[tcskeptic]

Yes, this exactly, and observed in practice. Layoffs in non-union shops are not done by seniority (Talking manufacturing here) they are done by relatively objective measures of employee "goodness" things like attendance, piece productivity, safety procedure compliance, etc. We (in manufacturing) know this before the layoffs occur and account for it in financial and strategic planning. We also account for it when hiring starts again. Not only will skill levels go down, but far from the new folks arriving with universally great attitudes and work ethics after having been unemployed for a while, the incoming workers on average will be significantly less productive attitude wise than the existing workforce. This will only gradually improve until the next downturn. The newly hired who are truly terrible will probably get fired in the interim, the newly hired who are mediocre will bump along and be the first out the door during the next layoff. (And yes, the sad truth is that cyclical layoffs are a fact of life for many manufacturing workers)

I assume that this would apply in other industries as well.