It comes as a surprise to living wage advocates that entrepreneurs are so alert to the impact of downsizing and firm closures on employee morale that they keep these a secret to the last possible minute.
Entrepreneurs are not fools. They profit from alertness to the effects of changes in the fortunes of the firm on labour productivity. There is a vast literature on how to motivate workers towards more effort and diligence and honesty.
I worked at a Japanese private university whose financial survival was always in question. We spent a lot of time gossiping about the security of our jobs.
I refer to one year at one employer as the year of doing nothing because management was so consumed with restructuring and downsizing. They were too busy to sign out the output of their staff.
I have come across an estimate the effect of downsizing announcement on productivity at a German bakery chain of 193 shops.
The study found that announcements of a sale to a new owner and closure reduced sales by six and 21 percent, respectively. This negative effect increased with the share of workers on a permanent contract, even though these workers faced a much lower unemployment risk. Fewer customers were served per unit of time because of less employee effort at the bakery chain.
Going back to my year of doing nothing, which dragged out through worker consultations sought by the unions under the collective agreement, I remember chatting to a mate whose father was in the downsizing consulting business. He told me that private businesses get downsizing over as quickly as possible because of the impact on morale and productivity. Entrepreneurs are perfectly aware that uncertainty promotes office gossip and valuable staff moving on.
Utopia, you are standing in it! 
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