Sunday, November 01, 2009

Do Furloughs Work?

By Steve Sloan

All of us who work for the state know the hardships imposed by furloughs on our families. We’re also aware of the impact on students of furloughs, reduced class sessions and increased fees. But, do furloughs work?

Furloughs are designed to save money and reduce layoffs. Furloughs may save some jobs, do they really save money? According to some recent studies and articles, it is possible state furloughs do not save much money.

David Greenwald of the UC Berkeley Labor Center, in a California Progress Report, said state furloughs save the general fund only 12 cents for every dollar cut in wages. Greenwald and others look at our state government furloughs in general. In addition to university employees our sister union, the Service Employees International Union Local 1000, represents 95,000 of the 193,000 state workers covered under the furlough program. Many of these workers are getting three furlough days a month, a 14 percent pay cut.

Ken Jacobs of the UC Berkeley Center for Labor Research and Education, in the policy brief The High Cost Of Furloughs wrote, "Whether imposed on employees paid from state, federal, or special funds, furloughs impact the broader economy in multiple ways. First, any reduction in pay is a reduction in spending in the local economy and will have a multiplier effect, resulting in private sector job loss and subsequent loss of tax revenues."

Jacobs said, "It is poorly designed, if the goal is to provide savings to the general fund." Jacobs, also the chair of the Labor Center said, "Key design problems include furloughing state workers in revenue-generating positions, continued accumulation of pension and benefit debt and inclusion of workers whose salaries are paid by the federal government and other special funds, in addition to the general fund."

Even some conservatives question furloughs. Dr. John Sullivan in the employee-recruiting forum wrote the post Employee Furloughs Can Be a Bad Alternative to Layoffs. He said, "While the tool may be popular and widely used, that doesn’t make it effective or the best choice."

Sullivan cites many reasons for this conclusion including productivity loss, morale decline over loss of income and increased workload, increased employee stress, higher error rates, angry customers, possible lawsuits over furloughs, loss of good employees who react to furloughs by leaving and a general decrease in innovation.

Sullivan said, "It’s hard to plan ahead and think of innovations when your job security is up in the air."

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