Companies forcing workers to take unpaid vacation as recession hits

Here's the vacation no one wants to take, courtesy of the recession: Forced time off without pay.

Financially struggling universities, factories and even hospitals in North America are requiring there employees 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 at the University of Maryland Medical Center. Maryland is requiring unpaid time off for 67,000 of its 80,000 (that's near 83.75% of it's workforce) employees as it struggles with a budget crisis. The state says the furloughs will save an estimated US$34 million during the financial 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 per cent were unemployed because of temporary layoffs, according to data from the Bureau of Labour 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 one per cent, 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 two per cent 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.