Firing Aversion: A Cross-Cultural Study By Bryan Caplan

Thanks to EconLog readers, I’ve finally located some real empirics on what I call “firing aversion” (see here, here, and here). My favorite piece so far: “Cultural Influences on Employee Termination Decisions” (European Management Journal, 2001). The authors analyze a survey of about 300 managers from financial institutions in England, France, Germany, Italy, and Spain. Key idea: The survey describes four hypothetical workers, and tells each manager he has to fire one. Who do they pick – and why?

Here are the worker profiles each manager sees:

The authors summarize these choices as: 1. Young, good performance, cheap

2. Young, average performance, cheap [but not as cheap as #1 – B.C.]

3. Middle-aged, average performance, expensive

4. Older, excellent performance, expensive Who gets fired? Almost half the respondents make what sounds like the profit-maximizing decision – firing #3. But #2 is almost as popular, and almost 15% fire the older but excellent performer. (See the bottom row of Table 2 for details). More strikingly, though, answers vary radically by country:

Notice: England fits the standard caricature of the “greedy” Anglo-American business model: over three-quarters fire #3. Germany is at the other extreme. Almost three-quarters fire worker #2, with worker #4 a distant runner-up. Spain is closest to England, with France and Italy about midway between England and Germany. In Italy, over 20% fire the excellent #4. What are these managers thinking? The authors explain that “Only two justifications are consistently cited within the top five reasons for each country.” The first takes advantage of the existence of early retirement programs that are commonly implemented in many countries and industrial sectors. This is clearly an easy choice fitting very well with the organizational justice reasoning provided above. The older employee is ‘given a gift’ as some French respondents put it. He no longer must trudge into the office and work but happily retains a large part of his salary. No hard decision must be made which would attack the sense of self-worth of someone who was being fired because he was no longer sufficiently productive. Only a few, largely Anglo-Saxon respondents, were concerned about the organizational impact of ‘throwing someone out at their peak’. In short, many managers prefer to fire the person who will suffer the least – or actually benefit. Of course, this isn’t the only motive. Plenty cite profitability (and/or desert) as well: The second ranked reason however is a much tougher justification. Someone should be fired if his performance longer merits his salary. This was respectively the first and second criteria used by the English, German, and Spanish respondents. This justification appears to reflect the consequences of classical economic theory more than the social justice model. If you are under-performing (relatively) you must go (when times are tough). Your commitment and years of service are not sufficiently important to your colleagues or company. Other common rationales for firing include: “good chance to find a new job because of youth,” “good chance to find a new job because of skills,” and just “age.” On the latter, check out this neat graph of “Average Age of Dismissed Employee By Country.”