More and more Minnesotans faced with 'forced furloughs'

Andrew Hine, a 3M product engineer, planned to spend the last week of 2008 devoting his attention to industrial adhesives.

Instead, he was in the second week of a forced vacation, one of thousands of workers in Minnesota told not to come to work in recent weeks as companies struggle to cope with declining revenue.

A veteran of 20 years at 3M, Hine was relatively lucky. He could tap an unused trove of vacation time to get paid for the time off. But for those who already have used their vacation allotments for 2008, the mandatory vacation amounts to a temporary pay cut at 3M, Hutchinson Technology or any other Minnesota company that has announced temporary shutdowns.

The "forced furlough" -- temporary layoffs ranging from one to five weeks or so -- has become a widespread tactic among businesses, governments and school districts across the nation as they cope with a dramatic slowdown in the economy and a limited ability to borrow money that might carry them through tough times.

More than 1.2 million Americans were hit by temporary layoffs in November, according to the Bureau of Labor Statistics. Not since February 1991, another recession year, have so many been sent home for unpaid time off. That month, 1.4 million U.S. workers stayed home without pay.

In a related indicator of a soft labor market, the number of people working part time involuntarily, because their hours were cut or they could not find full-time work, has almost doubled nationally, to 7.3 million in November from 3.9 million in April 2006.

Mandatory time off or reduced hours are better for the individual and the economy than the next option, the loss of a job, noted University of Minnesota labor economist John Budd.

At the St. Paul Ford plant, the 770 remaining members of United Auto Workers Local 879 are in the midst of a five-week furlough through Jan. 12.

"It's real tough," said Roger Terveen, president of the local. Many union workers have had too few hours on the job this year to qualify for full unemployment benefits.

"Nobody's buying nothing," Terveen said, both of auto sales and the private financial decisions of auto workers.

Steve Hine, director of labor market information at the Minnesota Department of Employment and Economic Development, said companies that turn to short-term furloughs may be able to avoid the lingering pain of permanent job cuts. Hine is the brother of the 3M engineer who spent the holidays at home.

"If these efforts are successful in weathering the economic downturn without those permanent layoffs, that could be a positive outcome," Steve Hine said.

"They're very temporary in nature," said Scott Anderson, senior economist at the Minneapolis office of Wells Fargo & Co. "In a protracted downturn like the one we're in, they're more of a stopgap than a long-term help."

Companies that send workers home unexpectedly, even if only for a matter of days, take a risk that workers will return with reduced confidence in their company's future -- and their own financial prospects.

"It puts people's budgets out of whack," Anderson noted. "Lots of people haven't planned for this. It kind of freezes everybody in place. They pull back because of the uncertainty. The strategy might end up backfiring."

Hine, the 3M product engineer, illustrates the point.

He and his wife had planned a trip to Bali in September. But now, Hine is being more cautious and not planning that far out.