Academic journal article The Economic and Labour Relations Review : ELRR

Health and Social Effects of Downsizing: A Review

Academic journal article The Economic and Labour Relations Review : ELRR

Health and Social Effects of Downsizing: A Review

Article excerpt


Downsizing is a process of workforce reduction, generally aimed at yielding labour cost savings while increasing the productivity and efficiency of the workers who are retained. However, it is a strategy that disrupts the continuity of the organisation and the lives of its employees, often with marked negative consequences for both. The most visible consequence is unemployment for the workers who are dismissed. The social, psychological and health effects of unemployment have been widely recognised and their nature is relatively well understood (see the symposium edited by Kriesler and Nevile 2000). The negative effects of job insecurity arising from downsizing may be less marked than those of unemployment and depend upon a more subtle interplay between demographic factors such as education and income (Hamilton et al. 1990). However, it is becoming clear that this insecurity does have significant costs (see Burgess and de Ruyter 2000).

The consequences of downsizing for retained employees are certainly less obvious than those of unemployment. They arise from a variety of effects including real or perceived job insecurity, work intensification, disruption of social networks and consequent impairment of family relationships and health. This paper surveys some of the literature concerning these phenomena. The nature of downsizing is briefly discussed before its consequences for the health and family and social relationships of employees are examined.

The nature and organisational impact of downsizing

In many countries, extensive workforce downsizing and restructuring has been observed in public and private sector organisations since the 1980s (see Quinlan 1998; Cascio 1993). However, downsizing has been defined in several different ways. Cascio (1993) defined it as "planned eliminations of jobs or positions" (p. 95) and noted that it "does not include the discharge of individuals for cause or individual departures via normal retirement and resignations" (p. 96). Cameron and colleagues (1993, cited in Dawkins, Littler, Valenzuela and Jensen 1999, p. 6) define it as "an intentionally instituted set of activities designed to improve organisational efficiency and performance which effect the size of the organisation's workforce, costs and work processes." They add, "It is implied that downsizing is usually undertaken in order to improve organisational-performance. Downsizing, therefore, may be reactive or proactive. Failures or ineffectiveness are not prerequisites to downsizing and it may be undertaken when no threat or financial crisis exists at all." Others have observed that downsizing has "become a favourite practice for a large number of troubled corporations ... people are seen more as liabilities than assets" (Kets de Vries and Balazs 1997). From a wider strategic perspective, downsizing has been portrayed as a "strategy favoured by many companies attempting to cope with fundamental, structural changes in the world." (Mishra et al. 1998).

Views clearly differ about whether downsizing is predominantly proactive or reactive and based on long-term strategy or short-term cost minimisation. However, there is general agreement that the term refers to workforce reductions that do not simply happen as a matter of course in an organisation but rather are undertaken as a purposeful strategy (Cascio 1993; Mishra, Spreitzer and Mishra 1998; Dahl and Nesheim 1998; Burke and Greenglass 2000). While downsizing implies an overall reduction in the size of the workforce, new jobs may be created to replace some of those lost. This has led to use of the alternative terms "reengineering" or "rightsizing" (Umiker 1999; Luthans and Sommer 1999) but in most cases these processes involve an overall reduction in the size of the workforce across the organisation.

Researchers have applied different numerical criteria to define the level of planned workforce reduction that constitutes downsizing. …

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