Do businesses benefit from labor hoarding?

Abstract This paper examines whether firms that retained more employees than predicted during the Great Recession, often termed “labor hoarding,” experienced benefits over 7 years. Using establishment-level data from the Infogroup Historical Business Database, we estimate labor hoarding and assess its impact on firm survival, employment, and sales in the recovery period. We find that labor hoarding firms were significantly more likely to survive, with the effect strongest for women-owned and women-led businesses. However, these firms grew more slowly in both employment and sales than non-hoarding counterparts, who needed to rehire post-recession. Our results suggest that retaining workers acts less as an added cost and more as a strategy of “workforce preservation,” providing stability at the expense of rapid post-recession growth. These findings highlight that policies supporting workforce retention, such as the Paycheck Protection Program, may improve business survival and economic resilience, especially for women-led firms.