The Fate of the NUMMI Workers

Michael Bernick
Counsel with the international law firm of Duane Morris LLP, a Milken Institute Fellow and former Director of the California Employment Development Department

What will be the employment futures of the approximately 4800 workers at the New United Motors Company (NUMMI) in Fremont that is now scheduled to close in March 2010?

The recent history of large scale layoffs in California suggests that these futures may not be as bleak as initial reports are suggesting. Over the past two decades, workers of mass layoffs have taken a variety of paths in new job placement and/or retraining in their region, as well as movement to jobs in other regions of California and other states.

In the early 1990s, the aerospace industry in California went through enormous downsizing, shedding over 200,000 jobs. The conventional wisdom then was that aerospace engineers and production workers would become either the long term unemployed or hourly McDonald’s employees.

In the mid 1990s, a group of researchers at the RAND Corporation decided to test this conventional wisdom. They gathered wage data for 517,148 workers employed in the aerospace industry at the beginning of 1989, and tracked their earnings from 1989 to the third quarter of 1994. As set out in Life After Cutbacks: Tracking California’s Aerospace Workers (1996, RAND Corporation), the researchers found around a quarter of the laid-off workers experienced a significant reduction in wages (15% or more) by the end of the period. However, the remaining three-quarters were employed, and at wages comparable to or higher than their 1989 wages.

Subsequent studies in California also have shown workers laid off in large scale layoffs are not doomed to long term unemployment or low wage jobs, especially if they are willing to consider new job occupations and/or geographic relocation. Michael Dardia, one of the researchers on the RAND study, later led a study of tech workers in Silicon Valley in the early 2000s. Around a quarter of the tech workers of 2000 were no longer working in tech by the end of 2003, and their non-tech jobs often paid less than their previous positions. However, the majority of skilled tech workers generally fared well, and even those who left tech were able to move into other employment.

Which brings us to NUMMI. Over the past 30 years in California, an energetic and sophisticated job retraining and replacement system has emerged for all laid-off workers, especially for workers in mass layoffs. As soon as the layoff is announced, the local Workforce Investment Board (WIB) contacts the employer, and sets up a process of re-employment plans. The plans are tailored to the individual worker, and allow for different paths: placement in the same industry, retraining, assistance in moving to another region of the state or another state.

The Alameda County WIB is experienced in rapid response, and is led by one of the veterans in the California job training world, Ms. Dorothy Chen. Ms Chen has been at the WIB for fifteen years. Ms. Chen and her staff already have given a lot of thought to the NUMMI situation, and the opportunities for laid off workers. When I spoke to her yesterday, she made the following points about re-employment and re-training in the current times:

*The Alameda County WIB needs to be invited in by Toyota management, to provide job services, and is ready at any time. The WIB services are free to Toyota and to the workers. Nearby WIBs are likely also to participate as the plant workers live throughout Northern California: in Contra Costa, Stanislaus, even Sacramento.

*There is no one strategy, but a wide range of strategies. The new Tesla plant in Palo Alto may provide some opportunities; and there may be other opportunities for workers willing to move to Toyota plants in other states. The great majority of job opportunities are likely to be in other fields outside of manufacturing.

*Ms. Chen’s vision is that if workers enter training programs following the plant closure, they will be ready with skills when the economy turns and new hiring begins in large numbers, even if this does not happen to mid to late 2010. Ms. Chen already sees some rays of hope in the job picture for Alameda County in the slowdowns in layoffs. She notes that in the 2008-2009 Fiscal Year, WARN notices for Alameda County topped 11,000 layoffs. In the first months of the current fiscal year, the WARN notices total less than 500 layoffs.

A few months ago, in early June, the Connecticut Department of Labor and University of Connecticut released a sober study of mass layoffs. The study, “Mass Layoffs and Their Impact on Earnings During Recessions and Expansions” used data over twelve years, 1993-2004, during which the economy in Connecticut was in periods of growth and recession. The study’s main conclusion: workers involved in mass layoffs during favorable economic times recessionary times generally are able to find other employment, and not experience great wage declines. However, in recessionary times, many workers in mass layoffs experience long periods of unemployment, and have far greater difficulty in finding subsequent employment.

There is no question that the resources and expertise for retraining and placement will be present for NUMMI workers. Fueled with ARRA workforce funds, the job training system has more training money than ever. The challenge will be identifying the jobs.

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