Are Layoffs THE SOLUTION?

At times like these when business is bad, cost cutting is a decision not made by choice, but rather by force. With this in mind comes the call for avenues of "Quick" cost cutting methods and the ones regularly tapped include downsizing (some one's pretty way of saying, "Thank you for working with us for all those years. We cant afford you right now. Goodbye".), freeze fresh hiring, slash perks, allowances and if the need be then advertising expenses.
But the law of equilibrium holds good here too. The ones who are laid off, usually are hired 3 or 4 years down the line by the same company or its competitors at a huge premium. Take for example 2001 when IT graduates were barely able to land a Rs10000 a month job. In 2004, the same IT engineer was bagging close to Rs85000 a month. If you talk about hiring fresh talent for a below average package due to the global scenario, then more often than not, it is seen that the talent tends to use the company as a stepping stone during the tough times and a year or so later, moves to greener pastures.
The important question is whether both the company and the employees gain from this at the end of the day. I say NO. The companies that understand this, focus on retaining employees and being fair to new hires and involve the entire organization in intelligent waste management of available resources rather than blind and aimless cost cutting.
What came to me as a surprise was that an Ernst & Young HR told me that the bottom most layer of the pyramid does not bother them in terms of attrition or layoffs as the cost of training and replacing them is very low. What bothers them is an experienced employee leaving the company or being poached.
I guess that's the corporate version of "expendable".