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Is 'Last Hired, First Fired' Worse for Minorities?

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For as long as companies have had employees, layoffs have been an unpleasant bedfellow. When the business cycle shifts downwards, cutting staff often seems like the fastest way for firms to stay afloat financially. But there’s concern that this layoff season may be hitting minorities the hardest.

The problem stems from ‘last in, first out’ (LIFO) layoff policies. A 2014 study by sociology professor Alexandra Kalev at the University of Tel Aviv shows that when companies conduct layoffs on the basis of tenure, minorities are disproportionately affected. It’s too early to tell whether this trend is continuing across all sectors this year, but so far Black and Latino professionals in tech may be having a tougher time—they reportedly comprised 7.42% and 11.49% respectively of tech reductions in 2022 but make up only 6.05% and 9.96% of the sector. “I’m concerned about companies getting rid of the folks who were last hired,” says JT Saunders, Korn Ferry’s Chief Diversity Officer, “because they tend to be more diverse.”

Ironically, for some companies, LIFO became more popular following a series of discrimination lawsuits brought against them in 2018. The goal of the layoff policy was neutrality, but experts say the reality is that workers from underrepresented backgrounds are concentrated in entry-level positions—and thus statistically more likely to be let go. Experts add that contractors are often typically laid off before full-time employees, and a study from Pew Research found that Black and Latinx workers are more likely to be gig workers than other ethnic groups. “If companies follow the pattern of previous layoff seasons, we can anticipate that minorities are going to get disproportionately portion hit again,” says Andrés Tapia, Korn Ferry Senior Client Partner and Global Diversity and Inclusion Strategist.

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Experts say focusing on skills, rather than seniority, should be the new normal in layoffs. Our research shows that well-managed diverse teams can significantly outperform well-managed homogeneous ones. And an inclusive workplace reportedly creates a virtuous cycle that attracts more diverse hires and also boosts employee retention 5.4 times higher. “You want to be a company that keeps its competitive edge,” says Tapia.

In contrast, experts say finding your firm lacking in diversity post-layoffs can hurt its reputation down the road. When the down cycle shifts upwards, firms will once again be looking for the same batch of diverse hires they had recently let go—but perhaps with less satisfying results from wary, once-bitten workers. Two-thirds of job seekers reportedly claim workplace diversity is a significant factor when deciding where to work, so improperly handling layoffs could have a huge impact on talent acquisition, say experts. “It's going to come back and haunt you,” says Marco Mingolla, who leads Korn Ferry’s EMEA Practice for People and Talent Strategies.

Reskilling or redeploying talent, say experts, can solve the issue by avoiding layoffs altogether. As an example, at the start of the pandemic, one major hospitality chain moved its recruiters to outplacement roles, where they helped laid-off workers seek new employment. According to the Harvard Business Review, it takes outside hires three years to perform as well in the same job as internal hires. “If you're solely thinking of getting rid of folks, you could lose out on very skilled workers,” says Saunders.

If layoffs must happen, moving the criteria away from tenure is as much about innovation as it is diversity, says Tapia. He notes that Gen Z is statistically more diverse than prior generations, and it’s in companies’ best interest to retain the workforce with the most forward-looking perspectives. “Go for the skills of tomorrow,” says Tapia.

For more insight on how best to navigate your DE&I journey, contact us today or explore our Diversity, Equity and Inclusion services.

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