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1
REDUNDANCY AND THE GREAT RECESSION
John Sutherland
Scottish Centre for Employment Research (SCER)
Department of Human Resource Management
University of Strathclyde, Glasgow
Email: [email protected]
ABSTRACT
Labour hoarding by organisations during the great recession is forwarded as one possible
explanation of the UK’s ‘productivity puzzle’. Productivity growth tends to be pro-cyclical, reflecting
lower factor utilisation during periods when aggregate demand is decreasing. At this point in the
economic cycle, organisations are unable to dispose easily of potentially redundant capital. Instead,
their focus is often upon making labour, the so-called ‘flexible’ factor of production, redundant. That
many organisations chose not make labour redundant during the years of the recession, opting
instead for alternative adjustment strategies, is argued to be one reason why productivity in recent
years has not returned to its pre-downturn trend.
This paper contributes to the discussion on labour hoarding by examining its obverse viz.
redundancy. It analyses responses made to two questions in the management questionnaire of the
2011 Workplace Employment Relations Study. These questions are:
“ …… can you tell me to what extent your workplace has been adversely affected by the
recent recession?” and
“ …. I would now like to focus on the impact (of the recent recession) on your workforce.
Which, if any, of these actions were taken by your workplace in response to the recent
recession?”
The principal focus of the paper is upon the relationships between whether a workplace was
affected ‘a lot’ by the recession and three policy actions denoting redundancy viz. whether
redundancy was compulsory; whether it was voluntary; or whether redundancy was an action taken,
irrespective of its type. Bivariate probits of the relationships between whether a workplace was
affected ‘a lot’ by the recession and each of the other policy actions identified are also estimated.
Predicted probabilities are calculated from these estimations and these are used to illustrate how
redundancy as a policy action increases in relative importance when a workplace is affected ‘a lot’ by
the recession. Finally, in a seemingly unrelated bivariate probit model, the ‘non-redundancy’ policy
action options are incorporated as additional explanatory variables into the estimation of whether
redundancy is adopted as a policy action to examine the nature of their inter-relationships with
redundancy. The results of this estimation suggest that the adoption of non-redundancy policy
actions are complements to the use of redundancy rather than alternatives to its use.
JEL Classification: M51 M54
Keywords: Redundancy: Workforce adjustment strategies: Labour hoarding: UK productivity puzzle
2
REDUNDANCY AND THE GREAT RECESSION
INTRODUCTION
What has come to be referred to as the ‘great recession’ had its origins in 2007 in the subprime
mortgage crisis in the USA. Soon, that initial financial crisis was to spread throughout the
international financial system. In time, it reached the real economy. Across the member nations of
the OECD, the great recession was characterised by a decrease in GDP unprecedented in recent
history (van Ours, 2015). In the UK, the recession of 2008-9 was the worst experienced in the post
World War 11 period. Over six quarters, GDP fell six per cent. The recession proved to be both
longer and deeper that the recessions of the 1980s and 1990s (Gregg and Wadsworth, 2011). In
terms of the traditional labour market effects, and as direct and indirect consequences of
organisations’ workforce adjustment strategies, there was the expected reduction in the number of
hours worked. Nonetheless, the loss of employment was “rather benign” (Gregg and Wadsworth,
2011, p. 11). There was a re-structuring within the labour force in that the share of part time
working and self-employment both increased. Accordingly, and contrary to experiences in previous
recessions, the employment rate remained higher than expected and the unemployment rate lower
than expected if at the expense of a decrease in the rate of growth of labour productivity.
Productivity performance in Great Britain has been particularly weak after the 2008
recession, in contrast to the productivity experience of other countries, notably the USA (Ohanian,
2010). Prior to 2008, value added per worker hour grew at an estimated 2.64 per cent per annum.
Since 2008, productivity growth has been minimal. In the third quarter of 2016, productivity
measured in terms of output per worker hour was 15.5 percent below its pre-downturn trend.
Expressed otherwise, productivity would have been 18.4 percent higher had it followed its pre-
downturn trend (ONS, 2017).
‘Labour hoarding’ has been forwarded as one of several possible explanations of this
‘productivity puzzle’ (Barnett et al, 2014). Productivity growth tends to be pro-cyclical, reflecting
lower factor utilisation during periods when aggregate demand is decreasing. At this point in the
economic cycle, many firms are unable to dispose easily of potentially redundant capital. Instead,
their focus is upon making labour redundant. That many firms did not make labour redundant during
the years of the recession, opting instead for alternative adjustment strategies, is argued to be one
reason why productivity in recent years has not returned to its pre-downturn trend.
This paper contributes to the discussion of the phenomenon of labour hoarding by
examining its obverse viz. redundancy. It analyses responses made to two questions asked in the
management questionnaire of the 2011 Workplace Employment Relations Study (WERS, 2011).
These questions are:
“ …… can you tell me to what extent your workplace has been adversely affected by the
recent recession?” and
“ …. Which, if any, of these actions were taken by your workplace in response to the recent
recession?”1
1 Fieldwork for WERS, 2011 took place between March, 2011 and June, 2012, some time after the recession itself and during which many establishments ‘died’. These questions, therefore, were put to what would be described better as a sample of the population of establishments that survived the recession.
3
The structure of the paper is as follows. Section 1 provides a context by surveying some
literature that discusses the adjustment strategies of organisations during periods of economic
contraction. Section 2 introduces the data set and presents a preliminary examination of the central
motivating questions. Section 3 examines the relationship between whether or not the recession
affected the workplace ‘a lot’ and the three redundancy variables viz. whether redundancy occurred
irrespective of its type; whether redundancy was compulsory; and whether redundancy was
voluntary. This section also describes the estimation strategy applied to examine this relationship.
Section 4 presents and discusses the results of the estimations. A final section concludes.
SECTION ONE: A CONTEXT
The phenomenon of labour hoarding was first articulated fully by Okun, when seeking to explain the
pro-cyclical nature of labour productivity in the USA (Biddle, 2014). According to Okun (1963), there
were four principal reasons why labour was not variable over the cycle viz. i.) ‘contractual
commitments’ (e.g. the contractual commitments associated with terms of employment, the costs
of severance pay etc.); ii.) ‘technological factors’ (e.g. indivisibilities of production that inhibit certain
types of labour input from being varied proportionately with output variations); iii.) ‘transaction
costs’ (associated with the firing then, perhaps, subsequent hiring (or re-hiring) of labour); and iv.)
‘acquired skills’ (that would be lost were it not possible to re-hire labour subsequent to the lay-off).
Contrary to the assumptions of the neo-classical theory of the firm, therefore, labour was a ‘quasi-
fixed factor (Oi, 1962). Moreover, as a workforce adjustment strategy, redundancy had its direct and
indirect costs to the organisation.
Redundancy, however, is but one strategic adjustment option open to organisations
confronted with what may be long term economic uncertainties.2 Figure 1 uses the possible actions
presented in the WERS, 2011 management questionnaire to create a taxonomy of workforce
adjustment strategies. There are two dimensions to the figure: the vertical reflects the traditional
macro-economic adjustment options of ‘prices’ or ‘quantities’; and the horizontal reflects
adjustment via either the organisation’s internal labour market or the labour market external to the
organisation.3 To illustrate: Redundancy – voluntary and involuntary – is an adjustment strategy that
involves a quantity adjustment where the consequences – with or without displacement (Chapman
and Tooze, 1982) – are manifest in the external labour market by generating an increase in the flow
off the stock of employment and, sometimes, an increase in the inflow onto the stock of
unemployment (Davis et al, 2006: Elsby et al, 2011: Smith, 2011). In contrast, cutting (or freezing)
wages or reducing the level of non-statutory non-wage benefits (such as bonuses or fringes) are
adjustment strategies that involve price adjustments where the consequences are manifest in the
internal labour market of the organisation. In principle, therefore, organisations have a range of
strategic adjustment options from which they can choose (Haskel et al, 1997).
