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The pulse of economic change: displaced workers of 1981-85.

One of the harsh realities of economic change is the closing of plants or the severe cutbacks in their operations. The mass layoffs create instant pockets of unemployment, often made up of people with years of dedicated service and acquired skills and no place to apply them. The ability of these workers to readjust after plant closings or large cutbacks has been a subject of considerable interest to policy-makers, labor leaders, and economic analysts.

In January 1986, the Employment and Training Administration sponsored a special supplement to the Current Population Survey designed to answer some of the questions about "displaced workers." The survey was almost identical to a study conducted in January 1984, which permitted additional insight into the problem.(1) The principal findings of the survey include:

* A total of 10.8 million workers 20 years of age and over

lost jobs because of plant closings or employment cutbacks over the January 1981-January 1986 period. Those who had been at their jobs at least 3 years numbered about 5.1 million. This estimate was very similar to that obtained in the 1984 survey, which had covered the 1979-83 period.

* While both surveys yielded about the same number of displaced workers with at least 3 years of tenure on the lost jobs, the reemployed proportion was much higher in 1986 than in 1984-67, compared with 60 percent.

* Close to 18 percent of those displaced were unemployed when surveyed in January 1986. This was an improvement over 1984, when 26 percent of those displaced were looking for work.

* The number of labor force exits among displaced workers was very close to the 14-percent level observed in 1984. More than I of every 3 older workers (over 55 years of age) left the labor force after losing their jobs.

* Of the 3.4 million workers who found work following the displacement, 2.7 million were working at full-time wage and salary jobs. More than half of those reemployed earned as much or more in their new jobs as in their lost jobs.

* About 2 of 3 displaced workers were men.

* The geographic distribution of displaced workers was again heavily concentrated in the East North Central States. More than 1.1 million workers there had lost jobs since 1981.

* Following displacement, reemployment was more difficult for black and Hispanic workers. The percentage of those who were reemployed as of January 1986 was about 10 percentage points lower than the comparable level for whites.

Measurement of displacement

Interest in the issue of displaced workers increased in the early 1980's, as two back-to-back recessions led to the elimination of many jobs.(2) Indications that the cutbacks in many industries might be permanent rather than cyclical spurred an effort to better identify those workers who had lost their jobs. The terms "displaced" or "dislocated" were used to describe workers who had put in years of service and acquired very specific skills, only to find that those skills were no longer in demand.

As noted above, only a small proportion of the displaced were unemployed when surveyed. In fact, many may have found another job rather quickly, although it may not have been at a pay and skill level comparable to the one from which they had been displaced. A frequently mentioned example of a displaced worker is the steel or automobile worker, who had been employed at a relatively high paying production job and who, upon losing that job, finds little prospect of replacing the earnings to which he-and his family-had become accustomed.

Some displaced workers might give up looking for work altogether, believing that there are no suitable jobs available. Unplanned early retirements often seem to be the only choice for many of the older displaced workers.

Altogether, a total of 10.8 million workers 20 years of age and over answered that they had lost a job between January 1981 and January 1986 because of plant closings, employers going out of business, or layoffs from which they had not been recalled. However, a large proportion of these workers had been at their jobs for only a short period before they were dismissed. For example, about 4 million-or 37 percent-had been at their jobs a year or less.

In order to focus on those displaced workers who had spent a substantial amount of time with their employer, while presumably acquiring a substantial amount of job-specific skills, the statistical universe used in this study was limited to those individuals with 3 years or more of tenure on the jobs they lost, some 5.1 million.

Demographic characteristics

About two-thirds of the 5.1 million displaced workers were men, and most were in the prime working ages, 25 to 54. (See table 1.) These men were not only the largest group of displaced workers, they also had the highest level of reemployment; over three-fourths of them were reemployed in January 1986.

Blacks accounted for 11 percent of all displaced workers, and there were nearly as many black women as there were men. Also, the level of reemployment was just under 58 percent for both black men and women.

Following displacement, women were much more likely to leave the labor force than men. Almost 1 in 4 white women and 1 in 5 black women who had been displaced were outside the labor force in January 1986. The proportion of labor force leavers was nearly 1 of 3 for Hispanic women.

Black and Hispanic displaced workers were more likely to be unemployed in January 1986 than whites. About 36 percent of black men and 28 percent of Hispanic men who had been displaced were unemployed compared with 17 percent of white men.

