Final answer:
Downsizing is the term used to describe the act of significantly reducing a company's workforce to improve productivity and competitiveness.
Step-by-step explanation:
The term referring to permanently dismissing a relatively large proportion of employees to enhance productivity and competitiveness is known as downsizing. Downsizing is a strategic decision that companies make when facing financial pressures or the need to restructure their operations. This approach helps the firm cut costs but also involves the risk of losing valuable employees, which could hamper the company's ability to rebound when market conditions improve. A common alternative to downsizing, mentioned in the adverse selection of wage cuts argument, is for companies to ask employees to take a pay cut temporarily, retaining more workers rather than laying them off.