Firms in the United States should consider cutting back in this recession by introducing shorter workweeks, flexible schedules and more time off, rather than laying off workers. These kinds of policies could help to keep consumption more stable than increased layoffs, as well as being potentially more popular with workers.
Prior to the recession, workers often reported that they would like to cut back on hours to spend more time with their family or focus on nonwork activities, but many employers did not provide them with this kind of flexibility. While cutbacks that lead to smaller paychecks may not be ideal, some families appreciate the extra time while still having a job. However, for many, fewer hours a week will pose an economic hardship. Families’ budgets are usually based on the amount of workers’ paychecks, and people don’t typically assume those paychecks will become smaller over time. Families will certainly have to cut back.
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