New Research on How Layoffs Affect the Labor Market – Harvard Business Review

New Research on How Layoffs Affect the Labor Market – Harvard Business Review

 

Economic Downturns and Their Impact on Sustainable Development Goals

Report Date: July 21, 2025

Analysis of prevailing economic forecasts indicates a significant risk of a recession in the United States. A common corporate strategy during such downturns involves immediate workforce reductions. This report examines the implications of such actions through the lens of the United Nations Sustainable Development Goals (SDGs), highlighting the conflict between conventional business responses and the 2030 Agenda for Sustainable Development.

The Direct Challenge to SDG 8: Decent Work and Economic Growth

Corporate downsizing in response to macroeconomic uncertainty directly contravenes the principles of SDG 8, which aims to promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. The consequences of such measures include:

  • Erosion of Productive Employment: Mass layoffs fundamentally undermine the goal of achieving full and productive employment, creating instability within the labor market.
  • Threats to Decent Work: The practice of downsizing jeopardizes job security, a key component of decent work, and can lead to a rise in precarious employment.
  • Damage to Sustainable Economic Growth: Widespread job cuts can cause lingering damage to the labor market, hindering long-term economic recovery and sustainable growth.

Cascading Negative Impacts on Core SDGs

The repercussions of workforce reductions extend beyond SDG 8, creating significant setbacks for several other interconnected goals. The primary effects are observed in the following areas:

  1. SDG 1 (No Poverty): Job loss is a primary driver of poverty. By eliminating household incomes, large-scale layoffs can push a significant number of individuals and families below the poverty line.
  2. SDG 10 (Reduced Inequalities): Recessions and subsequent downsizing often disproportionately affect vulnerable and low-income workers, thereby exacerbating existing social and economic inequalities.
  3. SDG 3 (Good Health and Well-being): The economic insecurity and stress associated with job loss have well-documented negative effects on both mental and physical health, directly conflicting with the objective of ensuring healthy lives and promoting well-being for all.

Analysis of Sustainable Development Goals (SDGs) in the Article

  1. Relevant Sustainable Development Goals (SDGs)

    • SDG 8: Decent Work and Economic Growth
    • The article directly addresses the core themes of SDG 8 by focusing on economic conditions (the threat of a recession) and their impact on employment. The text highlights how economic downturns lead to companies “downsizing their workforce,” which runs counter to the goal of promoting “full and productive employment and decent work for all.” The mention of “devastating consequences on workers” and “lingering damage to the labor market” explicitly connects the economic issue of a recession to the social and economic well-being of the workforce, which is central to SDG 8.

  2. Identified SDG Targets

    • Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
    • This target is clearly identifiable as the article’s main concern is the loss of employment. The phrase “employment cuts can have devastating consequences on workers” directly points to a failure to achieve or maintain full and productive employment. The discussion of companies responding to a recession by “downsizing their workforce” is the exact opposite of the objective stated in Target 8.5.

  3. Implied SDG Indicators

    • Indicator 8.5.2: Unemployment rate, by sex, age and persons with disabilities.
    • The article implies this indicator by repeatedly referring to actions that directly affect unemployment levels. Phrases like “downsizing their workforce” and “employment cuts” are direct causes of a rising unemployment rate. The “damage to the labor market” can be quantitatively measured by the unemployment rate, making it the most relevant indicator for tracking the negative impacts described in the text.

Summary Table: SDGs, Targets, and Indicators

SDGs Targets Indicators
SDG 8: Decent Work and Economic Growth Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value. Indicator 8.5.2: Unemployment rate.

Source: hbr.org