Companies respond to the corona crisis by adjusting labour costs

Abstract

The corona pandemic and the related lockdown measures have led to a strong contraction in business turnover and weakening of profitability, particularly in the service industries. If the profitability crisis persists, it will turn into a liquidity crisis and the risk of corporate bankruptcies will increase. Companies can, to some extent, adjust to the decline in turnover by cutting costs, for example by decreasing purchase volumes and by negotiating reductions to other cost items, such as rents. With the help of temporary lay-offs, companies can even adjust staff expenditure rapidly, if necessary.