Each adjustment option has different properties that will influence whether or not it is
adopted by the organisation, notably their probable (pecuniary and psychic), private benefits and
2 Confronted with economic uncertainty in the short run, some organisations may be able to adjust by reducing their product prices, thereby hoping to stimulate demand, or produce and store output as inventory (Sutherland, 1998). Some may be able to adjust using worker – initiated separations e.g. via a process of natural wastage (MacKay and Jones, 1989). 3 The list of adjustment strategies within WERS, 2011 is not exhaustive, but it does reflect similar work undertaken elsewhere (cf. Babecky et al, 2012).
4
costs to the company4; their speed of implementation; and their revocability (Zagelmeyer et al,
2012). To illustrate: Bewley (1998) maintains that employers are reluctant to cut wages because they
believe doing so will have a detrimental effect on workforce morale. Similarly, Jeon and Shapiro
(2007) caution that firms must take into account the uncertainty of how much the possibility of
being made redundant tomorrow affects worker performance today. In contrast, Bennett (2011,
102) portraits redundancy as a potential “liquidity adjustment tool”, generating net liquidity to the
organisation by decreasing its direct and indirect wage levels. In organisations where employment
regulation is associated with managerial decision-making, wage freezes (if not wage cuts) may be
implemented readily whereas arranging voluntary and involuntary redundancy can prove time
consuming.5 Finally, workforce reductions may be economically inefficient. The loss of human capital
– and the human capital investments made - is irrevocable and the associated negative signalling is
detrimental (Zagelmeyer et al, 2012). Choosing redundancy or any other adjustment strategy,
therefore, may be likened to making an investment decision, although there are both rational and
institutional processes at work in the exercise (Sutherland, 1998).
An organisation’s workforce adjustment strategy, however, cannot be examined outwith the
context of its employment strategy (which, in turn, cannot be examined outwith the wider context
of its business strategy where this is appropriate) (Aston et al, 2017). Three ‘ideal type’ models of an
organisation’s employment strategy feature in the literature, each offering different perspectives
about how organisations view the workforce; achieve flexibility; and are likely to adjust to
recessionary conditions.6
In the first model, members of the workforce are employed on standard contracts of
employment and benefit from human resource management policies designed to enhance skills that
are closely aligned to the product/service knowledge of the organisation that must be sustained and
developed further. Additionally, commitment and engagement are encouraged. Flexibility is
achieved at the intensive margin via functional flexibility on the part of the appropriately trained
workforce. Adjustment is made via the internal labour market, for example work-sharing (Andrews
and Simmons, 2001) rather than labour shedding because of the human capital investments made.
In the second model, in contrast, members of the workforce are employed on non-standard
contracts of employment, often of a short-term duration, and receive minimal training. The
employment of contingent labour is a conscious low cost HR strategy (Forde et al, 2009). Flexibility is
achieved at the extensive margin. High levels of labour turnover (‘churning’) are prevalent. Firing
costs are negligible. Consequently, adjustment occurs via the external labour market following both
employee and employer initiated quits. The third model is a hybrid of the first and second models,
with its ‘core’ employees being equated with employees in the former and its ‘peripheral’
employees with employees in the latter. Employment flexibility is the accepted norm for the
peripheral worker, thereby increasing job stability for the core worker (Atkinson, 1985: Beatson,
1984: Cappelli and Neumark, 2004: Hirsch, 2016: Hunter et al, 1993: Kalleberg, 2001: and Stirpe et
al, 2014).
4 Rarely do the likely externalities i.e. the public benefits and costs come into the calculus. 5 In contrast, where unions participate in the rule making process, both the exercise and the outcome are more problematic. (cf. Roche et al (2015) and Zagelmeyer (2013) for an examination of concession bargaining during the recession in Ireland and Germany, respectively.) 6 ‘Ideal-type’ in the sense that the frameworks oversimplify the problematics of the real world of work.
5
SECTION TWO: THE DATA SET AND THE CENTRAL MOTIVATING QUESTIONS
The data set analysed has its origin in responses made to questions posed in the management
questionnaire associated with the 2011 Workplace Employment Relations Study (hereafter WERS,
2011) (Department for Business, Innovation and Skills, Advisory, Conciliation and Arbitration Service,
National Institute of Economic and Social Research, 2015).7
WERS, 2011 is the sixth in a series of workplace surveys that map the changing contours of
employment relations in Britain (Brown et al, 2009). The population sampled was all workplaces in
Britain which had five or more employees operating in Sections C-S of the 2007 Standard Industrial
Classification (i.e. Agriculture and Mining are excluded), where a workplace was defined as
comprising the activities of a single employer at a single set of premises. The population sampled
accounted for 35 per cent of all workplaces in Great Britain and 90 per cent of all employees (van
Wanrooy et al, 2013).
Previous WERS-related studies had used two distinct samples. One was a new cross section
sample of workplaces. This sample was designed to provide representative results for the population
of workplaces in existence at the time of the survey. The other was a panel sample comprising
workplaces which had participated in the most recent previous cross section survey and which
remained in existence at the time of the new survey. This panel sample was established to examine
the extent to which - and the manner in which - individual workplaces had changed over time. The
two samples were analysed separately (cf. Kersley et al, 2006: Millward et al, 2000). The novel
design feature of the 2011 study was the integration of the new cross section sample with the panel
sample. Consequently, in the supporting literature, reference is made to what are identified as the
‘panel sample’; the ‘refreshment sample’; and the ‘combined sample’.
The 2011 sample design had two principal aims. The first was to obtain interviews at 900 of
the 2,295 workplaces that had participated in the cross section sample of 2004. These were to
constitute the ‘panel sample’. The second was to obtain interviews at a further 1,800 workplaces,
selected as a stratified random sample from the Inter Departmental Business Register maintained by
the Office for National Statistics. These were to constitute the ‘refreshment sample’. Taken together,
the ‘panel sample’ and the ‘refreshment sample’ constitute the ‘combined sample’.
Survey design took cognisance of workplace size and industry sector. The ultimate aim was
to select panel and refreshment samples, which, when combined, would generate a final sample
that had at least 250 workplaces in employee size bands: 5 -9; 10 – 24; 25 -49; 50 -99; 100 – 199; and
200 -499: at least 150 workplaces in employee size bands: 500 -999; 1000 -1999; and 2000 plus: and
7 The Workplace Employment Relations Study, 2011 was sponsored by: the Department for Business, Innovation and Skills (BIS), the Economic and Social Research Council (ESRC), the UK Commission for Employment and Skills (UKCES), the Advisory, Conciliation and Arbitration Service (ACAS) and the National Institute of Economic and Social Research (NIESR). The principal investigators were: BIS, ACAS, and NIESR. The data were collected by NatCen Social Research. The data were deposited at the UK Data Archive (UKDA) by BIS. The data were accessed via UKDA. Crown copyright is held jointly with ESRC, UKCES, ACAS and NIESR. Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland. None of the above parties bears any responsibility for the analysis of the data set undertaken or any interpretation made from this analysis. The bibliographic citation for this data collection is: Department for Business, Innovation and Skills, Advisory, Conciliation and Arbitration Service and National Institute of Economic and Social Research, Workplace Employee Relations Survey, 2011 [computer file]. Colchester, Essex: UK Data Archive [distributor], February, 2013. SN: 7226, http://dx.doi.org/10.5255/UKDA-SN-7226-1.
