How does downsizing affect those who are displaced?
Downsizing affects those who are displaced by putting them out of work. It is for this reason that it has a very bad reputation among most Americans. However, there are those who argue that downsizing is the only way for companies to survive and that things would be worse for everyone if they did not do so.
When a company downsizes, it cuts jobs from its payroll on a permanent basis. These are not people who will be rehired when the economy picks up. Instead, their jobs are simply gone so that the company can have lower costs. This is, of course, devastating to many of those who are laid off. The lucky ones can get new jobs without having to spend too much time unemployed. Others become unemployed for the long term or have to take jobs that are below what they are qualified for. Thus, downsizing is very hard on those who are displaced.
However, some would argue that there would be even more people hurt if firms do not downsize. From this point of view, companies that do not downsize can simply lose competitiveness and die. In such a case, their entire workforce loses their jobs. This is much worse than having some people get downsized. So, while downsizing is very traumatic, there are those who argue that it is better than the alternative for the workforce in general.