Reactive economies?

The other day while in Costco (for the foreigners, think Bunnings or some other hardware warehouse, but for food), I was graced with this conversation at the checkout, between two Costco employees:

e1: Where the hell is e3?
e2: Oh, we didn’t meet our sales target yesterday, so they cut hours today.
e1: So he’s not coming in at all?
e2: Nup

Apparently Costco works out their staffing based on a “budget for the day” which takes into account todays sales target, expected customer load, and whatever they have to “make up” from previous missed targets.

While there is nothing wrong with that, it must suck to be an employee in that environment. I can’t imagine not knowing how much work I would have day to day. I used to be a casual, but our rosters were fairly static and worked out weeks in advance. I guess that Australia is headed down this path with the new industrial relations laws as well.

That’s not why I finally got around to writing this though. It occurred to me this morning that being able to lay off people instantly based on a micro assessment of the economy must also lead to very reactive economies, which are more vulnerable to downturn. If Costco couldn’t lay people off instantly, then the billion dollar company would act as a cushion between small variations in economic state and the rest of the economy. Without that cushion, the laid off employee goes home and spends less (being unemployed for a day and all), which has a big knock on effect for the rest of the economy.

I wonder if there are any studies on the probability of this being a problem compared with countries with more employee protection like Ireland? France probably goes too far for such a study, because the barrier to firing there is so high that it acts as a barrier to hiring as well.