6
a minimum of 85 cases in each industry sector. The sample design, therefore, gave an above average
probability of selection to larger workplaces and workplaces in less populated industries.8
At each participating workplace, the most senior manager responsible for employment
relations/human resources/personnel was interviewed. Prior to this interview, this manager was
asked to provide a demographic profile of the workplace. When combined, responses to the
interview schedule and the demographic profile of the workplace, is referred to as ‘the management
questionnaire’.
There were 2,668 observations in the original data set. There are 2,041 observations in the
working data set used in this investigation after observations that had incomplete information
across all the variables used in the analyses were dropped.9
Two questions asked in the survey of managers motivated the research:
“ … can you tell me to what extent your workplace has been adversely affected by the
recent recession?”
“ …. Which, if any, of these actions were taken by your workplace in response to the
recent recession?”
The percentage distribution of responses to the first question is presented in Table 1.
Somewhat contrary to popular perceptions at the time, not all establishments were affected by the
recession. 11.26 per cent suffered ‘no adverse effect’; and 18.22 per cent were affected ‘just a little’.
In contrast, 24.49 per cent were affected ‘quite a lot’; and 19.78 per cent were affected ‘a great
deal’. Table 2 offers an alternative perspective of these data, categorising responses in accordance
to whether or not an establishment was affected ‘a lot’ by the recession. Subsequently, this sub
division constitutes the dichotomous dependent dummy variable used in the bivariate probit
regressions.
By way of an important preliminary investigation, an ordered probit model was used to
identify the co-variates of the probability of the extent to which a workplace was affected by the
recession. The model applied conformed to convention and was presented as a latent variable
model (Long and Freese, 2014). Defining y* as this latent variable, which takes the values -∞ to ∞,
the corresponding structural model was:
yi* = Xiβ + εi
where ‘y’ is the extent to which a workplace was affected by the recession, ‘i’ is an observation, ‘X’ a
vector of independent variables, ‘β’ a set of coefficients to be estimated and ‘ε’ a random error
term. The independent variables in the estimation are identified in detail in Table 3. They include,
inter alia, variables which reflect the composition of the workforce at the workplace; the SIC of the
activity undertaken at the workplace; the formal (i.e. legal) status of the workplace; as well as a set
of ‘policy- relevant’ dichotomous dummy variables designed to encapsulate human capital
investment.
8 The resulting ‘combined sample’, therefore, is not representative of the total population of workplaces in Britain. Hence, analysis needs to make use of the appropriate weighting factor for each component of the survey, partly to account for the sampling bias in the original survey design and partly to account for variable rates of non-response in its components. 9 There is no evidence that the observations dropped were anything other than random.
7
In the corresponding measurement model, y* was divided into J (in this instance four) ordinal
categories:
yi = m if Ƭm-1 ≤ yi* < Ƭm for m = J
where the cutpoints (or thresholds) Ƭ1 through to Ƭ J-1 were estimated.
The results of this estimation are presented in Table 3. The signs of the coefficients have a
qualitative interpretation i.e. positively (negatively) signed coefficients are associated with the
recession having greater (lesser) effects on the workplace. Few independent variables are
statistically significant (at p < 0.05). The tenor of the regression is best summarised by Table 4 which
reports the results of Wald tests of joint significance of selected sets of variables. Only one outcome
is statistically significant viz. that pertaining to the SIC activity undertaken. Generally, however, the
conclusion made is that if there is a pattern describing the extent to which workplaces were affected
differently by the recession, this pattern is not to be seen in the observed variables in the ordered
probit estimated.
In many respects, this outcome reflects a similar examination of how firms coped with the
recession of 1991 (Geroski and Gregg, 1996). Re-structuring is a central feature of recessions.
Product lives are both shortened and rationalised; aging capital is made redundant; workplaces
close; and organisations ‘die’. According to Geroski and Gregg, one of the most interesting features
of this process is its “selectivity” (p. 551). Consequently, “predicting which firms will be vulnerable to
recessionary pressures is very difficult” (p. 553).
Responses to the second question about the action taken at the workplace consequential of
the recession are presented in Table 5. In this context, an important early observation is that no
action was reportedly taken at (approximately) 25 per cent of workplaces. Consequently, the
incidence of action taken, by policy identified, was examined first for all workplaces then for that sub
population at which action was taken.
Reacting to the adverse economic conditions, managers implemented a diverse range of
adjustment strategies. Wages were either frozen or cut in 41.39 per cent of workplaces (cf. Table 5,
col. 2). Compulsory redundancies featured at 13.57 per cent of workplaces; voluntary redundancies
at 6.45 per cent; and redundancies of some sort at 17.25 per cent. In the workplaces where action
was taken, more than half (55.56 per cent) opted to freeze or cut wages. 23.21 per cent of
workplaces implemented redundancies of some sort (at 18.22 per cent of workplaces redundancy
was compulsory; at 8.66 per cent it was voluntary) (cf. Table 5, col 4). Excepting the policy of
implementing a wage cut/freeze, four policies were more prevalent than redundancy as managers
responded to the adverse consequences of the recession viz. a temporary freeze on recruitment to
fill vacant posts (37.02 per cent); a change in the organisation of work (33.13 per cent); a
postponement of plans to expand the workforce (29.84 per cent); and a reduction in paid overtime
(24.45 per cent). In contrast, of the other actions identified only 3.86 per cent of workplaces
required their employees to take unpaid leave; and only 3.89 per cent increased their use of agency
or temporary staff (although the use of agency and temporary staff was reduced in 20.23 percent of
workplaces).
In the context of both workplaces that did take action and the taxonomy of adjustment
options presented in Figure 1, therefore, the most prevalent action was a price adjustment affecting
the internal labour market (i.e. the freeze or cut in wages implemented at more than half of the
workplaces in question). Quantity adjustments within the internal labour market were also made,
however, most notably changes in work organisation. Nonetheless, adjustment strategies that
8
impacted upon the external labour market featured in (approximately) one in three/four/five
workplaces.
That 25 per cent of workplaces took no action warranted further exploration. Consequently,
to investigate the possible co-variates of the probability that a workplace took no action a binomial
probit model was estimated. Again the model applied conformed to convention. It was presented as
a latent variable model (Long and Freese, 2014). Defining y* as this latent variable, the
corresponding structural model is:
yi* = Xiβ + εi
where ‘y’ is whether a workplace took no action, ‘i’ is an observation, ‘X’ a vector of independent
variables, ‘β’ a set of coefficients to be estimated and ‘ε’ a random error term. The vector of
independent variables used in this regression was the same as that used in the previous ordered
probit.
The results are presented in Table 6A. However, a more informed perspective is again to be
observed in the outcome of tests of the joint significance of sets of variables (cf. Table 6B). Whether
a workplace took no action is associated with the SIC of the activity undertaken and its legal status.
Subsequently, the binomial probit was re-estimated with the inclusion of dummy variables denoting
the extent to which the workplace was affected by the recession. These results are reported in Table
6C. The extent to which the adverse effects of the recession impacted upon the workplaces’ decision
to act is very apparent from these results. The greater the impact of the recession the less probable
that the workplace took no action.
SECTION THREE: THE BIVARIATE PROBIT MODEL AND THE ESTIMATING STRATEGY
The principal focus of this section is the nature of the relationship between whether or not the
recession affected the workplace ‘a lot’ and the three redundancy variables viz. whether redundancy
occurred irrespective of its type; whether redundancy was compulsory; and whether redundancy
was voluntary.
