the recession. They also would want to be ready for the time when the demand increases and the recession is over. Besides, we know that large companies would be able to find and hire specialized workers at anytime because of their plenty of resources and offers.

2. If a large publicly traded company cannot keep maintaining its value, it may not be able to survive the recession and may go bankrupt. The greedy shareholders would just sell and flee if they see a sing of reduction in the values of the shares. A small company would not be facing such a threat in recession.

3. Small firms would employ more workers. As it is explained in the text, large companies lay off workers and they would be the ones to hires them. I would want to work for a large company because it has more to offer. (money, its share in the market, high positions)

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# Mehmet_Mert_Sumaon 10 Apr 2011 at 5:28 pm

@tomoya It is so true that large companies are more stable than small firms. Small firms are always challenged in the market and their share is so low that they can't make a impact on the market. They can easily vanish. Co-working companies generally prefer the larger companies because they find them more reliable.

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# Gökçe G&on 11 Apr 2011 at 7:38 am

1.since there is a decrease in demand, the company needst to reduce to supply for decresing the production cost. When the fixed plant period company can adjust the variable resources maybe labour, this is the first thing companies do if there is a decrease in demand.

2. investors the ones who expect high returns are publicly traded companies. However, they fear that the value of the things that they have decreases, there is a probability that withdraw of their investment from the company.

3. as soon as recession is finished, small companies can have a lot of workers because of unemployment is high and the sallary of workers are low, accept lower wages. As the article says when the economy is at full steam again and also the labour market is tight, the big companies take advantage of offering higher salaries to workers in order to this worker choose them not the small companies.

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# Melis_Selin_Tatlicanon 11 Apr 2011 at 10:35 am

There should be a reduction in supply in order to decrease the cost, in this period reducing the number of workers in the best way for that. A publicly traded company which is selling stocks to investors faces more pressure because they should satisfy the consumers but privately owned business won’t consider shareholders’ wants. I think when global recession is over, more people will work for small firms because risk is less in a small firm than in a large firm because large firms will affect from crisis much more than a small firm. I would work for a small firm because it is less dangerous and in a large firm it is easy to fire the workers but in a small firm it is not like that.

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# Melis_Selin_Tatlicanon 11 Apr 2011 at 10:38 am

Hi Asucan, I totally agree with you about your answers for the questions. Also I like the way you answer the questions it is true that working for a small company is better and less dangerous.

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# Javier_Alonso_Martinon 11 Apr 2011 at 1:25 pm

1. The reason of why big companies do so, is because in times of crisis, big companies generally have lots of loses on the profits. Therefore, they have to find some way of first decreasing the percentage of losing, plus also decrease the money spent in labour workers. If instead they shut down the company, I think major problems could come, since workers would complain about it, plus ask for an indenization due to the experience in the job. This would cause the comapny to even lose more money. Therefore, is better to decrease the costs of production than to basically shut down the company.

2. In times of recession, stocks and bonds prices will suffer great changes. This relies on the fact, that companies will lose consequently, the price of stocks will decrease by a lot. On the other hand, some unique companies will be benefited from such crisis, and its prices in the stock market will increase. People that had bought stocks, or that spend monye on it daily, will suffer a lot. These type of companies that work on it, will have a lot of pressure, since people with stocks on their hands, will complain, or at least try to negotiate more asequible prices for selling them, without losing much money.

3. After the recession is over, I guess what matter now is time. In a period of two years, more people will be working in big companies, since, this short experience people had on small ones, will serve them to get better jobs in bigger ones. If it was my case, I would prefer to work on a small company, since I think big and I like to be a developer. Therefore, a small company would grant me the oportunity of becoming important , since I could make my company more important in the maket by developing it.

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# Javier_Alonso_Martinon 11 Apr 2011 at 1:28 pm

Respond to Melis:

I do not really agree to some extent when you say: "more people will work for small firms because risk is less in a small firm than in a large firm because large firms will affect from crisis much more than a small firm." Ok I agree in a recession this will happen, but dont you think that after the recession is done, these kind of people will look towards getting important jobs at bigger companies? On other words, couldnt they use this recession period as a gain of experience towards thinking in the future?

Regards

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# Mitchell_Broughtonon 11 Apr 2011 at 5:04 pm

-Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

The amount of wages paid to employees is a cost of production for a firm. The fewer employees they have, the lower the cost of production is. This makes the recession easier for the large company to handle. They do not shut down their factories because that would be counter intuitive and essentially giving up. The purpose of a factory is to generate income, and if you shut it down, there is no chance of receiving income.

-What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

These companies have to worry about public emotions such as feelings of savings or not wanting to invest, and thus this may adversely affect their stocks, or in some cases help them. They feel added pressure to please their shareholders.

