What is the purpose behind layoffs?

When businesses lay employees off, they are trying to improve their profitability (or reduce their losses, which is essentially the same thing).  Sometimes, businesses are forced to lay people off by poor economics times.  Other times, businesses choose to lay people off (though the businesses would say they are forced to) in order to become more profitable.

Sometimes, businesses have to lay people off because the economy has gone bad or because people no longer...

When businesses lay employees off, they are trying to improve their profitability (or reduce their losses, which is essentially the same thing).  Sometimes, businesses are forced to lay people off by poor economics times.  Other times, businesses choose to lay people off (though the businesses would say they are forced to) in order to become more profitable.

Sometimes, businesses have to lay people off because the economy has gone bad or because people no longer want so much of what the business is selling.  For example, imagine that you owned a construction company at the start of the “Great Recession” in the late 2000s.  When the recession hit and people stopped building new housing developments, you would have had to lay workers off because you had no work for them.  Or imagine that you had a company that produced film for cameras.  You would have had to lay people off as digital cameras became popular and people no longer wanted your product.  In other words, sometimes businesses just have to lay people off in order to survive.

On the other hand, businesses sometimes lay people off even when times are good.  This usually happens when the business finds a new way to do the same amount of work with fewer people or at a lower price.  Often, this kind of layoff happens when new kinds of machinery are invented.  Sometimes, it happens when companies move some of their production to places where wages are lower.  Either way, these businesses are laying people off even though times are not that bad.  These kinds of layoffs tend to make people very angry, but businesses justify them by saying they have to lay people off in those situations or else they would no longer be able to compete and would eventually go broke.

Thus, layoffs tend to happen so that businesses can increase their ability to prosper or decrease their chances of losing money.