First, preliminary descriptive statistics are presented in Tables 7, 8, 9, and 10. Three
observations are made from these four tables. First, even although workplaces were affected ‘a lot’
by the recession, nonetheless redundancy of the three sorts under discussion was an adjustment
option employed at only a minority. In the context of redundancy of any sort, this was not used in 71
per cent of workplaces: in the context of voluntary redundancy, this was not used in 89 per cent: and
in the context of compulsory redundancy, this was not used in 77 per cent. Secondly, even although
workplaces were not affected ‘a lot’ by the recession, nonetheless, redundancy of each sort
occurred at some workplaces. In the context of redundancy of any sort, this was used at 8 per cent
of workplaces: in the context of voluntary redundancy, this was used at 3 per cent; and in the
context of compulsory redundancy, this was used at 6 per cent. Thirdly, there is a statistically
significant (and positive from coefficients reported in Table 8) association between whether a
workplace was affected ‘a lot’ by the recession and each of the three sorts of redundancies.
The conclusion made from these three observations is that the application of a bivariate
probit model would be an appropriate estimation strategy to examine the nature of the
relationships between whether a workplace was affected ‘a lot’ by the recession and the three
redundancy variables.
9
The essence of a bivariate probit model is that it takes two independent binary probit
models and estimates them simultaneously, allowing for the possibility of a correlation between the
error term (ρ) in the two estimations. Should the error term prove to be statistically significantly
different from zero, the two binary models should be estimated separately. However, should ρ prove
to equal zero, the two separate probits are nested in the bivariate probit model and the assumption
is made that there are unobservable factors pertaining to workplaces that influence whether a
workplace was affected ‘a lot’ by the recession and its decision to implement redundancy.
In terms of the conventional model (cf. Cameron and Trivedi, 2010):
Y*1 = x1β1 + ε1
Y*2 = x2β2 + ε2
Where x is a set of independent variables, β a set of coefficients to be estimated and ε an error term.
Y*j are unobservable and are related to the binary dependent variables yj by the following rule:
Yj = 1 if y*j > 0 but = 0 if y*j ≤ 0
Bivariate probits for the relationship between whether a workplace was affected ‘a lot’ by
the recession and each of the identified adjustment options were estimated (although only the
results of the three redundancy options are presented in the paper). With two binary outcomes, four
mutually exclusive outcomes are observed. Accordingly, for each estimation, predicted probabilities
were calculated. Finally, in a seemingly unrelated bivariate probit model, the ‘non-redundancy’
adjustment options were added as independent variables in the second equation of whether
redundancy of any sort occurred to examine the nature of their inter-relationship with the
dependent variable.
SECTION FOUR: RESULTS
The results of the estimation of whether a workplace was affected by the recession ‘a lot’ and
whether redundancy of any sort was implemented; and whether the redundancy that occurred was
compulsory; and whether the redundancy that occurred was voluntary are presented in Tables 11,
12 and 13, respectively.10
Two preliminary observations are made about these three estimations. First, in each
estimation, ρ is positively signed and is statistically different from zero. Therefore, the strategy of
estimating a bivariate probit rather than two binomial probits was warranted. Further, the
unobserved factors that influence whether or not a workplace was affected by the recession ‘a lot’
and whether redundancy, of any sort, occurred are positively related. Secondly, and not
unexpectedly, the outcomes of the independent variables of the binomial regression of whether the
workplace was affected ‘a lot’ by the recession were very similar to those of the previous ordered
probit estimation of the probability of the extent to which a workplace was affected by the recession
in that no pattern was discernible.
In each of the three bivariate estimations, redundancy in general is less probable in smaller
workplaces but more probable in larger workplaces (relative to the reference category of a
workplace of 50 – 99 employees), presumably because of the scope and opportunity to implement
10 Results are given a qualitative interpretation because marginal effects are not calculated.
10
this adjustment strategy is greater in larger workplaces. Turnbull and Wass, 1997, p. 38) have argued
that the distinction made between compulsory and voluntary redundancy is often spurious because
of the way in which management may “impose changes in the labour process to ‘encourage’ certain
groups to ‘volunteer’ for redundancy”. Nonetheless, some – if admittedly very few - differences are
to be observed between the respective regression results that offer an insight into experiences in
the public sector. In the context of compulsory redundancy, this is less probable in workplaces that
are in the Nationalised Industries, Public Sector Agencies and QUANGOs (relative to the reference
category of a PLC). In the context of voluntary redundancy, this is less probable in workplaces that
are Co-ops/mutuals but more probable in workplaces that are Other Non-trading public companies
or in local/central government (again relative to the reference category of a PLC). In many instances,
therefore, these particular results echo the comments made by Bach and Stroleny (2013, p. 349)
about public service employment restructuring during the recession that “The majority of
redundancies have occurred on a voluntary basis or by the use of early retirement schemes, but
mandatory redundancies have been implemented, traditionally a very rare occurrence in the public
sector.” The HR policy variables – selected to denote human capital investments and, therefore,
acting to constrain if not necessarily deter the use of redundancy as an adjustment strategy - prove
to be of little consequence.
Predicted probabilities for each of the possible policy actions were calculated from a series
of bivariate probit estimations. These results are presented in Table 14. With two binary variables
four outcomes are observed and they are presented in terms of whether or not action was taken at
the workplace by whether or not the workplace was affected ‘a lot’ by the recession.
Columns 3 and 5 of Table 14 are the columns of consequence. They suggest two different
stories about the predicted probability of a workplace using redundancy as an adjustment strategy in
response to the effects of the recession. First, when the workplace was not affected ‘a lot’ by the
recession, redundancy ranks sixth in the list of the possible adjustment responses (after
freezing/cutting wages; freezing recruitment to fill vacancies; reducing the use of agency staff or
temporary workers; changing the organisation of work; and reducing training expenditures.
However, when the workplace was affected ‘a lot’ by the recession, redundancy increases in relative
importance and ranks third in the list of adjustment options (after freezing/cutting wages and
freezing recruitment to fill existing vacancies). Moreover, the proportionate increase in the
predicted probability of compulsory redundancy is greater than it is for voluntary redundancy.
Irrespective of the extent to which the workplace was affected by the recession, therefore,
workplaces had two preferred adjustment options viz. one a ‘price’ adjustment with its impact upon
the internal labour market; and the other a ‘quantity’ one with its impact upon the external labour
market. Redundancy, especially compulsory redundancy, (a ‘quantity’ adjustment strategy with its
impact upon the external labour market) only becomes of consequence when the workplace is
affected ‘a lot’ by the recession.
Finally, to examine the nature of the relationship between the 12 non-redundancy
adjustment strategies and redundancy, the 12 other actions that a workplace could take were
incorporated as additional regressors in a seemingly unrelated bivariate probit estimation of
redundancy. The results are presented in Table 15. The coefficients of four of the additional
regressors are negatively signed. Only one of which, however, viz. some other action was
implemented is statistically significant (at p > 0.05). Of the positively signed coefficients, four are
statistically significant viz. a freeze on recruitment; a wage freeze; a reduction in the number of
hours worked; and a change in the organisation of work, suggesting that the adoption of these four
11
non-redundancy adjustment strategies are complements to the use of redundancy rather than
alternatives to its use.
CONCLUSIONS
In a contribution to the discussion about the possible role of labour hoarding in explaining the UK’s
current productivity puzzle, this paper has examined its obverse viz. redundancy. It has analysed
responses to two questions in the WERS, 2011 survey of managers viz. “ .. can you tell me to what
extent your workplace has been adversely affected by the recent recession?” and “ which, if any, of
these actions were taken by your workplace in response to the recent recession.
