Labor Hoarding

Labor Hoarding

The practice in which a company does not lay off employees when it otherwise would (as during a recession). Labor hoarding is high risk as it reduces a company's profitability during a difficult time, but it guarantees employee talent will be available to that company (and, just as importantly, not to its competitors) when growth resumes.
References in periodicals archive ?
What is less appreciated is the phenomenon of labor's rising share of income well in advance of the peak in economic activity and for reasons unrelated to labor hoarding.
In a fascinating retrospective, Biddle (2014) traces intellectual thought on the cyclical behavior of productivity to its early foundations and explains how labor hoarding emerged as the leading explanation.
Eight essays by international contributors explore topics such as the shaping of public economic discourse in postwar America, American institutionalism after 1945, the genealogy of the labor hoarding concept, and what to tell a graduate course in macroeconomics about Keynes.
Because of labor hoarding, worker productivity is a poor measure of worker capability at various points in the business cycle.
The most common explanation that does not involve supply shocks is the practice of labor hoarding by firms (Abel, Bernanke and Croushore).
For example, what appears to be a decrease in productivity during a recession may instead be attributed to a decrease in the utilization rate of certain inputs ( for example, labor hoarding or excess capacity).
This prediction also emerges in models that allow for labor hoarding and variable capital utilization rates (Burnside, Eichenbaum, and Rebelo, 1993 and Burnside and Eichenbaum, 1996).
4) Theory provides at least three explanations for this business cycle "fact": procyclical technology shocks, increasing returns to scale, and labor hoarding.
Acyclical real wages are consistent with many different explanations of wage rigidity, and procyclical labor productivity is consistent with technology shocks or labor hoarding.
Labor hoarding however cannot be adequately expressed by isoquants.
Firms that practice a relatively large degree of labor hoarding will naturally have more stable employment, and this model suggests that they would give larger price-cost markup estimates as well.
They find that job security provisions and worker bargaining power interact with institutional factors and sectoral shocks to determine allocation, and the extent of labor hoarding.