Industry and occupation. As was found in the 1984 survey, about one-half of the displaced workers in January 1986 had lost jobs in manufacturing. The industries in which much of the displacement had taken place included nonelectrical machinery, electrical machinery, and primary metals. (See table 2.)

By January 1986, the rate of reemployment among manufacturing workers had improved considerably relative to 1984. About 2 of 3 workers displaced from manufacturing had found new jobs as of January 1986, a rate of reemployment quite similar to that for workers who had lost jobs in other industries. In the 1984 survey, the reemployment rate for manufacturing workers was much lower-59 percent.

The services industry accounted for about 10 percent of the displaced workers. This proportion was relatively small considering that these workers accounted for over 30 percent of all employed workers. Also, more than 2 of 3 service workers who had been displaced were able to findnew jobs as of January 1986.

The largest number of displaced workers-some 1.9 million-were formerly employed as operators, fabricators, and laborers, occupations which are quite prevalent in the manufacturing industries. They represented nearly 2 out of 5 displaced workers in January 1986. (See table 3.)

The higher the workers' skills, the more likely they were to have found other jobs. For example, among persons who had lost managerial and professional specialty jobs, almost 3 of 4 were reemployed in January 1986. On the other hand, fewer than 2 of 3 of the displaced operators, fabricators, and laborers had been able to find new jobs. The highest proportions of displaced workers who were still unemployed were those who had lost their jobs in the transportation and material moving occupations, as well as in the service occupations.

Regional distribution. As in January 1984, the largest concentration of displaced workers in the 1986 survey was found in the East North Central area-1.1 million. This area comprises the heavily industrialized States of Illinois, Indiana, Michigan, Ohio and Wisconsin. Close to half of the job losses in this area had occurred in the durable goods manufacturing industry. (See table 4.)

But some improvement was found even in the East North Central area. About 65 percent of the area's displaced workers were employed in January 1986, compared with only about half in January 1984. However, among those still unemployed, almost one-third had been without work for 6 months or more.

Reemployment was much higher for displaced workers on the Atlantic and Pacific coasts. In New England, for example, about 75 percent of those identified as displaced workers had found new jobs. On the Pacific coast, about 70 percent of those who had been displaced were again employed in January 1986, and among those who were still looking for work, 42 percent had been unemployed for less than 5 weeks.

Tenure on jobs lost. In order to identify workers who had formed a long term relationship with their employers, only those who had worked for 3 years more on the jobs lost were included in the detailed analysis of the data from 1984 and 1986. While persons with shorter job durations may also face hardships following plant closings, their skills are unlikely to be tied to an employer or industry.

The tenure of displaced workers on the jobs lost tends to be higher than the tenure of the overall work force. Obviously, the restriction to 3 years or more of tenure imparts an upward bias that the general tenure level does not have. In addition, in declining industries, workers with the least tenure are likely to be released first. Should the plant ultimately close its doors, those with longer tenure are likely to be still on the job when the decision to shut down is made.

The 5.1 million displaced workers can be divided into three roughly equivalent groups on the basis of their job tenure. About one-third had been on their jobs for 3 to 4 years, one-third for 5 to 9 years, and the remaining third for 10 years or more. Median tenure on the lost jobs was 6.6 years. (See table 5.)

The proportion of older workers displaced from jobs of long tenure was noticeably higher in 1986 than in 1984. In the 1986 survey, it was found that nearly two-fifths of the displaced men age 55 and over had lost jobs which they had held for 20 years or more.

Before, during, and after displacements

Notification of dismissal. An important issue in debates surrounding plant closing legislation has been the question of advance notification of workers about to be laid off. It is argued that advance notification allows the workers a better chance of finding new jobs by possibly beginning their job search efforts while still employed. On the other hand, advance notice is viewed unfavorably by some employers, who fear the anger of disgruntled employees and the possible reduction in productivity. (3)

In both the 1984 and 1986 surveys, a question was asked regarding whether the displaced worker had received an advance notice, or had left the business because he or she expected to be released.(4) About 45 percent of the displaced workers in the 1986 survey said they had not received notification prior to displacement. (See table 6.) Among those affected by plant closings or moves, about 40 percent neither were notified in advance nor had anticipated the closing.