Given the data set under analysis, two important qualifications are made at the outset. The
first is that fieldwork for the survey took place between March 2011 and June 2012. Had this been
conducted three/four years earlier, nearer to the time of the recession when some workplaces were
striving to survive the recession and some were not succeeding in doing so, it is quite likely that the
population sampled and the responses of the sampled population to these and other questions
would have been different. How different is an unknown, but not unimportant. The second is that
what is being examined in the context of the second question is the incidence of redundancy and the
other policy actions adopted at the workplace. It is not the extent of redundancy nor its potential
costs savings to the workplace, information perhaps more appropriate to investigating labour
hoarding.
Nonetheless, some salient conclusions may be made from the research investigation. The
first is that not all workplaces were affected equally by the recession, although just over four in ten
workplaces were affected ‘a lot’. Second, not all workplaces chose to implement the actions
specified consequential of the recession. No action was taken at 25 per cent of workplaces, although
the probability of a workplace taking no action decreased the greater the adverse effect of the
recession on the workplace. Third, for those workplaces at which action was taken, 23.17 per cent of
workplaces used redundancy as an adjustment strategy. (Compulsory redundancy took place at
18.26 per cent of workplaces and voluntary redundancy at 8.66 per cent.) The incidence of
redundancy, however, was much less than the incidence of several other policy actions, notably
cutting/freezing wages (which took place at 55.56 per cent of workplaces) and halting recruitment to
fill vacant posts (which took place at 37.02 per cent of workplaces).
In principle, a workplace has a range of possible adjustment strategies from which to
choose. The argument is that these strategies have either a ‘price’ or a ‘quantity’ dimension and
impacts that are manifest in either the internal labour market of the workplace or its external labour
market. The assumption is that a workplace chooses an adjustment strategy most appropriate to its
circumstances. Further, its choice of adjustment strategy may change with changes in these
circumstances. An important fourth conclusion from the research was that when a workplace was
not affected ‘a lot’ by the recession, redundancy ranked only sixth in the list of possible adjustment
responses. However, when a workplace was affected ‘a lot’ by the recession, redundancy increased
in its relative importance to rank third in the list of adjustment options. Nonetheless, even in these
more fraught circumstances, redundancy still ranked only third (after freezing/cutting wages and
halting recruitment to fill existing vacancies). Finally, when redundancy was used as an adjustment
strategy, it was observed to be used mostly in conjunction with, not as an alternative to, other
strategies, in particular strategies such as freezing recruitment, work-sharing and changing the
organisation of work.
12
That redundancy was a relatively unimportant adjustment strategy for many workplaces is
compatible with labour hoarding. Both in the private sector, where workplaces were confronted
with the consequences of decreases in their product demand, and in the public sector, where
workplaces faced the financial consequences of the government’s policy of fiscal consolidation,
workplaces appeared to adopt adjustment strategies such as freezing recruitment and wages rather
than declaring redundancies. The apparent preference was to retain rather than to release labour.
That this outcome is ‘compatible’ with labour hoarding, however, is not in itself ‘evidence’ of labour
hoarding.
It is difficult, conceptually and empirically, to make the transitions first from the incidence of
redundancy to labour hoarding and then from labour hoarding to labour productivity. The incidence
of redundancy as a workforce adjustment strategy is capable of estimation, given an appropriate
data set, something that has been established in this paper. In contrast, labour hoarding is a concept
from macroeconomics used to explain why labour productivity is pro-cyclical and not counter-
cyclical. As the debate about the ‘productivity puzzle’ demonstrates, it has come to be applied to the
economics of the workplace. Problematical in its meaning, however, it is not amenable to
measurement, especially at the level of the workplace. Nor can labour productivity be measured
directly at the level of the workplace. Rather, it is a derived statistic, obtained from statistics of
output and labour input, and also fraught with problems of meaning and measurement.
All that this paper can safely conclude, therefore, is that redundancy was a relatively
unimportant adjustment strategy for many workplaces in their response to the great recession.
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15
Figure 1. A Taxonomy of Workforce Adjustment Strategies
Freeze or cut in wages Reduction in non-wage benefits Reduction in training expenditures
Reduction in basic hours Reduction in paid overtime Use of unpaid leave Change in the organisation of work
Voluntary and involuntary redundancy Freeze on recruitment Postponement of employment expansion Decrease (increase) in use of agency staff
PRICES
QUANTITIES
EXTERNAL LABOUR MARKET INTERNAL LABOUR MARKET
16
TABLES
Table 1. Percentage Distribution of the Extent to Which Workplaces Were Adversely Affected by the Recession
The extent to which the workplace was affected Percent
No adverse effect 11.26
Just a little 18.22
A moderate amount 26.25
Quite a lot 24.49
A great deal 19.78
Total Number of Observations 2041
Table 2. Percentage Distribution of the Extent to which Workplaces Were Affected ‘a Lot’ Whether or not the workplace was affected ‘a lot’ Percent
Not affected ‘a lot’ 55.73
Affected ‘a lot’ 44.27
Total Number of Observations 2041
17
Table 3. Ordered Probit Regression Results: Dependent Variable: The Extent to which a Workplace was Affected by the Recession
Variable Coefficient Robust SE
P > |T|
Workplace Size Categories Less than 25 employees
.159
.095
0.096
Between 25 and 49 employees .172 .106 0.105
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .245 .126 0.052
Between 200 and 499 employees .169 .168 0.316
500 or more employees .249 .141 0.078
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.160
.101
0.111
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.150 .248 0.546
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
.058
.128
0.645
Private Limited Company .167 .224 .0.455
Company Limited by Guarantee .264 .174 0.131
Partnership -.165 .198 0.403
Trust/charity .164 .627 0.793
Body Established by Royal Charter -.1015 .437 0.020
Co-operative/Mutual/Friendly Society .357 .316 0.259
Government Owned Limited Company (Nationalised Industry) .176 .319 0.582
Public Service Agency .198 .283 0.483
Other Non-trading Public Corporation .198 .283 0.483
QUANGO .361 .243 0.138
Local/Central Government -.064 .207 0.757
HR Policy IIP accredited (=1)
-.196
.099
0.048
New staff require 6 months to do the job competently (=1) .146 .108 0.177
More than 50 per cent of employees have received off-the-job Training (=1)
-.076
.085
0.375
More than 60 per cent of employees are trained to do Another job (=1)
-.027
.095
0.777
/cut 1 -.791 .252
/cut 2 -.079 .252
/cut 3 .644 .251
/cut 4 1.385 .255
Number of observations 2041
Wald Chi2 (56) = 100.68
Prob > chi2 = 0.0002
Pseudo R2 = 0.0299
Footnote to Table 3 and all subsequent tables presenting regression results: Additionally, the model estimated included a set of variables reflecting the composition of the workforce at the workplace (being variables denoting the proportion of women employed; the proportion employed in the ‘lower’ occupational categories; the proportion of part time workers; the proportion of ‘young’ workers; the proportion of workers who were members of ethnic minorities; the proportion of workers holding fixed term contracts; the proportion of workers who were ‘low’ paid; and the proportion of workers who were agency staff); a dummy variable denting that 60 per cent of employees were covered by collective agreements; and the Standard Industrial Classification (i.e. SIC 2007) of the workplace (by means of 15 dummy variables).
