Given some thought on this subject overnight, I believe this was inevitable. Not only because of the economy, but the push for WotC to reduce costs on material production by moving their share of effort into the digital market.
No, it was inevitable because Wizards does this
every year around this time They lay off people, switch to using more freelancers, realize that they need more in-house people to help things run smoothly, hire more in-house people, then have a layoff when your projected budget starts looking wrong. It's a crappy way to run a company, and a crappy way to treat your employees. I have friends there that have been laid off and rehired by Wizards two or more times now ... Wizards just keeps repeating the cycle.
See, Hasbro is a dying company. They don't produce anything new or innovative, they're too "east coast" and set in their "old business" mindset. What they do is find interesting, profitable young companies, buy them, squeeze as much money as they can out of them, crush everything that is unique and innovative about them, and then discard them when they're no longer profitable. As a former Wizards person pointed out to me, Wizards of the Coast (and other Hasbro acquisitions like Galoob) are "chemotherapy" to Hasbro. In a year where every division of Hasbro lost money except for Wizards, Hasbro had a company-wide flat headcount reduction, even for Wizards (still flush with money from Pokemon, Magic, and 3e). Hasbro started "fun alerts" in its daughter companies, pushing the employees to have fun at work (net result: "fun alert" Mr Potato Head posters popped up at the Wizards office), ignoring that people at Wizards were already having fun making great games. So when you see things like these layoffs, it's corporate types saying, "making $8 million profit per year on this brand isn't enough, you have to make $10 million profit," and then
letting go of the people who make your profit in order to cut costs (i.e., salaries) and give the
appearance of extra profit. Far too many companies act this way, whether it's cutting benefits, shipping jobs to cheaper workers overseas, etc. ... it looks good on paper in the short term, but 1, 2, 5, or 10 years down the road you look at the ruins of your business and wonder why profits are still down and your employees have no loyalty.
That really depends on the circumstances.
Hasbro is a publicly traded company. The company has an ethical obligation to put the interests of the shareholders ahead of the personal interests of both management and employees.
You can be fair and responsible in your treatment of your employees
and fair and responsible to the financial interests of your investors. You don't have to maximize one at the expense of the other. Netting $8 million every year for the next 10 years is better than netting $10 million this year, $9 million the next, then $8m, etc., all the way down to $1 on the 10th year ($80 million vs. $55 million).
From time to time at TSR people would talk about forming a union of designers and editors. I've heard that Lorraine's response was, "If you form a union, I'll fire you all and replace you with college students happy to do this work for half the pay, or even free." While she could do such a thing, the quality of your products would suffer (much like how the quality of the D&D minis has gone downhill), and that would alienate your customers, and that eventually makes up for the "savings" of hiring cheaper workers. It's stupid and shortsighted.
And to repeat: this is an annual thing for Wizards. And doing this right before the holidays is especially sleazy.
To use a potential example (and I have no idea if this is actually happening at WotC, but something similar could), if I'm Bruce Cordell (3E Psionics Guru), and I'm tasked with writing Psionics for 4E, and that book hasn't yet been completed, I have to wonder if upon its completion that I'm now suddenly "expendable".
You just described the TSR layoffs of late 1996: if you were finished with your project, you were laid off because you weren't needed in the immediate future. So, yes, it happens.