The salience of costs and the hidden value of benefits can help account for the
persistence of downsizing. In cyclical industries such as oil drilling, virtually every
company faces the same general conditions, so they tend to lay off and rehire at the
same time. Cycles of layoffs have driven some experienced workers from the
industry into other employment where their skills can be used on a more constant
basis. These same cycles have discouraged new employees from entering the
industry. With secular growth in demand for drilling-rig labor, there is increasing
labor scarcity over time. Consequently, each new round of hiring is accompanied by
escalating salaries and signing bonuses as companies compete for the same set of
people, many of whom they had laid off in the past year or two. It is not clear that
a decision to “inventory” (retain) skilled labor during temporary downturns would
really be more costly than continually having to compete when the labor market is
tight.