Among the workers who had received an advance notice or had expected an impending closing, the proportion that was reemployed by January 1986 was greater than it was among those without warning of a layoff, but by a small margin-69 versus 64 percent. Among those who had been laid off because of plant closings, the difference in the reemployment rates between those with and without prenotification was even smaller.

Reasons for dismissals. More than half of the 5.1 million displaced workers reported that they had lost their jobs because of plant closings or moves. (See table 7.) About one-third offered "slack work" as the reason for their dismissals. The remaining persons reported that they had been working on jobs or shifts which were abolished.

The reasons offered for the dismissals were closely related to age, with older workers more likely to be affected by plant closings. For example, about two-thirds of the workers age 55 and over were dismissed because of plant closings, while only about half of those age 25 to 34 were released for this reason. It is likely that seniority would offer older workers some protection against dismissal during periods of "slack work," whereas they would have no protection if the plant closed down.

Weeks without work. Displaced workers were asked to estimate the number of weeks they were without work following job loss. The median period for the entire 5.1 million was about 18 weeks. It should be noted that, for many persons, this included periods spent outside the labor force. For example, displaced workers who were not in the labor force in January 1986 reported the longest spells without work, typically stretching over a year in length. (See table 8.) For these persons, the time spent "out of work" cannot be equated with unemployment, the latter condition implying jobseeking.

Displaced workers who were employed in January 1986 reported a much shorter period without work, the median being 13 weeks. About 1 of every 3 reemployed displaced workers had spent less than 5 weeks without work.

When surveyed, unemployed displaced workers had been jobless for a median duration of 21 weeks. This group and displaced older persons were more likely to report longer periods without work than were younger persons.

The measurement of "weeks without work" presents a difficult challenge. For example, for the reemployed the reporting may relate to a period in the distant past, the length of which is only vaguely remembered. For the unemployed, the spell of joblessness may still be in progress and could possibly last much longer than reported in the survey. And, as already noted, for persons outside the labor force, the "weeks without work" could relate to periods which, although long, might have included few, if any, attempts to find another job.

Receipt of unemployment insurance. For many displaced workers, loss of income was cushioned by their receipt of unemployment insurance benefits. About 3.4 million workers reported receiving unemployment benefits after they had lost their jobs.

One reason why some displaced workers do not collect unemployment insurance benefits is that some of them are able to find new jobs quickly or even immediately after their job loss. Almost 1 in 3 who were employed in January 1986 reported that they had been without work less than 5 weeks.

Moving to another area. Few displaced workers moved to other areas following the loss of their jobs. (See table 9.) For the 14 percent who moved, the reemployment rate was significantly higher than for those who did not move-82 versus 64 percent.

There was a pronounced difference in the relocation activity of men and women. The proportion of displaced men who had moved was almost twice as high as that of women.

Older displaced workers were least likely to pull up stakes after losing their jobs. Of those age 55 and over, only about 5 percent had moved to another city or county. Among displaced women, only about 3 percent of those age 55 and over had moved subsequent to the job loss.

Loss of health insurance. The loss of group health insurance which usually accompanies a job loss can deal a financial blow to workers.(5) Of the displaced workers surveyed in January 1986, almost 80 percent had been included in a group health insurance plan on their lost jobs. (See table 10.) For these workers, recovery of coverage was closely related to employment status: those who found new jobs were usually covered by some form of insurance, either through their new jobs or through the plans of other family members. Only about 1 in 5 of the reemployed workers were not covered in their new jobs. However, displaced workers who were unemployed in January 1986 had a much higher exposure to health cost risk; almost 60 percent of those who had been covered on the lost job no longer had any coverage when surveyed.

Job spirals or new careers?

About 3.4 million of the 5.1 million displaced workers were reemployed in January 1986. Almost all of these, about 3.2 million workers, had been working at full-time wage and salary jobs when they were dismissed. Of these, 10 percent were holding part-time jobs when surveyed. An additional 8 percent were involved full time in their own businesses as self-employed or unpaid family workers.

Thus, the vast majority of those working in January 1986 had returned to full-time wage and salary employment. For about 2.4 million of these workers, earnings information was obtained for both the old and the new jobs, making it possible to compare nominal earnings. Overall, about 56 percent were making as much or more than before displacement. More than half of that proportion were earning 20 percent or more above pay in their

previous job. (See table 11.)

