It appears to me that the employees with the desirable traits will look for work elsewhere and only the employees without the skills to find other work will re-apply for their old position at the lower pay.

I agree that Circuit City should not and probably can't afford to pay more than the going rate for people with similar skills doing similar jobs. Their error was in not taking the time or trouble to evaluate each individual employee on the merits of their capabilities. They might have even found that some employees deserved a raise.

It costs a lot of money to advertise for workers, read and cull the applications and interview prospects. Even then it's difficult to gauge a person's actual abilities with certainty and some mistakes will be made. Here is a situation where each of these employees already had a history with the company and simply asking the store manager about the value of each employee could have resulted in huge savings. I hope this was done and the 3400 employees were the 10% at the bottom of the rankings but it doesn't sound like it.

Right or wrong, in New Zealand mass layoffs followed by mass hirings would get you a serious fine with each employee receiving payment for backpay and reimbursed for hurt and humiliation. You can lay off people legitimately but then can't go and rehire for a reasonable amount of time and without good reasons.

Cheers,

Bert