Not a Debt Crisis or a Liquidity Crisis but an Ethics Crisis

Apparently, Microsoft Corp sent 1,400 collection letters out to employees hoping they would return overpayments in their severance pay. Former employees received the letter which gave them 14 days to refund portions of their severance payments. It has become a real embarrassing public relations matter for the world's largest software maker which has a problem accounting for payroll. "This letter is to inform you that an inadvertent administrative error occurred that resulted in an overpayment in severance pay by Microsoft," the letter said. "As it turns out, the Microsoft accounting department overpaid their severance to former employees who were laid off last month. Several blogs on the Web are having a field day by asking if Microsoft Windows Vista was the culprit. Another Web user posted "I bet it was the latest Microsoft Excel upgrade!" While it is unknown if it was Vista or Excel, you can bet that the humor about the payroll error will be around for a long time. When asked if the former Microsoft employee will return the money, she said "Yes. It's not mine to keep."Some workers will not return the overpayments. They feel that it's the fault of the company, and they need the extra severance to survive. They feel that it's a Microsoft mistake, and therefore, they will not pay it back. Other workers are just down on their luck, out of work, and need the cash to survive.

The statistics are alarming: Nearly 2 million people have lost their jobs in the last three months, almost 600,000 in January alone. The national unemployment rate has reached 7.6%. In California it's 9.3%.

But the numbers are only half the story.

The other half is what happens to people and families when a job disappears. The psychological and emotional toll can be devastating.

"Our culture is based on what people do and how much they make," said Sharon Tucker, an L.A. psychologist who says an increasing number of her clients are dealing with layoff-related issues. "For a lot of people, being laid off means your identity has been taken away."

Dorothea Braginsky, a psychology professor at Fairfield University in Connecticut who has spent decades studying how layoffs affect people, said the link between people's jobs and their sense of self-worth is established at an early age -- and reinforced throughout our lives.

"One of the first things we ask little children is what they want to be when they grow up," she said. "When we meet people at a party, one of the first things we ask is what they do. It really becomes an essential part of self-definition."

Beginning in the 1970s, Braginsky started following a group of 50 men who'd lost their jobs.

She found that the trauma of the experience could be long-lasting, for both the men and their loved ones.

"The men who found new jobs eventually recovered their self-esteem, but it never got back to the point of men who had not lost their jobs," Braginsky said.

At the same time, she saw cynicism and distrust rise among those who'd been laid off. These feelings affected relationships with spouses and were passed on to children.

That dynamic, Braginsky predicted, will play out again in the current downturn, resulting in a generation of young people who will approach jobs and relationships with a sense of wariness instilled early on.

We'll see the ramifications of this for many years, she said. "Things are going to be different for people after this, and it's not going to be good."