Debt and the terms of employment

For the last two decades, firms with higher debt have reduced their employment more often, used more part time and seasonal employees, paid lower wages, and funded pension plans less generously. These effects are economically significant and cannot be explained by variation in performance. Thus debt seems to discipline the employment relationship. However, this result reflects a clear historical reversal, during the years 1967-73, of the opposite effect that prevailed in the 1950s. Apparently some of the disciplinary effects of debt are driven by forces that emerged during the period now colloquially referred to as the Sixties. (C) 1998 Elsevier Science S.A. All rights reserved.