Occupational displacement. A major concern regarding displaced workers is that they will be unable to use the hard-earned skills they had acquired in the jobs they lost. Besides earnings comparisons, another way to examine the changes forced upon displaced workers is to examine their occupational mobility.

The major occupational groupings and the percent of workers within each group who were able to find new jobs in the same broad occupational classification are shown in table 12. Of the displaced workers who were reemployed in January 1986, 45 percent were working in the same general occupation they had left.

For most of the occupational groups shown, the proportion returning to jobs in the same broad occupation they had left ranged between 30 and 60 percent. The lowest rates of occupational stability across the old and new jobs were found in the occupations of technicians and related support, and handlers, equipment cleaners, helpers, and laborers. Some of these workers may have found better jobs than the ones they had lost. Professional specialty and precision production, craft, and repair occupations had the highest levels of reemployment within the same broad occupation.

It is interesting to compare the shift into service occupations found among reemployed displaced workers. Machine operators, assemblers, and inspectors, who accounted for almost one-fourth of all displaced workers, were more likely than most other workers to move into service jobs. Still, only about 18 percent of the displaced operators, assemblers, and inspectors were working in service-related occupations.

Number of jobs held since displacement. Another indicator of the stability or suitability of the new jobs is the frequency with which displaced workers change them. Numerous short-term stretches of employment or quits could indicate the difficulty of finding acceptable work. A question was added to the 1986 survey regarding the number of jobs held since displacement. Aboutone-third of those unemployed in January and just over one-fourth of those outside the labor force had held a job at some time following their displacement. As shown in the following tabulation, nearly two-thirds of those who were employed when surveyed were working on their first and only job held since the original job loss. The remainder had, of course, held more than one job since displacement.
 Two jobsnce displacement.
 Total or more One job No jobs.
 Total . . . . . . . . . 100.0 29.0 48.5 22.5bs.
 Employed . . . . . . . . 100.0 36.7 63.3 --5bs.
 Unemployed . . . . . . . 100.0 16.5 18.6 64.8bs.
 Not in the labor force . . . 100.0 10.2 18.3 71.5bs.


The 1986 survey of displaced workers presents a more positive picture of post-displacement success than the one conducted in 1984, reflecting the effect of continued employment growth in the economy. While the overall level of displacement was little changed, the number of displaced workers who were reemployed at the time of the survey was 7 percentage points higher. The regional distribution, while still not evenly balanced across the country, improved slightly, in that the rate of reemployment in areas which had been hardest hit was now closer to the national average.

However persistent unemployment has remained among some groups. Levels of reemployment among older workers were still relatively low. Reemployment rates of women lagged behind those of men by about 10 percentage points.


(1) For a more detailed discussion of the findings from the first survey of displaced workers, see Paul 0. Flaim and Ellen Sehgal, "Displaced workers of 1979-83: how well have they fared?" Monthly Labor Review, June 1985, pp. 3-16; Richard Devens, "Displaced workers: one year later," Monthly Labor Review, July 1986, pp. 40-43; and U.S. Congress, Office of Technology Assessment, Technology and Structural Unemployment: Reemploying Displaced Adults, OTA-ITE-250 (Washington, Government Printing Office, February 1986).

(2) The level of concern about displaced worker issues can be seen in Kevin Hollenbeck, Frank Pratzner, and Howard Rosen, eds., Displaced Workers:Implications for Educational and Training Institutions (Columbus, Ohio State University, 1984); and U.S. Congress, Congressional Budget Office, Dislocated Workers: Issues and Federal Options (Washington, Government Printing Office, July 1982).

(3) Additional information on advance notification is available from the Permanent Mass Layoffs and Plant Closings program. See the accompanying article by Sharon P. Brown.

(4) "Advance notice" was defined as 30 days, but the definition did not appear in the specific wording of the question asked the respondent.

(5) For another look at the loss of health benefits for displaced workers, see Michael Podgursky and Paul Swain "Job displacement and health insurance loss," Monthly Labor Review, April 1987, pp. 30-33 .
COPYRIGHT 1987 U.S. Bureau of Labor Statistics
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Author:Horvath, Francis W.
Publication:Monthly Labor Review
Date:Jun 1, 1987
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