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OCR for page 216
D Statement of Anne 0. Krueger Advance notification of layoffs is undoubtedly beneficial to those workers who will lose their jobs. If there were no negative side effects associated with advance notification, it would clearly be beneficial to all. There will be several side effects, however, if notification is mandatory. First, the necessary enforcement apparatus would increase the cost of doing business. Second, for all firms, but especially for risky ones, knowledge that layoffs could not be made on short notice would increase incentives to use capital and hire fewer workers. To the extent that fewer jobs would be created, the proposed requirement would hurt the employ- ment prospects of those the proposal is designed to assist. That manda- tory periods prior to layoffs can result in smaller levels of employment has been well documented in a number of developing countries. Third, requirements of advance notification reduce the flexibility of firms already in difficulty. The requirement is, in effect, the same as a tax for these firms. I conclude that advance notification is desirable, and efforts to educate employers of its value to employees should be encouraged. With respect to mandatory notification, however, I believe that the evidence is far from sufficient to warrant such a step. 216