18
Table 4. Results of the Tests of Joint Significance of the Sets of Variables as Identified Variable Set Chi Square Prob > Chi2
The variables reflecting the composition of the workforce At the workplace
(8) = 9.83 0.2771
The variables denoting workplace size categories (5) = 6.14 0.2932
The variables denoting the Standard Statistical Region of the location of the workplace
(9) = 11.60 0.2367
The variables denoting the SIC of the activity undertaken At the workplace
(16) = 29.65 0.0199
The variables reflecting the single/multi plant nature of The workplace
(2) = 3.41 0.1817
The variables denoting the formal (legal) status of the workplace
(11) = 18.01 0.0812
19
Table 5. Action Taken by Workplaces in Response to the Recession (weighted) Action Taken All workplaces: Per
cent Workplaces that took action: Per cent
Compulsory redundancies 13.57 18.23
Voluntary redundancies 6.45 8.66
Redundancies, whether compulsory or voluntary * 17.25 23.17
Temporary freeze of recruitment to fill vacant posts 27.56 37.02
Postponement of plans for expanding the workforce 22.28 29.84
Freeze or cut in wages 41.39 55.56
Reduction in non-wage benefits 6.90 9.21
Reduction in basic hours 13.94 18.73
Reduction in paid overtime 18.34 24.55
Employees required to take unpaid leave 2.85 3.86
Reduction in the use of agency staff or temporary workers
15.06 20.23
Increase in the use of agency staff or temporary workers
2.90 3.89
Reduction in training expenditure 16.62 22.32
Change in the organisation of work 24.67 33.13
Some other action 2.98 4.00
None 25.56
Number of Observations 2041 1664
*This action is calculated from responses to ‘compulsory redundancies’ and ‘voluntary redundancies’
20
Table 6A. Binomial Probit Regression Results: Dependent Variable: Whether a Workplace took no action
Variable Coefficient Robust SE
P > |T|
Workplace Size Categories Less than 25 employees
.016
.149
0.913
Between 25 and 49 employees -.084 .166 0.613
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees -.160 .217 0.461
Between 200 and 499 employees .021 .231 0.926
500 or more employees -.234 .240 0.329
Single/multi plant nature of the workplace One of a number of workplaces in the UK
-.243
.129
0.060
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.412 .317 0.194
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company .067 .154 0.660
Company Limited by Guarantee -.460 .370 0.214
Partnership -.148 .222 0.505
Trust/charity .106 .258 0.682
Body Established by Royal Charter
Co-operative/Mutual/Friendly Society 1.266 .446 0.005
Government Owned Limited Company (Nationalised Industry) .521 .433 0.230
Public Service Agency -.851 .451 0.059
Other Non-trading Public Corporation 1.207 .601 0.045
QUANGO
Local/Central Government -.380 .328 0.246
HR Policy IIP accredited (=1)
.167
.141
0.236
New staff require 6 months to do the job competently (=1) -.054 .146 0.710
More than 50 per cent of employees have received off-the-job Training (=1)
.205 .116 0.064
More than 60 per cent of employees are trained to do Another job (=1)
.179 .121 0.139
Constant -.805 .367 0.028
Number of observations 2019
Wald Chi2 (54) = 105.59
Prob > chi2 = 0.0000
Pseudo R2 = 0.0931
Additional footnote to Table 6A and 6C: The dummy variables ‘Body established by Royal Charter’ and QUANGO predict failure perfectly, consequently they – and 22 observations – are not used.
21
Table 6B. Results of the Tests of Joint Significance of the Sets of Variables as Identified
Variable Set Chi Square Prob > Chi2
The variables reflecting the composition of the workforce At the workplace
(9) = 5.44 0.7949
The variables denoting workplace size categories (5) = 2.23 0.8161
The variables denoting the Standard Statistical Region of the location of the workplace
(9) = 11.11 0.2684
The variables denoting the SIC of the activity undertaken At the workplace
(16) = 26.38 0.0489
The variables reflecting the single/multi plant nature of The workplace
(2) = 4027 0.1180
The variables denoting the formal (legal) status of the workplace
(9) = 25.89 0.0021
22
Table 6C. Binomial Probit Regression Results: Dependent Variable: Whether a Workplace took no action with the incorporation was dummy variables denoting the extent to which the workplace was affected by the recession
Variable Coefficient Robust SE
P > |T|
Workplace Size Categories Less than 25 employees
.117
.164
0.477
Between 25 and 49 employees -.010 .178 0.955
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees -.047 .237 0.842
Between 200 and 499 employees .009 .230 0.968
500 or more employees -.122 .256 0.634
Single/multi plant nature of the workplace One of a number of workplaces in the UK
-.184
.137
0.181
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.572 .369 0.121
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company .187 .174 0.284
Company Limited by Guarantee -.307 .427 0.472
Partnership .039 .240 0.870
Trust/charity .090 .271 0.739
Body Established by Royal Charter
Co-operative/Mutual/Friendly Society .934 .398 0.019
Government Owned Limited Company (Nationalised Industry) .890 .455 0.050
Public Service Agency -.817 .612 0.182
Other Non-trading Public Corporation 1.590 .664 0.017
QUANGO
Local/Central Government -.508 .326 0.120
HR Policy IIP accredited (=1)
.081
.152
0.591
New staff require 6 months to do the job competently (=1) .044 .158 0.781
More than 50 per cent of employees have received off-the-job Training (=1)
.195 .126 0.121
More than 60 per cent of employees are trained to do Another job (=1)
.182 .136 0.183
Extent to which workplace was adversely affected by The recession Just a little
-.615
.203
0.002
A moderate amount -1.002 .193 0.000
Quite a lot -1.827 .204 0.000
A great deal -2.228 .262 0.000
Constant -.179 .419 0.665
Number of observations 2019
Wald Chi2 (58) = 225.64
Prob > chi2 = 0.0000
Pseudo R2 = 0.2625
23
Table 7. Cross Tabulation of whether the workplace was affected ‘a lot’ by the recession and redundancy, of either sort
No redundancy Redundancy Total
Not affected a lot by the recession 46.97 0.51 0.91
4.07 0.04 0.08
48.04 0.55 1.00
Affected a lot 27.37 0.31 0.71
10.80 0.12 0.28
38.17 0.44 1.00
Total 71.34 0.82 0.82
14.87 0.17 0.17
86.22 1.00 1.00
Key (to Tables 7, 8, and 9): weighted counts cell proportions row proportions Pearson:
Uncorrected chi2 (1) = 138.3285 Design-based F(1, 2040) = 64.0841 : p = 0.0000
Table 8. Cross Tabulation of whether the workplace was affected ‘a lot’ by the recession and voluntary redundancy
No voluntary redundancy
Voluntary Redundancy
Total
Not affected a lot by the recession 46.53 0.53 0.96
1.51 0.01 0.03
48.04 0.55 1.00
Affected a lot 34.12 0.39 0.89
4.04 0.04 0.10
38.17 0.44 1.00
Total 80.65 0.93 0.93
5.56 0.06 0.06
86.22 1.00 1.00
Pearson:
Uncorrected chi2 (1) = 46.4490 Design-based F(1, 2040) = 37.8474 : p = 0.0000
24
Table 9. Cross Tabulation of whether the workplace was affected ‘a lot’ by the recession and compulsory redundancy
No compulsory redundancy
Compulsory Redundancy
Total
Not affected a lot by the recession 44.93 0.52 0.93
3.11 0.03 0.06
48.04 0.55 1.00
Affected a lot 29.58 0.34 0.77
8.58 0.09 0.22
38.17 0.44 1.00
Total 74.52 0.86 0.86
11.70 0.13 0.13
86.22 1.00 1.00
Pearson:
Uncorrected chi2 (1) = 110.2241 Design-based F(1, 2040) = 48.3328 : p = 0.0000
Table 10. Values of the Respective Redundancy Coefficients in (three separate) linear regressions of whether the workplace was affected ‘a lot’ by the recession
Variable Coefficient P > |t|
Redundancy, of any sort 0.3422 0.0000
