Should U.S. Companies Be Required To Provide Severance Pay?

Severance Pay

When a person loses their job after they’ve worked at the same company for a considerable length of time, the experience can be quite traumatic. If no severance pay is being offered to the worker, the whole situation can become even more stressful due to possible financial insecurity.

In a current business opinion article on the South Florida Sun Sentinel website, economist Dean Baker explains why he thinks that more U.S. corporations should be providing severance pay to their employees when they lose their jobs.

Research shows that it can be very difficult for long-term workers, particularly older ones, to find new employment after they have lost their jobs. If they do find new work, the wages are generally lower than what they were previously receiving.

According to Mr. Baker, all of the world’s wealthy countries besides America provide some type of severance pay for long-term workers when job loss is experienced. In the U.S., only the state of Montana ensures that workers receive some type of severance pay when they lose their jobs.

A severance pay scale that Dean Baker considers to be reasonable would provide workers with two weeks of pay for every year that they have worked for a company. The proposed maximum that a person could receive compensation for would be 40 weeks.

Because former long-term employees often utilize public assistance such as unemployment insurance, required severance pay would lead to a reduction in government-dependence.

Mr. Baker makes it clear that a proposed policy of requiring severance pay would only apply to people who have been let go because of business-related reasons. Workers who were fired for poor job performance or violation of company rules would not be eligible for severance pay.

With worker benefits like paid family leave already being proposed at various levels of government throughout the U.S., Dean Baker suggests that severance pay also be debated in the American political arena.

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