Circuit City lays off 3,700 salespeople

— 4:40 PM on March 29, 2007

After closing down 70 of its stores in the United States and Canada last month, Circuit City has announced that it has now fired 3,400 of its highest-paid salesmen and saleswomen. According to the San Diego Union-Tribune, the electronics retail chain plans to replace the workers with lower-paid staff—a way to cut costs that is reportedly both risky and unusual. Circuit City's high-paid sales staff aren't being thrown out on the street, though. The company says it will provide them with severance packages and give them a chance to apply for lower-paid jobs after a delay of 10 weeks.

The sales staff represents 8% of Circuit City's total work force, and the retail chain expects the layoffs to cut its expenses by $110 million in 2008 and $140 million in 2009. However, some think the move might backfire. "You can hire a bunch of cheap, inexperienced people but that has to show up as diminished service and probably lower sales," Economic Policy Institute senior economist Jared Bernstein told the Union-Tribune.

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