INDIVIDUAL LAYOFF HISTORY AND VOLUNTARY TURNOVER Creating a More Quit-Friendly National Workforce ? Individual Layoff History and Voluntary Turnover

While Bureau of Labor Statistics data reveal that U.S. employers laid off over 33 million employees since 1994, virtually no research has addressed the behavior of layoff victims upon reemployment. In a first step, we investigate how layoffs shape voluntary turnover behavior in subsequent jobs. Utilizing a recently developed fixed effects specification of survival analysis, we find that a layoff history is positively associated with quit behavior. This effect is partially mediated by underemployment and job satisfaction in the post-layoff job. The remaining indirect effect is consistent with the notion that layoffs produce a psychological spillover to post-layoff employment, which then manifests in quit behavior. We also find that layoff effects on turnover attenuate as an individual’s layoffs accumulate and vary in magnitude according to the turnover “path” followed by the leaver. Individual Layoff History and Voluntary Turnover ! 3 Creating a More Quit-Friendly National Workforce? Individual Layoff History and Voluntary Turnover One of the standard mechanisms through which today’s companies attempt to cope with competitive pressures is through downsizing (Cascio, 1993). The extent to and manner in which downsizing contributes to subsequent organizational performance is a complex issue, with scholars offering explanations for both positive (e.g., Love & Nohria, 2005) and negative downsizing effects (e.g., Trevor & Nyberg, 2008). What there is no dispute about, however, is the prevalence of downsizing in the U.S.—the Bureau of Labor Statistics reports over 30 million layoffs between 1994 and 2010, a figure that does not include small-scale layoffs (i.e., those displacing fewer than 50 employees). While layoffs are more numerous when firms are struggling economically (Cascio, 1993), company financial health, employee tenure, job performance, and industry all fail to protect American employees from the layoff axe (Cascio, 2002). Often lost in the analysis of layoffs and their effects on the companies that initiate them is that a majority of layoff victims ultimately find new jobs. In the aggregate, these millions of victims therefore comprise an increasingly noteworthy proportion of this nation's workforce. Research documents the trauma and disruption that layoffs can bring to individuals, including damaging effects to income (e.g., Kletzer & Fairlie, 2003; Seninger, 1997), physical health (e.g., Kivimaki, Vahtera, Elovainio, Pentti, & Virtanen, 2003), mental health (e.g., Kets de Vries & Balazs, 1997), and general attitudes about work (e.g., Brockner et al., 1994; Konovsky & Folger, 1991; Wanberg, Bunce, & Gavin, 1999). What remains unclear, however, is whether these or other layoff outcomes ultimately manifest in worker behaviors in post-layoff employment (Datta, Guthrie, Basuil, & Pandey). If layoffs do affect the behaviors of their victims upon Individual Layoff History and Voluntary Turnover ! 4 reemployment, layoffs become relevant not merely for the organizations that engage in them, but for all organizations. Indeed, behavioral changes after a layoff amount to material human capital changes within the external talent pool upon which virtually all firms rely. Hence, our aim here is to begin to determine how employee behavior is evolving as a function of the downsizing strategies that are now standard business practice (Cascio, 1993). One of the most crucial of these behaviors is voluntary turnover, which is notoriously expensive (e.g., Cascio, 2000) and, in the aggregate, is a critical predictor of a variety of organizational performance outcomes (Hausknecht & Trevor, 2011). We argue that a layoff history should be associated with greater voluntary turnover likelihood in post-layoff employment, a prediction that is supported through the development of a broad theoretical rationale that integrates complementary arguments from several otherwise distinct literatures. While these arguments explore different mechanisms for a layoff effect, each is consistent with the expectation that layoffs produce psychological effects that spill over into subsequent employment relationships and loosen the ties between employee and employer. Measures of job satisfaction and underemployment in the post-layoff job, as well as data on the reason for quitting, allow us to better infer whether any layoff-quit associations are consistent with our broad rationale. Thus, our work lays a theoretical foundation for the wider study of layoff victims’ behaviors in post-layoff employment. In exploring this framework, we provide the first direct evidence on whether important employee behaviors are a function of a prior employer’s severing of the employment relationship. Given that the broad and generally indiscriminant reach of layoffs affects tens of millions of American workers, the study also speaks to the potentially highly consequential effects of institutionalized downsizing on the subsequent stability of the modern American workforce. Individual Layoff History and Voluntary Turnover ! 