Can someone explain to me - Business economics

[niccig]

We were at a 4th July BBQ yesterday and talking about work and people being laid off etc.

DH works in entertainment industry. Companies have laid off older, more experienced, more expensive editors and will hire younger staff instead. DH worked on a project with 2 junior editors. He was given twice as much work, completed it before the junior editors, and his work didn't need revisions, it went straight to the client for review, and DH moved on to another project while waiting for the client's comments. The junior editors took longer, needed to work overtime, work was poorer quality and the producer had to sit with them helping them, and not working on other projects.

So, how does the younger cheaper person end up being cheaper if their productivity and quality is less???

Another friend works on animated movies. He tried to get higher ups to agree to some work up front that would save time for every subsequent scene. They refused saying it cost too much. He said that for every scene he had to recreate the SAME thing, rather than having it already done and just put it in. He said it meant they couldn't complete as many scenes per week as they needed to do.

How does that save money?


I'm not a business person, but to me this seems to be a short-term saving that ends up costing more later on. Am I wrong??

ETA. I know benefits can be different, but as far as I know the benefits offered are the same - same healthcare, some disability. Granted DH has me and DS, adn the younger staff might be single. A couple are married, and a few of the older employees that were laid off only have their wife as well, as the kids are grown. So how are benefits different? Is it use of health care eg. older people have more care??

[wellyes]

In my business by far the greatest expense is FTEs (salary and benefits). Hiring cheaper workers lets the company report a cost reduction to it's shareholders. If the cheaper workers perform poorly and everything takes longer, the added expense might be classified as 'project overages'. Or they could list the extra time it takes as billable hours. So though the cost is the same overall , they can spin it to make it look like they've cut cost while maybe even being more
productive. That's my best guess.

[egoldber]

but as far as I know the benefits offered are the same - same healthcare, some disability

Often employees who have been with the company longer will have a different benefits package. Or get more vacation vs a newer employee. Or charge a more expensive "project rate" vs a more junior employee.

And as the PP said, fixed employee overhead costs often get charged to a different budget than "project" work.

[niccig]

In my business by far the greatest expense is FTEs (salary and benefits). Hiring cheaper workers lets the company report a cost reduction to it's shareholders. If the cheaper workers perform poorly and everything takes longer, the added expense might be classified as 'project overages'. Or they could list the extra time it takes as billable hours. So though the cost is the same overall , they can spin it to make it look like they've cut cost while maybe even being more
productive. That's my best guess.

So, it's just fancy accounting then? Same overall cost, but as it's broken up into different areas the company "looks" to be in a better position.

DH's company is now corporately owned, and they all think the layoffs are coinciding with quarterly reports to make share price better.

[niccig]

Often employees who have been with the company longer will have a different benefits package. Or get more vacation vs a newer employee. Or charge a more expensive "project rate" vs a more junior employee.

And as the PP said, fixed employee overhead costs often get charged to a different budget than "project" work.

The benefits package it the same at DH's work. Vacation does differ - DH gets 5 weeks.

They have a number of very high profile projects and fewer experienced staff to work on them. DH would normally have 1 high profile and then lesser profile projects. He's juggling 4 big-name movies and working lots of overtime. The manager complained to DH that he can't give these high profile movies to the junior staff as they can't do the type of work required. They also do a lot of video conferencing with the client watching what is on DH's computer screen and DH puts changes in as they're talking on the phone. He has to do all of these conference calls as the junior editors can't put the changes in as quickly, and the clients get annoyed.

He thinks the managers are starting to realise they need the experienced editors, but the people above them don't understand that.

[codex57]

So, it's just fancy accounting then? Same overall cost, but as it's broken up into different areas the company "looks" to be in a better position.

DH's company is now corporately owned, and they all think the layoffs are coinciding with quarterly reports to make share price better.

Pretty much yeah. You can call it corporate "politics".

He thinks the managers are starting to realise they need the experienced editors, but the people above them don't understand that.

They understand reality. Shareholders don't. Hence, you get things like the actions BP took right before that platform blew.