Voluntary redundancy 0.3050 0.0000
Compulsory redundancy 0.3370 0.0000
25
Table 11. Bivariate Probit Estimation: Dependent Variables: ‘Whether the workplace was affected ‘a lot’ by the recession’ and ‘Whether a policy of redundancy of any sort was implemented’
Variable Coefficient Robust SE
P > |T|
Whether the workplace was affected a lot by the recession
Workplace Size Categories Less than 25 employees
.161
.121
0.186
Between 25 and 49 employees .049 .132 0.705
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .297 .162 0.065
Between 200 and 499 employees .119 .178 0.503
500 or more employees .154 .180 0.392
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.113
.118
0.336
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.595 .304 0.048
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company -.162 .145 0.263
Company Limited by Guarantee -.263 .322 0.414
Partnership -.012 .208 0.954
Trust/charity -304 .262 0.246
Body Established by Royal Charter .447 .738 0.545
Co-operative/Mutual/Friendly Society -.899 .472 0.057
Government Owned Limited Company (Nationalised Industry) .219 .333 0.510
Public Service Agency .171 .391 0.661
Other Non-trading Public Corporation .519 .400 0.194
QUANGO 1.503 .624 0.016
Local/Central Government -.248 .229 0.278
HR Policy IIP accredited (=1)
-.270
.119
0.023
New staff require 6 months to do the job competently (=1) .090 .127 0.475
More than 50 per cent of employees have received off-the-job Training (=1)
-.018 .100 0.854
More than 60 per cent of employees are trained to do Another job (=1)
-.030 .109 0.778
Constant -.599 .306 0.050
26
Table 11. cont. Variable Coefficient Robust
SE P > |T|
Whether the workplace implemented redundancy of any sort
Workplace Size Categories Less than 25 employees
-.562
.148
0.000
Between 25 and 49 employees -.154 .152 0.311
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .128 .166 0.440
Between 200 and 499 employees .397 .187 0.033
500 or more employees .701 .198 0.000
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.209
.129
0.106
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation .000 .335 0.999
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company -.001 .163 0.995
Company Limited by Guarantee -.061 .358 0.865
Partnership .066 .228 0.772
Trust/charity -.160 .260 0.538
Body Established by Royal Charter -.000 .519 1.000
Co-operative/Mutual/Friendly Society -.653 .568 0.251
Government Owned Limited Company (Nationalised Industry) .013 .323 0.966
Public Service Agency -.773 .363 0.033
Other Non-trading Public Corporation .518 .600 0.387
QUANGO -.096 .850 0.910
Local/Central Government .233 .237 0.325
HR Policy IIP accredited (=1)
-.070
.130
0.587
New staff require 6 months to do the job competently (=1) .037 .138 0.787
More than 50 per cent of employees have received off-the-job Training (=1)
-.156 .110 0.154
More than 60 per cent of employees are trained to do Another job (=1)
-.011 .114 0.920
Constant -.052 .320 0.870
/athro .604 .065 0.000
rho .540 0.046
Number of observations 2041
Wald Chi2 (112) = 388.95
Prob > chi2 = 0.0000
Wald test of rho = 0 : chi2 (1) = 86.5276 : Prob > chi2 = 0.0000
27
Table 12. Bivariate Probit Estimation: Dependent Variables: ‘Whether the workplace was affected ‘a lot’ by the recession’ and ‘Whether a policy of compulsory redundancy was implemented’
Variable Coefficient Robust SE
P > |T|
Whether the workplace was affected a lot by the recession
Workplace Size Categories Less than 25 employees
.161
.122
0.188
Between 25 and 49 employees .045 .132 0.731
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .293 .161 0.070
Between 200 and 499 employees .118 .177 0.506
500 or more employees .164 .182 0.366
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.116
.118
.0.325
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.595 .300 0.048
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company -.161 .144 0.264
Company Limited by Guarantee -.268 .318 0.399
Partnership -.013 .207 0.948
Trust/charity -.303 .261 0.245
Body Established by Royal Charter .430 .470 0.056
Co-operative/Mutual/Friendly Society -.897 .470 0.056
Government Owned Limited Company (Nationalised Industry) .230 .343 0.502
Public Service Agency .175 .394 0.658
Other Non-trading Public Corporation .533 .413 0.197
QUANGO 1.429 .626 0.023
Local/Central Government -.248 .229 0.281
HR Policy IIP accredited (=1)
-.272
.119
0.022
New staff require 6 months to do the job competently (=1) .092 .127 0.468
More than 50 per cent of employees have received off-the-job Training (=1)
-.022 .100 0.823
More than 60 per cent of employees are trained to do Another job (=1)
-.029 .109 0.787
Constant -.596 .306 0.051
28
Table 12. cont. Variable Coefficient Robust
SE P > |T|
Whether the workplace implemented compulsory redundancies
Workplace Size Categories Less than 25 employees
-.481
.171
0.005
Between 25 and 49 employees -.077 .179 0.665
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .196 .191 0.303
Between 200 and 499 employees .320 .203 0.116
500 or more employees .701 .211 0.001
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.203
.137
0.139
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation .049 .350 0.888
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company -.067 .167 0.687
Company Limited by Guarantee -.112 .350 0.748
Partnership -.011 .238 0.962
Trust/charity -.183 .252 0.467
Body Established by Royal Charter -.822 .419 0.050
Co-operative/Mutual/Friendly Society -.378 .527 0.472
Government Owned Limited Company (Nationalised Industry) -.931 .364 0.011
Public Service Agency -1.816 .344 0.000
Other Non-trading Public Corporation .230 .652 0.752
QUANGO -2.384 .534 0.000
Local/Central Government -.137 .248 0.581
HR Policy IIP accredited (=1)
-.128
.144
0.375
New staff require 6 months to do the job competently (=1) -.208 .152 0.172
More than 50 per cent of employees have received off-the-job Training (=1)
-.182 .119 0.126
More than 60 per cent of employees are trained to do Another job (=1)
-.106 .125 0.394
Constant -.117 .345 0.733
/athro .553 .068 0.000
rho .503 .051
Number of observations 2041
Wald Chi2 (112) = 414.36
Prob > chi2 = 0.0000
Wald test of rho = 0 : chi2 (1) = 64.8452 : Prob > chi2 = 0.0000
29
Table 13. Bivariate Probit Estimation: Dependent Variables: ‘Whether the workplace was affected ‘a lot’ by the recession’ and ‘Whether a policy of voluntary redundancy was implemented’
Variable Coefficient Robust SE
P > |T|
Whether the workplace was affected a lot by the recession
Workplace Size Categories Less than 25 employees
.170
.124
0.171
Between 25 and 49 employees .064 .134 0.634
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .300 .162 0.064
Between 200 and 499 employees .129 .179 0.470
500 or more employees .159 .181 0.381
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.111
.296
0.053
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.574 .296 0.053
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company -.166 .143 0.245
Company Limited by Guarantee -.261 .320 0.415
Partnership -.018 .206 0.929
Trust/charity -.305 .260 0.241
Body Established by Royal Charter .447 .775 0.564
Co-operative/Mutual/Friendly Society -.902 .464 0.052
Government Owned Limited Company (Nationalised Industry) .217 .392 0.662
Public Service Agency .171 .392 0.662
Other Non-trading Public Corporation .623 .430 0.148
QUANGO 1.466 .627 0.019
Local/Central Government -.251 .228 0.271
HR Policy IIP accredited (=1)
