Introduction
P&O Ferries is one of the UK’s largest ferry carriers with a long history. However, their March 2022 actions against their employees came as a shock to many stakeholders. In addition to the laid-off workers, both the company’s reputation and its competitiveness suffered due to the immediate cancellation of many flights to various cities (Martin, 2022). In return, there was a benefit in payroll calculations, but it is still difficult to assess the impact of such a decision in the long term. This work is intended to consider this phenomenon from the point of view of macroeconomic processes and the correctness of this decision, including the ethical side of the issue.
Macroeconomics
P&O Ferries have, in fact, created an unemployment effect in the specific labor market for ferry professionals. More than 800 people were left without work, potential consultations, and the opportunity to work for the company’s benefit, even on a new casual basis (Martin, 2022). At the macroeconomics level, a non-equilibrium state was established when there were much more resume offers than similar vacancies. Such a decision is accompanied, perhaps insignificant on a national scale, but still a blow to the country’s economy. While studies show that other business sectors are less affected by mass layoffs, there is a need to create protective mechanisms for employees at the political level (Blien, Dauth, and Roth, 2021). In addition, the loss of income of the victims increases, which significantly reduces the purchasing power of their own families (Blien, Dauth, and Roth, 2021). As a result, such labor is depreciated and performed by workers from foreign countries, which may contribute to the domestic national product, but does not affect GDP growth.
Similar processes have already been observed in many countries during the pandemic and were dictated by global external factors that a single company could not influence. P&O Ferries also struggled through this period, receiving subsidies from the state, but even then did not resort to unexpected layoffs of the headquarters (Martin, 2022). Just during the pandemic, mechanisms were developed to reduce the burden on the payroll for companies that were going through a crisis. Such practices in post-pandemic times may have been used with reservations, but there are no strict prohibitions on such activities (Schnetzer, Tamesberger, and Theurl, 2020). Short-term reductions in the number of working hours have helped maintain employment at the macro level of the economy (Schnetzer, Tamesberger, and Theurl, 2020). In addition, the pandemic has not proven to be a unique new external factor in matters of job retention. The same processes were observed during the Great Recession of 2007 when models of short-term work were also introduced.
Between 2007 and 2012, various measures were also taken to prevent mass layoffs. For example, the creation of local labor market networks facilitated the hiring of low-paid workers in the event of an unexpected job loss (Hellerstein, Kutzbach, and Neumark, 2019). Trade unions perform a similar function to protect employees in such cases, but they cannot provide jobs or arrangements with organizations for assistance in a crisis. However, the longer-term macroeconomic response of the labor market tends to have a limited range of underlying causes, which include immigration, emigration, retirement, or insurance claims (Foote, Grosz, and Stevens, 2019). In this case, the problem is solved by the immigration of cheaper labor, which may be the current practice in businesses in crises (Hansen, Lyngemark, and Weatherall, 2021). In the regions, this strategy does not negatively affect either laid-off employees or others in the job market if they are young (Gathmann, Helm, and Schönberg, 2020). The situation is much worse for older employees.
The uniqueness of the P&O Ferries case also lies in the fact that this company is not local and regional; it makes transportation throughout the country. Dismissal of employees cannot be accompanied by migration to another region since competitors have not yet experienced a similar crisis as P&O and do not need several such specialists. Consequently, this decision has macroeconomic consequences in a single industry, where a state of inequality in the field of demand and supply of labor has occurred. The consequences of this decision may be more tangible. First, suppose P&O Ferries does not create a more competitive offering in this way compared to competitors. In that case, the market will lose an important player, which is not a positive sign for developing GDP and living standards (Hellerstein, Kutzbach, and Neumark, 2019). In addition, the organization has now wholly stopped transportation and has not developed any program to support customers and laid-off employees. As a result, the reputation suffers significantly due to the lack of a clear position of the company in the field of social responsibility.
