Verizon announced on Monday that they have cut 10,400 management employees in the company – and believe it or not, this could be a sign that the economy is doing great.
Verizon offered voluntary buyout deals to some 44,000 employees who were eligible, with 10,400 taking their offer. The terms of severance were particularly generous, offering three weeks of pay for each year of service with a cap of 60 weeks.
Back in 2003, Verizon offered a similar voluntary buyout to some 152,000 employees, but only 14% took the deal. A far cry from the 24% who took the severance this time around. While the previous offer was less generous, the outcome of the new buyouts reflect well on the economy.
With the unemployment rate at 3.7%, the job market is hot. That probably played a factor in the decision for employees to take the current buyout package. In 2003 when Verizon saw many fewer takers, the unemployment rate was at 5.8%.
Since the positions were all in management and employees are likely to have advanced educations, their prospects for finding new employment looks very good.
GM offered buyouts recently and found far fewer volunteers – only 15,000 employees chose to take the deal. This may be because auto workers face a more difficult job market. Work is concentrated in fewer locations, meaning relocation is necessary. Verizon workers are spread throughout the country rather than clustered in a few locations.
Employees who take voluntary buyouts are classified by the Bureau of Labor Statistics as layoffs. Since layoffs that don’t involve plant shutdowns can be seen from future employees as possible evidence of an employee underperforming at their last job, voluntary buyouts are a better way to hit the job market than traditional layoffs. Taking a voluntary severance package makes the layoff look like the decision of the employee.
Currently, people are quitting their jobs in record numbers. In October, the number of quits were reported to be 3.5 million – a rate of 2.3%. This was down slightly from the previous report, but still an incredibly high number.
The job market is hot and with so many positions available with such a low number of unemployed, many people have decided that new opportunities for better wages are worth leaving their old jobs for.