Circuit City targets better-paid workers for layoff

A new plan for layoffs at Circuit City is openly targeting better-paid workers, risking a public backlash by implying that its wages are as subject to discounts as its flat-screen TVs. The electronics retailer, facing larger competitors and falling sales, said Wednesday that it would lay off about 3,400 store workers — immediately — and replace them with lower-paid new hires as soon as possible. The company will lay off 33 workers in eight St. Louis area stores. The laid-off workers, about 8 percent of the company's total work force, would get a severance package and a chance to reapply for their former jobs, at lower pay, after a 10-week delay, the company said.

Analysts and economists said the move is an uncertain experiment that could backfire for the chain. They say morale could sink and customers could avoid the stores. Also, knowledgeable customer service is one of the few ways Circuit City can tackle competitors that include Wal-Mart Stores Inc., they say. "This strategy strikes me as being quite cold," said Bernard Baumohl, executive director of the Economic Outlook Group. "I don't think it's in the best interest of Circuit City as a whole." While other companies have introduced two-tiered wage systems, where newer workers make less, firing workers and offering to rehire them at a lower wage is rare. "I don't think you're going to find too many examples," of this, said Ken Goldstein, labor economist for the Conference Board, a business research group. "That certainly has not been a trend we've seen." Circuit City, the nation's No. 2 consumer electronics retailer behind Best Buy Co., says the workers being laid off were earning "well above the market-based salary range for their role." They will be replaced with employees who will be paid at the current market range, the company said in a news release.