financial and non-financial disadvantages to the employee due to lack of learning and development.

 

The global economy has been rocked by various financial crises throughout history, from the stock market crash of 1929 to the more recent subprime mortgage crisis of 2008. However, financial crises are not just a phenomenon of the past or distant future; it can strike at anytime, anywhere, and have a significant impact on individuals, families, and communities. In this article, we will explore how financial crises affect employees and their livelihoods, and examine some of how companies can support their employees during these challenging times. While I won't focus specifically on the 2008 financial crisis, I will draw from the lessons learned during that time to help shed light on the impact of financial crises on the modern workforce.

The world has experienced several economic crises throughout history; each time, it has affected the workforce in various ways. When an economic crisis occurs, companies often find themselves struggling to stay afloat, which can lead to layoffs, salary cuts, and hiring freezes. These measures can profoundly impact employees, affecting their financial stability, job security, and overall well-being.

Job Loss:

One of the primary ways that an economic crisis affects employees is through job loss. When companies are faced with financial difficulties, one of the first measures they take to cut costs is to lay off employees. Losing a job can be a devastating experience for an individual, especially if they have been working for the company for a long time. It can lead to feelings of anxiety, depression, and a loss of self-worth (Deller, J & Stubbs ,W 2016).

Even for employees who are fortunate enough to keep their jobs during an economic crisis, there may be other consequences to contend with. For example, many companies will implement a hiring freeze, which means that there will be no new job openings, promotions, or salary increases. This can lead to feelings of frustration and a lack of motivation among employees who feel stuck in their current roles. One HR theory related to job loss’s effects during an economic crisis is Maslow's Hierarchy of Needs. This theory suggests that individuals have a hierarchy of needs that must be fulfilled for them to achieve self-actualization. The most basic needs are physiological, such as food and shelter, followed by safety needs, such as job security. When employees lose their jobs during an economic crisis, their safety needs are threatened, leading to anxiety and a loss of self-worth. Furthermore, the conservation of resources theory suggests that individuals strive to protect and build their resources, such as financial resources and social support. Losing a job during an economic crisis can lead to a loss of financial resources and social support, which can have negative effects on an individual's well-being. Overall, these HR theories highlight the importance of job security and fulfilling the expectations of the employment relationship in maintaining employee well-being during an economic crisis.

Reducing the Salary:

Another way that an economic crisis affects employees is through salary cuts. To cut costs, some companies may reduce the salaries of their employees. This can be a significant blow to an individual's financial stability, especially if they were already struggling to make ends meet.

A reduced salary can lead to difficulty paying bills, buying groceries, and other necessary expenses. The concept of compensation and benefits in HR management theory can be linked to the impact of salary cuts during an economic crisis (Matsuo, M 2017). According to this theory, an organization must offer competitive compensation and benefits to attract and retain talented employees. When a company reduces an employee's salary, it can be seen as a violation of this principle. It can lead to dissatisfaction among employees and a decrease in morale, which can ultimately result in reduced productivity and poor job performance. In the context of an economic crisis, HR managers must carefully consider the impact of salary cuts on employee satisfaction and motivation to minimize negative consequences.

Employee Motivation:

The Expectancy Theory is the HR theory that can help explain the impact of an economic crisis on employee morale. This theory suggests that employees are motivated by their belief that their efforts will lead to a desired outcome. However, during an economic crisis, employees may question whether their efforts will lead to job security and advancement opportunities. This uncertainty can lead to a decline in motivation and morale. Moreover, an economic crisis can also have an impact on employee morale. When a company is facing financial difficulties, there may be a sense of uncertainty and instability among employees. This can lead to a decline in morale, as employees worry about their job security and the future of the company. The stress and anxiety caused by this uncertainty can also lead to a decline in productivity and increased absenteeism.

One potential way to mitigate the effects of an economic crisis on employees is for companies to be transparent and communicative with their workforce. By being upfront about the challenges the company is facing and what measures they are taking to address them, companies can help to alleviate some of the anxiety and uncertainty among employees(Sarwar,A 2019). Additionally, companies can consider implementing employee assistance programs, such as financial counseling or mental health resources, to help employees navigate the challenges they may be facing.

In conclusion, an economic crisis may have a significant influence on workers, hurting their general

 welfare as well as their capacity to maintain their financial stability and maintain their jobs. An

 economic crisis may have far-reaching impacts, including the reduction or elimination of jobs and

 salaries as well as a dampening of morale among workers. It is critical for businesses to maintain open

 and honest communication with their workforce and to take into consideration the implementation of

 employee support programs to aid workers in navigating the challenges presented by the current

 environment.

 

References

Bae, J. & Cho, S., 2016. The impact of the 2008 financial crisis on firm innovation: Evidence from patent-based measures. Journal of Business Research.

Deller, J. & Stubbs, W., 2016. Workplace stress, well-being and creativity in a changing economy. International Journal of Innovation Management.

Matsuo, M., 2017. Financial crisis and human resource management., s.l.: s.n.

Pellegrino, S. & Lodigiani, E., 2017. The impact of financial crises on female labour. Journal of Labour Policy.

Sarwar, A., 2019. Impact of financial crisis on job satisfaction and motivation of employees: A case study of the banking sector in Pakistan. Journal of Business and Management Sciences.