DEBT AND THE TERMS OF EMPLOYMENT

For the last two decades, firms with higher debt have reduced their em ployment more often, used more part time and seasonal employees, paid lower wages, and funded pension plans less generously. These effects a re economically significant and cannot be explained by variation in pe rformance. 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. App arently some of the disciplinary effects of debt are driven by forces that emerged during the period now colloquially referred to as the Six ties. (C) 1998 Elsevier Science S.A. All rights reserved.