“Natural Wastage” and its intergenerational impact

Angus Hanton argues that using “natural wastage” as a policy for staff reduction has a negative impact on youth employment

A classic insider/outsider problem arises when a firm or government department needs to sack people. Okay, “sacking” is too brutal – they need to “reduce headcount” or even to “re-engineer the workforce”. These phrases illustrate the common desire to soften the blow to known individuals. An instinct towards gentleness and decency to those one knows best is of course laudable, but in employment terms it often has consequences that were not intended.

Avoiding compulsory redundancies

Sometimes there are no easy ways out, and people simply must be speedily laid off; and in such cases a company may adopt a policy of last-in-first-out, meaning that younger workers are typically made redundant before older ones. As redundancy pay is usually based on years of service, this has the added advantage (to employers) of being a cheaper option in the short run: but such an approach is clearly damaging to younger workers. However, sometimes there is the possibility of reducing numbers employed over a period of months or even a few years and the temptation then is to adopt “natural wastage” policies, which sounds quite benign. These usually include:

  • not replacing positions as they happen to become vacant;
  • offering early retirement or medical retirement more readily;
  • moving surplus staff to fill vacancies at other departments or group companies;
  • increasing overtime work to get jobs done rather than recruiting new people.

What effects does natural wastage have on young people?

Clearly all these elements of “natural wastage” are relatively friendly to “insiders” – compulsory redundancies are avoided. But they are devastating to “outsiders” looking for work. Insiders are known individuals whereas outsiders are, by definition, unidentifiable. This makes the natural wastage approach to downsizing attractive to employers and it gives the illusion that it is victimless.

The effect of the widespread use of “natural wastage” policies across the economy is partly to blame for the sharp rise in youth unemployment: the UK’s 16-25 year olds have the highest rates of unemployment, with over one million unemployed in this age group alone.

Natural wastage also sends out a dangerous message to young people that they are on the outside of the employment market and are not allowed in. It is well-documented how harmful early unemployment is in terms of shaping negative attitudes and behaviour patterns, and how it contributes to habituating some young people to an unemployed status.

What could be done to attack natural wastage?

Companies and government departments could resist the policy of indiscriminately espousing “natural wastage” and say rather that they will continue to recruit younger people whilst encouraging “natural reductions” in numbers of older staff.

Certainly the first step is to recognise that – as a way of managing the cuts in the public sector, and financial pressure in the private sector – “natural wastage” is highly damaging to intergenerational harmony. It is a term that sounds friendly but is deeply unfriendly to the younger generation.

Posted on: 3 June, 2011

One thought on ““Natural Wastage” and its intergenerational impact

  1. SamDes

    This policy of ‘natural wastage’ has serious implications for the younger generation today. Despite increasing numbers of graduates battling it out for each job, graduate schemes are actually being cut back due to the freezing of external recruitment that ‘natural wastage’ causes. For example, the graduate scheme for 2011 at the government agency the Forestry Commission has been cancelled as a result of this ‘natural wastage’ policy. This cannot become an ongoing trend, as it will leave the younger generation with even fewer employment opportunities.

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