It was FedEx's turn yesterday to play Scrooge, announcing cutbacks in the face of recession, but the company's strategy—cutting wages for senior execs and other salaried employees, rather than cutting jobs—maybe prove to be the smart alternative, and a harbinger of things to come, Peter Eavis writes in the Wall Street Journal. It's less disruptive and expensive than layoffs, he argues, and better for the economy as a whole.
Why better? By keeping layoffs to a minimum, there's less negative effect on consumption. Banks could face fewer defaults from people who can no longer keep up with their bills. But perhaps most importantly, it brings down labor costs. Recessions tend to bring prices down to sustainable levels, and the sooner the price of labor finds equilibrium, the sooner economic recovery can begin.