Chapter 5 Blog

AbitibiBowater to suspends at several plants, affects 1,500 jobs in Canada
http://ca.news.finance.yahoo.com/s/17092009/2/biz-finance-abitibibowater-suspends-several-plants-affects-1-500-jobs.html

Summary
A Montreal-based company, AbitibiBowater, has to stop its production at several facilities due to its financial problems. Aside from stopping production, as much as 1500 jobs will be affected due to the outcome of this decision. The reason for this decision is because of the lessening demand for newsprint. A spokesman for the company said that the demand for newsprint has dropped as much as 30% within a year. Along with many forestry industries in Canada, AbitibiBowater has been greatly affected during the recession. An attempt to restructure the company would be difficult since AbitibiBowater is operating with little profit while carrying a huge debt load.

Connection
This article linked with chatper 5 Ecnomic Indicators because the decision made by the company directly effect the unemployment rate in the country. Unempolyment rate is the employment-to-population ratio. By stopping the company's production 1,500 employees will be lay off, this will incease Canada's unemployment rate. AbitibiBowater Inc. laid off workers due to the financial problems, this is Demand-Deficient Unemplyment, which happened when the company's sales is decreasing so they don't need to use as many workers, so they laid off workers to cut the expenses. The unemployment of this company is not only effecting the unemployment rate, it will also affect the participation rate.

Reflection:
I personally don't support lay off workers, but I understand that cut the expenses especially workers is the first thing every company would do when they are facing financial problems. But, if the company laying off workers because the decrease of their sales, laying of workers will help a little by decreasing the expenses but it won't help the decerase in sales. Workers got lay off, they have no income, they will starting to buy less, this will maybe cause raising the decrease amount of the sales, which the sales will be decrease more than before they lay off the workers. This leads us to these questions, is it a good thing to lay off workers? Does it really help company's financial problems in longer term?