5 Construct Definitions and Theory Layoffs can be understood as one avenue for downsizing, which is the planned reduction in workforce (Cascio, 1993). While natural attrition also constitutes downsizing activity (Cascio, 2010), we focus on layoffs, defined here as the termination of non-temporary employment for business reasons (e.g., cost reduction). Although layoff victims may ultimately be selected from the feasible set according to, for example, their position in the performance distribution, a layoff requires that the initial decision to reduce headcount be motivated by business-level concerns. The post-layoff behavior of interest here is voluntary turnover, defined as any employee-initiated separation (i.e., a quit). We also explore two aspects of the post-layoff job as potential mediators of the proposed relationship: underemployment, which is present when the new job is inferior or of lower quality than the prior job (Feldman, 1996); and job satisfaction, the degree to which one is content with his or her job. Our theoretical approach to the issue of whether being laid off makes one more likely to quit in subsequent employment is built upon two rather distinct conceptual platforms. One of these is quite straightforward, primarily involving connecting bivariate relationships that are established within the literature. The other, however, while more intriguing, is also more difficult to study, requiring inferences about unmeasured mediating constructs to link the two readily observable events of interest here. In short, we envision that a layoff history results in greater likelihood of quitting behavior for two distinct reasons: (a) psychological spillover, in which experiencing a layoff leads to an untethering from, or looser tie to, subsequent employment, as suggested by the literatures addressing psychological contracts, trust, job insecurity, and the unfolding model of turnover’s shock construct; and (b) occupational underemployment, in which layoffs result in lower-quality post-layoff employment (see Figure 1). The former explanation Individual Layoff History and Voluntary Turnover ! 6 can both allow greater variety in layoff conceptualization (e.g., layoffs anytime in one’s employment history) and provide more compelling implications for theory and practice. Thus, we first describe the application of the various literatures that converge in support of the layoff experience itself spilling over into perceptions of looser ties to post-layoff employment. We then explore the occupation-based explanation (underemployment in post-layoff employment) for the layoff-turnover relationship. Finally, we further examine the validity of our conceptual framework by investigating whether the pattern of layoff effects on turnover across different quit reasons (i.e., turnover paths) is consistent with our theory. [Insert Figure 1 about here] Layoffs, Psychological Spillover, and Voluntary Turnover in Post-Layoff Jobs Broadly, we suggest that the psychological ties that bind individuals to organizations are weakened by the experience of a layoff. This expectation of psychological spillover, in which a past layoff untethers the victim from subsequent employers, is evident in the lay business press’s frequent characterization of layoffs as precipitating a free agent mentality, leaving the workplace replete with employees with low levels of commitment and loyalty to the employer (O'Reilly, 1994; Hirsch, 1987; Munk, 2000; Pink, 2001). Yet, specific theorizing is lacking to date. Fortunately, however, several conceptual frameworks suggest how this spillover can occur. While we are limited here in that we cannot measure the mediating mechanisms that we describe, the manner in which these literatures converge to yield the prediction of a positive layoffturnover association provides a strong, albeit indirect, conceptual basis for our hypotheses (see Figure 1). The psychological contract in post-layoff jobs. The psychological contract describes the reciprocal exchange agreement between employee and employing organization, as perceived by Individual Layoff History and Voluntary Turnover ! 7 the worker (Rousseau, 1989). While these perceptions of what is owed to, and from, the employer are influenced by the employee’s interactions with organizational representatives, complete information regarding employer intentions is unlikely, especially at early stages of the employment relationship (Rousseau, 2001). As a consequence, new employees rely on generalized employment schemas—mental organizing frameworks that frame the employment experience—to help guide the establishment of the terms of the psychological contract (Rousseau, 2001). We argue that layoffs affect these schemas and thereby influence post-layoff expectations of both employer and employee obligations surrounding long-term employment. Schemas, including those specific to employment, resist change. Nevertheless