-When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I believe people will fear working for large companies due to the recent recession and thus will gravitate more towards small companies than they did previously. Over time, however, I believe the numbers of people working in big companies will increase and people will lose their fears of being without a job when a new recession hits.

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# Mitchell_Broughtonon 11 Apr 2011 at 9:03 pm

@Michael

You say that if a stock begins to underperform people will begin to sell it. I don't think you can state this as a fact, as the stock market and people decisions are unpredictable. Maybe people will all hope that the stock rises once again, and they all keep their shares, and maybe even buy more while the stock price is low.

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# Jaewan hongon 12 Apr 2011 at 2:34 am

1.Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Most of the companies lay off their workers before make decision to shut down their factories. If demand of a company’s products fall, then the company should reduce their production and their production costs in order to make profit. To cut down production costs, companies should lay off their workers because of Fixed Plant period, in which workers are the only variable, and land, factories and capital are fixed.

2.What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

First of all, publicly traded companies are owned by many shareholders. Shareholders buy stocks of the company which counts as investment to the company and expect to have return of the investment. If a company faces time of recession, company will earn less profit or maybe make loss. Then, it will be hard for company to give returns back to shareholders so shareholders will give pressure to the company because they want to have their return. Another problem a company may have when it faces the time of recession is reduced investment. Usually public limited companies run their company with invested money so it will be a big problem to them if people stop to invest money.

3.When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

Article claimed that during the recession, big companies fire their skilled workers and small companies hire those fired skilled workers. But as recession finishes, big companies will hire workers again so I would rather work for a big firm than small firm.

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# Jaewan hongon 12 Apr 2011 at 2:37 am

@Mitchell

you said tha people will fear working for large companies due to the recent recession and thus will gravitate more towards small companies than they did previously. Why would people fear to work for large companies during recession? i think they would rather fear more to work for small companies because there are more chance that small firms to bankrupt.

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# Jackson_Moteon 12 Apr 2011 at 4:33 pm

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Laying off workers is the first thing big companies do when faced with falling demand because it is one of the easiest and least drastic solution. Why would they close down a factory when there might be a chance of keeping it open in they lay off a few workers.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company must listen to their investors as well as inform them of company decisions. The investors can vote on major decisions within the company whereas within a private company the board of directors can make all decisions without public interruption.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I believe that more people will work for smaller companies after the global recession is over because there is theoretically less of a chance of being laid off within a smaller company. This is somewhat risky and unpredictable though because small company can fail easier than large ones.

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# Jackson_Moteon 12 Apr 2011 at 4:34 pm

@Won_Woo_Choi I agree with your response to the last question. Small and large companies are very different and they both have advantages and disadvantages in the areas of risk of unemployment.

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# Gunnhildur Ómon 12 Apr 2011 at 5:15 pm

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

When firms face a decrease in demand for their products it means that their total profit decreases as well. This means that they need to lower their cost of production and the fastest way to do so is to lay off workers in the firm. Another reason is that when there is lower demand the output of the firm is lower and therefore fewer workers are needed to produce the goods.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Publicly traded companies are companies that offer others to buy stocks and invest in the company, which means that the company has many investors. However when a recession hits then the value of the stocks go down and people want to sell their stocks before they will be of no value. This causes the firm to ‘loose their base’ and are therefore in much more danger to go bankrupt than for example smaller firms that do not depend as much on investors.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

I would think that more people will be working for larger companies because they can offer people more money and it is well known that most people seek to get the job that pays the best. Although I do think that there will be some people that really think about what happened as the recession hit and I think those people are more likely to work for the smaller firms because there they are more ‘save’ then when working for larger firms.

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# Dogan_Can_Ozcanon 12 Apr 2011 at 5:17 pm

Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

-This situation is mostly connected with money. Instead of shutting down a business laying off workers are better. Because if a business is shut down this means they will not have an income, they cannot earn money anymore. Here I want to add this firm can decrease its fixed costs by laying of workers.

What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

-Publicly traded companies will suffer if there is a recession. Also this can be a risk because the firm cannot meet with their investor's expectations. They have to keep their consumers satisfied.

When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

-I think more people will have a chance to work in small companies. They don't work in big companies because in an economic crisis they can lose their jobs and also the company's income can decrease during the economic crisis. I would work for a small company because as I said before if an economic crisis happens I can lose my job in that big company. But if I have a job in a small company there will not be a risk like this and my company will not be affected too much.

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# Dogan_Can_Ozcanon 12 Apr 2011 at 5:18 pm

@jackson

It is good to see people who have same ideas with me especially for the 3rd question.

