I guess at least this is better than hanging on to people you don’t want in a team so they can be laid off when the demand comes in to avoid being forced to give up the people you do want.
He's saying that whether or not they fire this person the day may come when they have to get rid of someone.
More broadly, managers like to hold onto headcount if they can unless someone is a real problem for their team. If they're just someone who isn't an ideal fit any longer they'll probably hold onto them.
As someone who has worked in an environment like this for a long time, those people still exist. Everyone on the team generally knows who’s at the bottom and would get let go. Ideally there are enough open positions to cover the layoffs, but that’s not always the case.
