'US Companies That Increase Salaries While Conducting Mass Layoffs: A Series of Contradictions [Jjinbit]'

[Asia Economy Reporter Jeong Hyunjin] We have reported several times on the consecutive layoffs by global companies. As layoffs increase amid concerns about an economic recession, there was also an article questioning whether this would lead to a return to the office, which was already covered once in Jjinbit (July 30, 2022, Economic Recession → Layoffs... Will Office Return Begin Again?). Today, we will look at how executives in the U.S. are responding with their personnel strategies amid recession concerns.

According to Bloomberg on the 18th (local time), a survey conducted last month by global consulting firm PwC of more than 700 U.S. corporate executives and directors found that about half of them are either conducting layoffs or planning to do so. Additionally, 52% of respondents said they are implementing hiring freezes. More than 4 out of 10 have withdrawn job offers, and some are also retracting proposals such as offering additional bonuses to attract more talent.

Interestingly, at the same time, 70% of respondents said they have already implemented or plan to expand full remote work options. Furthermore, 64% reported plans to increase compensation, and Bloomberg noted that companies are also enhancing mental health benefits. Typically, remote work, pay raises, and expanded benefits are measures to retain employees. The high rate of such responses amid cost-cutting layoffs is seen as contradictory.

The U.S. unemployment rate remained at 3.5% last month, the lowest since 1969. Layoff news continues to emerge, but it started primarily in rapidly growing IT companies. Bloomberg stated, "Even as companies try to lay off employees, the contradictory nature of the current labor market is shown in sectors like technology and real estate, where talent remains hard to find and employees still hold power." PwC’s Global People Leader, Bushan Setty, said, "Companies are simultaneously playing offense and defense in their talent acquisition strategies," adding that companies must weigh reputational damage and employee morale when conducting layoffs.

The PwC survey also revealed contradictory responses in the U.S. labor market. While 70% said they are pursuing remote work strategies, 61% said they are asking employees to come to the office more often. Even considering multiple responses, it is surprising that two opposing answers about work location appeared at similar rates. Ultimately, this results in a hybrid work model where employees come to the office part of the week.

If employees come to the office less frequently, demand for office space, i.e., real estate, inevitably decreases. In the PwC survey, more than one in five U.S. corporate executives and directors said they plan to reduce real estate investments. Nevertheless, 31% said they are increasing real estate investments. Bloomberg assessed that "various corporate decisions follow an environment full of uncertainty."

Not all companies will devise the same work styles or personnel strategies. However, as diverse concerns about the future of work have accumulated since COVID-19, it seems that companies’ experiments are progressing in various ways tailored to their individual circumstances.

Editor's Note[Jjinbit] is short for ‘Jeong Hyunjin’s Business Trend’ and ‘Real Business Trend,’ a corner that showcases trends in corporate management such as organizational culture and personnel systems. Based on analyses from foreign media and major overseas institutions that have not received much attention so far, we will deliver fresh and differentiated information and perspectives.