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# Gunnhildur Ómon 12 Apr 2011 at 5:20 pm

@Jaewan hong

What I understood from your post is that when the recession is ongoing then large firms are having a hard time but and smaller firms might have some advantages but when recovery from the recession takes place then large firms overpower the smaller firms again and therefore it would be better to work for the larger firms. I agree with you, overall good post!

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# William Overhauseron 13 Apr 2011 at 3:23 pm

1. Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Workers are an easier factor of production to replace than capital, so rather than shutting down all the machines, the businesses can just hire the employees back later.

2. What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

Public companies are constantly pressured by their stockholders to maintain the largest profits possible. If they do not, no one will want to invest in their stock and their business will be hurt. Private companies are able to bear through a period of loss in order to come out stronger on the other side without losing its investors.

3. When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

More people will work for smaller companies because the smaller companies are the only ones that are hiring. I would rather work for a small firm.

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# William Overhauseron 13 Apr 2011 at 3:23 pm

@Gunnhildur

But do you think more people will be employed by the smaller firms than they previously employed?

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# SuyeonSoon 14 Apr 2011 at 7:54 pm

Big companies would rather lay off workers than shutting down the factories, because it would reduce unnecessary costs more effectively. Wages for workers are considered as variable costs since it varies depends on how many workers are employed in the company. However, factory is more related with the fixed cost because though the factory is halted, the company still has to pay tax, management fee and such. Therefore, it would be more effective for them to decrease as many variable factors as possible because it is impossible for company to remove fixed costs, unless they sell their factory to other corporations.

Publicly traded company faces more pressure during recession because it has duty to guarantee their shareholder’s safety in the market. For instance, when we look at giant corporations, the owner does not hold all the stocks of company, but there are individuals who hold some proportions of the corporation, which means they are also considered to be the owner of the corporations in some extent. CEO is just representing those people, promising they would work hard to maximize their profit. Therefore, for giant corporations, they have to try to protect that individual shareholder’s money. However, since ownership of company is liked directly to managing company for most of small corporations, they don’t have to think about their shareholders, which let them to face less pressure than giant firms.

After the recession is over, people who are employed in small companies would have to work for small companies for a while, because they are hired and they have duty to finish their work and such. However, if big corporations guarantee high salary and more benefits for the workers, people in small companies would eventually quit their job in small company and would be willing to work for big companies. For me, I think I would rather prefer working for small companies, because there is less possibility to work in high position if I work for big companies, since there are so many intelligent people in big companies. I would rather work as leader in the small company than just employee in big corporations. Also, small companies have possibility of growing up in the future, and I want to do that on my own. End of recession means there would be more demand for goods in the market, which means there is a high possibility of small companies to grow up. So I would rather work for small companies.

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# SuyeonSoon 14 Apr 2011 at 7:56 pm

@William

I think your connection of workers and the factor of production is really good. i also agree with your idea about the stockholders for the second question. Good post generally

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# Kansuon 26 Apr 2011 at 9:07 am

-Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

Before shutting down the factories, most of the companies lay off their workers. If a countries’ demands reduce, the production costs are also reduced to make profit; and to do that, workers are layed off.

-What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company have always more pressure than a privately owned business in a recession. As the satisfaction of the consumers is very important for the companies to keep the consumers consuming from that factories. Privately owned business are not going to consider shareholders’ needs.

-When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

Smaller companies will be able to hire workers because there will be a lot of unemployed who will easily want a job even in lower wages, when the recession is finish. However, when economy is fixid, then people will return back to bigger companies to get secure jobs.

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# Muhammet_Murat_Sekbaon 26 Apr 2011 at 3:22 pm

1) Why is laying off workers the first thing big companies do when faced with falling demand for their products? Why don’t they shut down factories instead?

When the demand is decreased, the company has to reduce supply in order to cut production costs. Laying of workers is the most simplest way to reduce the costs and decrease output in the short run. However, in the long run the factories may be closed.

2) What pressures does a publicly traded company (one that sells stocks to investors) face in times of recession that a small, privately owned business does not?

A publicly traded company is owned by many investors. These investors expects many high returns . If the investors understand that the company is doing badly, many of them possibly may decide to sell their shares.

3) When the global recession is finally over, do you think more people or fewer people will be working for small companies (less than 50 people) than before the recession? What would you rather work for, a small firm or a large one? Why?

As it is said in the question, when the recession is over, small companies will be able to have more workers than big companies. Because, unemployment is quite high and the people are willing to accept lower wages. However, working in a large company will be better. Because, in the future they can pay more money, so I would choose large one.

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# Muhammet_Murat_Sekbaon 26 Apr 2011 at 3:25 pm

@Kansu

I agreee with you about 3rd response. As you said smaller companies will be able to hire workers because there will be a lot of unemployed .

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