labour hoarding

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Retention by a business of more workers than are required to produce the present level of output. This may be based on expectations that output will recover so that the surplus workers will soon be needed again. It may be more efficient to retain workers than to incur redundancy payments by sacking them and then have to meet recruitment and training costs replacing them a few months later. Labour hoarding may, however, simply be a form of organizational slack. Managers know that redundancies are unpopular and bad for morale, so may be willing to retain unnecessary labour so long as the shareholders in a private firm, or the taxpayers in a state-owned one, are willing to bear the cost.

Subjects: Economics.

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