Secondly, a crowded job market will significantly lower the bar for specialists in this field. People studying or applying for vacancies prior to this news will be in a difficult position (Ost, Pan, and Webber, 2018). Unique knowledge for working on ferries has a reasonably high threshold for transition to another profession. Against the backdrop of reduced wages in the job market, companies that remain operational amid shutdowns of P&O Ferries can benefit. As a result, an even more significant gap is formed, which the company in question must overcome with more prudent management decisions that do not strike at their employees and reputation.
Side Effects
This decision is adverse in the broadest sense of the problem, even if it can bring profit to the company locally. First of all, indirect consequences concern, as already mentioned, education. Institutions may lose investor support due to overcrowding in the labor market, the corresponding prestige, and the flow of students. The lack of employment opportunities in the specialty will significantly reduce the attractiveness of this business industry. In addition, the industry is vital at the state level, since with the help of these transportations, important cargoes are transported daily by sea, and people travel. A large outflow of customers will happen precisely during the downtime of the company, during which potential consumers will be able to familiarize themselves with the offer of competitors. Against the background of this action, a complete transformation of the consciousness of consumers, who pay more and more attention today to social responsibility (Hategun et al., 2018), can happen. A much more critical problem will be the attractiveness of vacancies in this company for any other positions. Job seekers certainly will not risk an unexpected layoff for a paycheck.
Employees themselves are one of the most affected parties in this case. Studies prove that the negative effect on mental health is reflected in both laid-off and remaining workers (Elser et al., 2019). While this decision could be profitable for the company’s financial activity, it led to downtime, which signals a lack of preparation and a coherent strategy among senior management. On the one hand, the company supports the UN Declaration of Human Rights and the 1998 International Labor Organization’s “Declaration on Fundamental Principles and Rights at Work” it lacks a single code, precise positions, mission, and vision that include employees in core values ââ(P&O Ferries, 2019). In this case, the ethical side of the issue is the key to understanding the problem.
First, P&O Ferries did not develop a plan in advance, which led to the need for downtime. Although it is considered correct to notify about such important news in person, mass layoffs of employees passed through Zoom. No prerequisites at the external and internal level, dictated by serious factors, were presented before the eyes of the workers. Consequently, the decision was made behind closed doors, and no mechanisms were developed to mitigate the consequences of such a massive dismissal. This aspect became the biggest mistake of the management of P&O Ferries, reflecting the lack of an ethical attitude. Experts have already noted this issue, and they believe that the blatant injustice of the decision lies precisely in the way this news was presented (Martin, 2022). The company’s potential bankruptcy is not an excuse for such an attitude, although it is to replace cheap labor. The company’s corporate social responsibility turned out to be at a low level, which became a resonant event.
The importance of CSR in any large company is demonstrated in this case. An organization with a clear position on the value of human resources would be unlikely to allow such an outcome. P&O Ferries are losing their locally trained team with experience directly in this company, replacing them with specialists from abroad who need to go through all the recruitment and selection procedures again. An important question is why the company did not take action in advance to mitigate the consequences, at least for the operational functionality and business, because in this case, P&O loses both reputation and profit. DFDS is getting an influx of clients for at least the coming weeks, as well as cheaper job offers, which creates an advantage in expanding and posting vacancies. Cost optimization should be highly profitable, paying off all the negative consequences; otherwise, such a decision looks exceptionally imprudent.
Conclusion
Answering the question about the dismissal of employees, we can say that P&O Ferries may have made the only possible decision in a crisis, but they did it in the most unethical way. As a result, the company itself remained in a difficult situation, which did not allow finalizing the employees and was forced to cancel flights – it lost its competitive advantage. Employees also filled the labor market with a mass of supply in the absence of demand, which at the macroeconomic level caused a situation of imbalance and, in the long run, can lead to a deterioration in national GDP and unemployment. Many offers on the market reduce the growth of wages for specialists and put students in this specialty at a disadvantage. During the Great Recession and Pandemic, many mechanisms were put in place to keep jobs at minimum wages. Due to the company’s social responsibility, P&O Ferries had to offer options for mitigating the consequences, inform about the crisis in advance, and, if possible, personally.
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