The Washington Post reports that about 47,000 employees have accepted buyout packages from General Motors and its supplier Delphi Corp, which makes it the largest of such buyout in corporate history.  This kind of buyout is apparently on the rise.  Ford has instituted a buyout program in which it expects 11,000 workers to participate.  Even the federal government has gotten into the act.  The GAO reports that since 2002 when Congress authorized such buyouts, the number of federal agencies offering buyouts to their employees has nearly doubled.

           On the surface employee buyout programs seem like a win-win situation.  Employees get to control their own fate, while the corporation gets to restructure and cut costs in a manner that appears—as some have argued—“compassionate” and “humane.” 

           But then I am reminded of something Judge Easterbrook said of another GM program in McNab v. General Motors, 162 F.3d 959, 960 (7th Cir. 1998): "Like many other firms, General Motors Corporation uses early-retirement programs to reduce its workforce without resorting to involuntary separation. One problem with early-retirement systems, however, is that the best employees may leap at the opportunity, knowing that they can add income from other jobs to their retirement packages; the firm wants to keep these superior employees while shedding those who are not up to snuff, but the sub-par workers are less willing to go, because they may value sinecures and do not expect to find comparable employment elsewhere. If the firm augments the early-retirement incentive to make it attractive to employees who lack prospects of finding other jobs, then the best employees have even more reason to take the offer. To overcome this problem of adverse selection, firms may limit early-retirement programs to employees chosen by management. Managers offer the package to the weakest members of the staff, simultaneously cutting their unit's budget and improving the average quality of its workers. But good workers may take exclusion poorly; why, they may ask, should rewards vary inversely with quality? Resentment may lead to litigation."

       So the win-win idea may be taking it a bit too far.  As Easterbrook suggests, these programs appear to target older workers who lose benefits they may not be able to recover in the market.  Yet it seems like a better alternative than lay-offs.  Thus, it still feels like a net positive for both groups.

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