Cash for Clunkers

I was reading about the fed’s Car Allowance Rebate System and started wondering about its applicability to human capital in organizations.Cash for Clunkers

The “cash for clunkers” program in a nutshell: it’s a $1 billion program that provides a voucher of up to $4,500 to help offset the cost of a new fuel-efficient car purchase or lease.  You can only trade in drivable vehicles made in the last 25 years that have been continuously insured by the same owner for at least one year leading up to the trade in, so no junkyard finds or used cars can be bought to be “flipped.”

With all of the layoffs, right sizings, competitive build-downs, reengineering, release of resources, negative hiring, de-recruiting going on (we have lots of terms for “dirty” words, don’t we) , it occurred to me that organizations have their own cash for clunkers program.  Except many of the folks who are being traded in today are not clunkers – even if they were “insured” by the same business owner for the past 10 or more years.

What I’m talking about here are the people who, for one reason or another, are being let go by their organizations because of the perception that they are paid too much, cost too much, are too old, etc.  At the beginning of the year, reported that at the end of 2008, 2.6 million jobs were lost; the highest level in more than six decades.  And 2009 ain’t looking so pretty either.  The Washington Post reports that,

“The number of job losses had decreased every month since January before spiking again in June, and economists think it is highly likely that the jobless rate will hit double-digits later this year. A broader measure of unemployment, which includes people working part time who want full-time work and those who have given up looking for a job, has already risen to 16.5 percent. The nation now has the same number of jobs it did in 2000, meaning that nine years of employment gains have disappeared.”

We know that organizations downsize to reduce costs, generate positive shareholder reaction, increase productivity, or to better decision-making – or so they say.  Estimates are that each laid-off employee will cost the company 50% of the person’s compensation and benefits for each week the position is vacant, even if other people are performing those duties.  So, short term, save some cash.  Long term, cost savings are obliterated, especially when new folks (no matter how old or young they are)  are brought back into the job.

More importantly though, what is the cost of this “cash for clunkers’ to our society, nevermind our economy?  I read this statistic – pretty scary – that for every 1% rise in the unemployment rate, the U.S. suffers  36,887 additional deaths, 20,240 heart attacks, 495 alcohol-related deaths, 920 suicides, 648 homicides, 4,227 admissions to mental hospitals, and 3,340 state prison admissions. 

So, who are we helping here folks? 

Our challenge as HR pros is to help our organizations react to outside threats and strategically manage people to help prevent talent flight and the deterioration of morale.  But I believe we have a much larger role to play – shouldn’t we be coaching our business leaders to look at the bigger picture and rather than use a “cash for clunkers” program, employ “cash for care” instead?  You decide.



  1. Really nice post, and I like the ‘Cash for Care’ idea. I thought I saw some statistics that tend to show those firms that can navigate through difficult times without resorting to mass downsizing often emerge on the other side in a stronger position. I would love to see what you think are the key points in your ‘Cash for Care’ idea.

  2. Good points HR Whisperer! Unfortunately what I’m seeing in today’s business climate is that leaders tend to go for what they perceive as the quick fix solution vs. use of more “performance results”, bigger picture, and strategic level thinking. For example, redesign of the employees’ jobs to include aspects that drive revenue, and use of incentives to reward top performance. Implementing these types of change is comparable to getting 10-20+ more miles per gallon from the existing “clunkers” – with a lot less collateral damage ending up at the scrap yard. Peace, – P

    • HR Whisperer says:

      Thanks, P – yes, unfortunately a lot of leaders are looking for the “quick fix” rather than treating the root cause or addiction…..

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