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Plant Closings and Worker Displacement: the Regional Issues.

Strategies and solutions

Plant Closings and Worker Displacement: The Regional Issues.

By Marie Howland. Kalamazoo, MI, The W. E. Upjohn Institute for Employment Research, 1988. Marie Howland's comprehensive study of the regional dimension of plant closings and worker displacement takes its place in a long line of significant contributions to understanding the face of unemployment by the W. E. Upjohn Institute for Employement Research. Howland's contribution is important, for it not only documents, in a carefully organized and elaborately annotated study, the extent of current knowledge about plant closings and their consequences, but it evidences the still-severe limitation in our understanding of these events and their impact.

The literature in this field is certainly more elaborate than it was at the beginning of this decade, when estimates of the number of dislocated workers ranged from a low of a few hundred thousand to some 12 million. In large measure, this improvement owes to the biennial Current Population Survey supplemental inquiries on dislocated workers and their labor force situation. As a result of these supplements, we are now able to say with some confidence that some 5 million experienced workers are displaced during a 5-year span. But much of what we need to know if we are to effectively deal with the problems and administer the new dislocated workers and advanced notice legislation still is not available because the data system is not sufficient to support the needed analysis.

In drawing on the Dun and Brad-street data files, available with some structure because of the work of David Birch and the Brookings Institution, Howland approaches the issue from the appropriate perspective, that of the business unit, and wisely does so in bite-sized pieces by focusing on three industries. Unfortunately, the problems that were encountered with this file and the number of assumptions about behavior of firms for which no clear data were available remind the reader that one of the major tasks facing analysts of the impact of economic adjustment and development is the generation of solid data sources for the analysis.

With this in mind, Howland adopts a generally parsimonious analytical view of the causes of regional shifts in the distribution of employment in the metalworking machinery, electrical component, and motor vehicle industries and the impact of local labor market conditions on the readjustment fortunes of displaced workers. Howland finds that employment shifts are not explained by differential rates of plant closings, but rather by regional variations in the rate of job creation, lending some credence to what has previously been suspected. More interestingly, after holding plant size and ownership status (branch versus headquarters) constant, the closure rates were not found to vary by region. Similarly, none of the aggregate variables commonly thought to affect plant closure decisions--wages, unionization, import penetration--were found to have much impact. The conclusion is the interesting observation that "plant closure decisions appear to reflect the strategies and idiosyncrasies of individual firms," with the quite obvious meaning for legislation which would attempt to fix the problem.

Another intuition confirmed by Howland is that workers who are displaced in areas where the industry from which they were displaced is growing, suffer less in terms of duration of joblessness and financial loss. However, moving to a growing industry is often difficult, and many workers, especially those older and with less formal education, endure large financial losses, even if they are in a growing local labor market.

The final chapter explores policy options. Howland argues against industrial protection policies designed to slow plant closing rates. This advice certainly appears consistent with Howland's finding that closing rates are not the critical variable.

The notion that individual firms will not respond to concessions on wage, tax, and other cost factors is less convincing. In the chapter that makes this assertion, Howland uses logit regressions of the probability of an individual plant closing that largely reflect regional economic conditions. While it may be agreed that closings are idiosyncratic, the forces that generate plant-specific concessions probably are also.

This is a study that can take its place in the growing literature on plant closings and displacement with a sure confidence. Overall, Howland's book is a pleasing mixture of literature review and innovative assessment of the regional aspect of economic adjustment. The geographic impact is just now coming to be understood as the ultimate question in dislocation.

THOMAS J. PLEWES Associate Commissioner Office of Employment and Unemployment Statistics Bureau of Labor Statistics
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Author:Plewes, Thomas J.
Publication:Monthly Labor Review
Article Type:Book Review
Date:Jan 1, 1990
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