Layoff

Downsizing is a euphemism referring to layoffs initiated by a company in order to cut labor costs by reducing the size of the company. Downsizing can occur at any time, but becomes epidemic in difficult economic times.

Layoff means "the failure, refusal or inability of an employer on account of shortage of raw material or the accumulation of stocks or the breakdown of machinery, natural calamity or for any other connected reasons to give employment to the workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched".

Downsizing in America

Throughout the last quarter of the 20th century, the manufacturing sector has seen massive downsizing due to increased per-worker productivity, technology advances that have rendered human labor obsolete, and the availability of lower-cost labor overseas.

The real or fictional "downsizing boss", an uncaring, selfish individual who lays off workers for his own benefit, has been a favorite villain of the 1990s and 2000s, especially in workplace satire such as Dilbert and The Drew Carey Show. In fiction, this type of person is usually depicted as male, unattractive, lacking in terms of intelligence, personality, and humor, with the air of a "petty tyrant".

Strategy of Downsizing

Downsizing is typically driven by one of two forces. In the first case, the primary goal of downsizing is to increase a company's profits. This usually occurs when there are other firms in the same industry who are performing better, or when a company needs to reduce excess capacity during times of lower volumes.

In the second case, downsizing is driven by structural, macroeconomic forces. In this case, a company determines that its workers can no longer profitably produce products at current market prices. A company will only employ workers when the per-hour value of their output (marginal productivity of labor) exceeds the cost to employ those workers. If that condition no longer holds, the company will downsize the workforce.

Downsizing in the English Language

Downsizing has come to mean much more than job losses, being the word downsize now applied to almost everything. People describe downsizing in their cars, houses and nearly anything else that can be measured or valued.

This has also spawned the opposite term upsize, which means to grow, expand or purchase something larger.