Circuit City may be paying some employees too much compared to the prevailing market, but this move doesn’t seem wise:

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 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.

Obviously a company that can’t make money won’t be able to pay any employees; but was the situation so dire that a wage freeze wasn’t viable? Last year’s inflation rate was 3.24% and this year it seems to be on the same track. One would think using inflation would have been a better way to bring wages in line.

Circuit City has chosen a path of negative good-will with employees and customers. A couple of years ago Best Buy let go an extended family member under circumstances that didn’t reflect well on that company; no one in the family has been back. Circuit City just created 3400 families with a similar disposition.