Massive Layoff of Employees

Massive Layoff of Employees

From a government standpoint and governmental employees, when there is a massive layoff of governmental employees, historically, there has not been more than a ripple in the unemployment rate overall. A 1995 survey and a subsequent 1999 follow up to municipalities in Illinois found that the average amount of people still unemployed after a governmental layoff was only 3.8%. (Reason Foundation, 2012) From a governmental employee standpoint, there is not a large scale economic impact which means that the majority of affected governmental workers will still have income to spend at businesses and for their household needs.

When private sector businesses have a massive layoff occur, they are required by Federal law to notify the affected employees 60 days in advance. The employees have an opportunity to look for other jobs in that timeframe, however, resources will begin to be held back by the households in the case of long term unemployment which will in turn cause business who offer the good and services to the affected families to experience a decrease in sales.

Purchasing of Groceries

Groceries are an inelastic product. People will purchase food regardless of the price because they need to eat. When a household purchases groceries, and pays a higher price for them in one grocery store versus another, the business which earned the opportunity for the sale will benefit. The government does not benefit from a tax standpoint on non-processed foods. Processed foods, however, are taxable; which is a benefit to the government. The Government may also pay a producer not to produce a food so as to stabilize the market. A couple of examples of this situation are in the commodities of rice and wheat. Producers are paid not to plant as much so the market price of the end product is stabilized. In fact, those producers are paid not to produce so there is no loss of income to those households.