Pro: Should firms be required by law to provide six months of severance pay to long-term employees who are laid off due to outsourcing or corporate restructuring?
Mandated severance pay in America is an issue that is often disagreed upon and often talked about because it involves businesses, employees, consumers and the government. Each stakeholder may have differing views about mandated severance pay, government intervention, and who would benefit most from a law requiring companies to offer long-term employees a minimum of six months’ severance pay when laid-off or having their job terminated. Severance pay is compensation that an employer provides to an employee who has been laid off, whose job has been eliminated, who through
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In one article, we found a direct historical explanation of when severance pay has been mandated, the reasons for it, and the times when it has been offered voluntarily. “The available literature on this topic suggests three main historical determinants of severance mandates across the world: (i) the creation of broader labor codes, (ii) early industrial restructuring and spells of high-level unemployment in the interwar period, and (iii) the expansion of the welfare state after WW II. These determinants are at times intermingled with two main reasons why firms choose to voluntarily provide severances pay: one-off payments during industrial restructuring to allow for quick action and to avoid political fall-out, and seniority-related payments – corporate pensions and severance – that balance the interest of firms and workers in knowledge intensive firms.” (Holzmann 2011) With high welfare and unemployment, and a call to action for labor codes to be updated, the US seems like the perfect economy for mandated severance pay. While statistics show that mandated severance pay has not always been a huge success, and can also be very costly to the economy, the US needs to do something about this problem because companies are starting to outsource