-.266
.119
0.025
New staff require 6 months to do the job competently (=1) .085 .127 0.502
More than 50 per cent of employees have received off-the-job Training (=1)
-.018 .100 0.854
More than 60 per cent of employees are trained to do Another job (=1)
-.032 .109 0.767
Constant -.603 .305 0.048
30
Table 13. cont. Variable Coefficient Robust
SE P > |T|
Whether the workplace implemented voluntary redundancies
Workplace Size Categories Less than 25 employees
-.672
.161
0.000
Between 25 and 49 employees -.218 .168 0.195
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .234 .170 0.170
Between 200 and 499 employees .479 .199 0.016
500 or more employees .783 .206 0.000
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.177
.145
0.224
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.486 .369 0.188
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company .124 .168 0.458
Company Limited by Guarantee .162 .402 0.687
Partnership .310 .261 0.236
Trust/charity .174 .304 0.567
Body Established by Royal Charter .660 .530 0.213
Co-operative/Mutual/Friendly Society -5.286 .509 0.000
Government Owned Limited Company (Nationalised Industry) .705 .371 0.058
Public Service Agency -.298 .378 0.430
Other Non-trading Public Corporation 2.021 .515 0.000
QUANGO .591 .713 0.407
Local/Central Government .674 .262 0.010
HR Policy IIP accredited (=1)
.068
.125
0.582
New staff require 6 months to do the job competently (=1) .308 .155 0.048
More than 50 per cent of employees have received off-the-job Training (=1)
.046 .121 0.701
More than 60 per cent of employees are trained to do Another job (=1)
.168 .147 0.252
Constant -1.312 .362 0.000
/athro .545 .070 0.000
rho .496 .053
Number of observations 2041
Wald Chi2 (112) = 1943.72
Prob > chi2 = 0.0000
Wald test of rho = 0 : chi2 (1) = 58.9805 : Prob > chi2 = 0.0000
31
Table 14. Predicted Probabilities from the Bivariate Probit Estimations of the Policy Action Taken ‘Action’ Not affected ‘a lot’ by the recession Affected ‘a lot’ by the recession
No action taken Mean (SD)
Action taken Mean (SD)
No action taken Mean (SD)
Action taken Mean (SD)
Redundancy, of any sort .4629 (.1505) .1034 (.1094) .2482 (.1454) .1853 (.1277)
Compulsory redundancy .5026 (.1495) .0643 (.0743) .3019 (.1434) .1337 (.1182)
Voluntary redundancy .4942 (.1512) .0721 (.1072) .3161 (.1665) .1175 (.1154)
Temporary freeze on recruitment to fill vacancies
.3926 (.1600) .1733 (.1307) .2164 (.1277) .2176 (.1328)
Postponement of plans to expand workforce
.4780 (.1369) .0880 (.0684) .2734 (.1258) .1604 (.1018)
Freeze or cut in wages .3567 (.1520) .2084 (.1501) .1771 (.1185) .2576 (.1231)
Reduction in non-wage benefits
.5491 (.1393) .0181 (.0312) .3661 (.1447) .0665 (.0619)
Reduction in basis hours .5350 (.1458) .0306 (.0451) .3564 (.1436) .0778 (.0743)
Reduction in paid overtime .4734 (.1530) .0916 (.0846) .2796 (.1343) .1552 (.1191)
Employees required to take unpaid leave
.5553 (.1486) .0111 (.0212) .4035 (.1349) .0330 (.0537)
Reduction in use of agency staff or temporary workers
.4063 (.1605) .1599 (.1326) .2822 (.1450) .1514 (.1209)
Increase in the use of agency staff or temporary workers
.5425 (.1404) .0235 (.0476) .4002 (.1514) .0336 (.0498)
Reduction in training expenditure
.4550 (.1371) .1118 (.0994) .2833 (.1418) .1497 (.0937)
Change in the organisation of work
.4284 (.1342) .1369 (.1055) .2504 (.1333) .1841 (.0964)
Some other action affecting the workforce
.5544 (.1443) .0116 (.0232) .4077 (.1433) .0261 (.0398)
32
Table 15. Seemingly Unrelated Bivariate Probit Regression: Dependent Variables: ‘Whether the workplace was affected ‘a lot’ by the recession’ and ‘Whether a policy of redundancy of any sort was implemented’ (with additional independent variables denoting the 12 ‘non-redundancy’ adjustment options
Variable Coefficient Robust SE
P > |T|
Whether the workplace was affected a lot by the recession
Workplace Size Categories Less than 25 employees
.059
.093
0.525
Between 25 and 49 employees -.093 .103 .367
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .110 .113 0.330
Between 200 and 499 employees .125 .114 0.273
500 or more employees .280 .116 0.016
Single/multi plant nature of the workplace One of a number of workplaces in the UK
-.012
.073
0.864
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation -.403 .217 0.063
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company .218 .091 0.016
Company Limited by Guarantee .117 .221 0.596
Partnership .244 .152 0.108
Trust/charity .022 .144 0.874
Body Established by Royal Charter -.424 .375 0.258
Co-operative/Mutual/Friendly Society -.101 .329 0.757
Government Owned Limited Company (Nationalised Industry) .128 .203 0.527
Public Service Agency .172 .224 0.443
Other Non-trading Public Corporation .492 .427 0.249
QUANGO .797 .541 0.141
Local/Central Government .320 .133 0.017
HR Policy IIP accredited (=1)
-.041
.066
0.536
New staff require 6 months to do the job competently (=1) -.054 .074 0.467
More than 50 per cent of employees have received off-the-job Training (=1)
.009 .062 0.884
More than 60 per cent of employees are trained to do Another job (=1)
-.048 .069 0.488
Constant -.456 .193 0.019
33
Table 15. cont. Variable Coefficient Robust
SE P > |T|
Whether the workplace implemented redundancy of any sort
Workplace Size Categories Less than 25 employees
-.384
.114
0.001
Between 25 and 49 employees -.092 .119 0.443
Between 50 and 99 employees (the reference category)
Between 100 and 199 employees .144 .127 0.254
Between 200 and 499 employees .322 .128 0.012
500 or more employees .540 .130 0.000
Single/multi plant nature of the workplace One of a number of workplaces in the UK
.020
.088
0.819
Single independent establishment (the reference category)
Sole UK establishment of a foreign organisation .017 .268 0.948
Legal Status of the Workplace Public Limited Company (PLC) (the reference category)
Private Limited Company .154 .111 0.166
Company Limited by Guarantee .075 .264 0.775
Partnership .030 .200 0.878
Trust/charity -.164 .177 0.353
Body Established by Royal Charter .439 .367 0.231
Co-operative/Mutual/Friendly Society -.095 .456 0.834
Government Owned Limited Company (Nationalised Industry) .139 .242 0.566
Public Service Agency -.297 .269 0.271
Other Non-trading Public Corporation 1.891 .471 0.000
QUANGO .224 .497 0.651
Local/Central Government .090 .165 0.586
HR Policy IIP accredited (=1)
.139
.076
0.069
New staff require 6 months to do the job competently (=1) .023 .084 0.778
More than 50 per cent of employees have received off-the-job Training (=1)
-.114 .074 0.122
More than 60 per cent of employees are trained to do Another job (=1)
-.097 .086 0.256
Temporary freeze on recruitment .528 .075 0.000
Postponement of plans to expand workforce .127 .077 0.099
Freeze or cut in wages .248 .075 0.001
Reduction in non-wage benefits .226 .118 0.055
Reduction in basic hours .371 .112 0.001
Reduction in paid overtime .048 .079 0.537
Employees require to take unpaid leave -.052 .169 0.759
Reduction in use of agency staff or temporary workers .152 .080 0.056
Increase in the use of agency staff or temporary workers -.061 .141 0.655
Reduction in training expenditure -.009 .080 0.903
Change in the organisation of work .434 .074 0.000
Some other action -.675 .184 0.000
Constant -.599 .232 0.010
/athro .359 .048 0.000
rho .344 .042
Number of observations 2041
Wald Chi2 (124) = 546.34
Prob > chi2 = 0.0000
34
Wald test of rho = 0 : chi2(1) = 55.3238 : Prob > chi2 = 0.0000