NEW YORK – Here’s the vacation no one wants, courtesy of the recession: forced time off without pay.
Financially struggling universities, factories and even hospitals are requiring employees to take unpaid “furloughs” – temporary layoffs that amount to one-time pay cuts for workers and a cost savings for employers. This year, the number of temporarily laid off workers hit a 17-year high.
“If they do it once, I think it’s easier for them to try to do it again,” said Carrie Swartout, who researches traumatic brain injuries in a state-funded position at the private University of Maryland Medical Center. Maryland is requiring unpaid time off for 67,000 of its 80,000 employees as it struggles with a budget crisis. The state says the furloughs will save an estimated $34 million during the fiscal year.
State governments, facing lower revenues but stymied by the long process required to cut public sector jobs, are using furloughs as a quick way to trim payrolls. Private-sector businesses – from automakers to small businesses – are shutting down factories and offices as sales drop.
The temporary layoffs are “kind of employment purgatory, but it’s better than the alternative,” said Carl Van Horn, a professor of public policy at Rutgers University. They’re a typical response to decreasing demand in a recession, although this round is slightly worse than past bad recessions, Van Horn said.
Of 10.3 million unemployed workers in November, roughly 12 percent were unemployed because of temporary layoffs, according to data from the Bureau of Labor Statistics.
The last time this many workers fell into the category was February 1991, when 1.4 million workers were unemployed because of temporary layoffs.
As a proportion of the total work force, workers on temporary layoff are roughly 1 percent, nearly the same now as 17 years ago.
The numbers, based on a Census Bureau survey of households, likely understate temporary layoffs. The survey asks about participants’ working hours during the prior week, so a worker who knows he faces a temporary layoff later in the month would not be included.
Swartout, the 28-year-old Maryland researcher, could lose as much as $800 in pay, or nearly 2 percent of her salary, depending on how long she’s furloughed. “That’s a huge chunk,” she said. The timing and duration of the furloughs of non-critical state workers are still unclear, she said, but the loss will mean she’ll struggle to make her monthly $500 student loan payment.
At state-funded Winthrop University in South Carolina, workers are being asked to stagger days of unpaid leave as the state’s sales tax revenue declines.
Professors were told to take nine furlough days without canceling classes or office hours, missing meetings or interfering with any other university responsibility. They are required to take the days before June 30, when the university’s fiscal year ends.
For factory workers, unpaid time is coming in the form of extended shutdowns as manufacturers try to reduce inventory of goods as varied as aluminum, newsprint and fertilizer.
This month, RV maker Winnebago Industries Inc. said that all its workers, including Chief Executive Bob Olson, would take an unpaid week off during the current quarter, along with a two-week production shutdown during the holidays.
3M Co. said early this month that it had ordered some workers to take vacation or unpaid time for the last two weeks of the year. Computer maker Dell Inc. in November asked employees to consider taking unpaid vacation days during the fourth quarter.
Chrysler, General Motors Corp. and Ford Motor Co. have all extended their annual holiday shutdowns, typically the last two weeks of the year. The moves will idle tens of thousands of workers both at the major automakers and their suppliers.
Tire maker Michelin and parts makers BorgWarner Inc. and Gentex Corp. have also announced shutdowns of varying lengths beginning in December and ending in January.
At some companies, the furloughs are a prelude to a permanent layoff.
Trinh Nguyen, 23, was called into a conference room with four other workers at the 50-person Baltimore architecture and design firm where he works. The group was told that they were on a 30-day furlough. “They tried to lighten (it) up as not a termination,” said Nguyen, who asked that the company not be named.
As he sees it, most of his co-workers will spend the time hunting for new work. Those who succeed won’t qualify for severance payments they would have gotten had they been laid off.
That would make the furloughs a way for the company to save money both on paychecks and severance – if workers can find other jobs.
“It’s just a harsh situation,” he said.