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Automakers' Jobs Bank Program Pays Laid-Off Workers to Do Nothing

Thousands of laid-off auto workers get paid $31 an hour to sit around and do nothing all year under a controversial program that could continue even if American taxpayers bail out the American auto industry.

The program, called "Jobs Banks," has been around for 24 years. Some of the employees at jobs banks choose to do community service, but others do crossword puzzles and watch TV all day -- or just stare at a wall. If you're a laid-off auto worker, it's what comes with your pink slip, thanks to a deal struck in 1984 between the United Auto Workers and the Big Three carmakers.

The program is likely to continue if Congress approves a $25 billion bailout of the industry. But if the automakers go bankrupt, some analysts say, they may be able to eliminate the program, which would abruptly eliminate benefits to the workers in it.

"Subject to some limits, management could find itself in a position to terminate the program," said Edward R. Morrison, a professor at Columbia Law School and a bankruptcy law expert. "The [laid off] employees may become 'creditors' with claims against the company -- they would be in the same position as bond holders and other creditors."

A second bankruptcy law expert, George Mason University Professor Todd Zywicki, said, "This is exactly the sort of thing bankruptcy is useful for ... to get rid of programs that don't do the company any good.

"The short answer is, yes, this would put the workers 'out on the street.' The longer answer is that they might also be entitled to some damages or compensation."

Hoping to avoid bankruptcy and secure federal loans, carmakers and the UAW are considering eliminating the program anyway. But they have not decided yet.

"It's premature for me to answer a speculative question," United Auto Workers President Ron Gettelfinger said Thursday, regarding whether the program would be eliminated if Congress made it a stipulation for a loan. "Let's wait and see ... what they come down with, and then we'll make a decision at that point in time."

Tony Sapienza, General Motors communications director for manufacturing and labor relations, said that he couldn't speculate about what would happen to the Jobs Bank program or how bankruptcy could affect workers in it.

In 1984, when the program was created, General Motors, Ford and Chrysler were all doing well. The automakers wanted the UAW to support new, flexible manufacturing processes and more automation in their plants, and the workers wanted to ensure that they would have job security as the industry modernized. So an agreement was reached during contract negotiations to create the jobs banks, which would provide job security for workers who were laid off due to modernization.

"Unions honestly thought that it would then cost too much to lay them off," said Kristin Dziczek, a senior project manager at the Center for Automotive Research. Twenty-one years later, at the program's height in 2006, nearly 15,000 workers were in jobs banks and in many cases were getting their full pay to do nothing but show up.

"They can simply sit in the jobs bank, play checkers for the rest of their lives at 90 or 95 percent of pay. Does that make any sense to you?" Peter Morici, a business professor at the University of Maryland who testified before Congress on the relief plan, said on the FOX Business Network. "And why should a waitress in Indiana have her tax money sent to Detroit to subsidize that?"

But union officials say the jobs bank program has been good for their constituents.

"Do I think it's been a good thing? Yeah, absolutely," Brian Fredline, President of UAW Local 602, told FOXNews.com. "Now I'm not sure if Wall Street would agree. But I think it's saved the income security of a lot of workers."

UAW and GM officials are also quick to point out that the program has already been scaled back significantly in the last year. Before then, workers could stay in jobs banks indefinitely -- some were there for more than 15 years -- but now there is a two-year limit. In addition, jobs bank employees at GM may turn down only one company offer to go back to work at a plant within 80 miles of home, and they cannot turn down more than four offers to work for the company elsewhere in the country.

In the 2007 GM contract, workers get full pay if they report to a jobs bank and 85 percent if they stay home.

Currently, 3,500 workers are in jobs bank programs, according to the Detroit News.

Dan Simon, a former GM worker who was paid by a jobs bank in Lansing for seven years before he retired two years ago, said that his old bank has been closed.

"They had to get rid of the jobs bank," Simon said. "There was no real production coming out of that. I'm surprised that they managed to keep it going as long as they did."

Most of the workers in the program accepted buyouts to leave it, and new work was found for the rest. Earlier this year, GM offered buyouts ranging from a $45,000 bonus for those who simply agreed to retire early to a $140,000 payment for employees with at least 10 years of experience who agreed to retire early and forgo pension and health benefits.

"They got a pretty good chunk of change to leave," Simon said. "GM had to pay all that up front, but in the long run that's probably worth it."

But Fredline, the Local 602 president, said the reductions meant a loss for the community.

"We built Habitat for Humanity homes, worked on river cleanups, built parks, [worked at] food banks," Fredline said of the jobs bank employees in his area. 

"The perception is that they just sat at home watching the 'The Price Is Right all day. That's just wrong."

Unions help workers find community service work, but it is optional.

"Our JOBS bank facilitators have gone to great lengths to arrange a variety of alternatives to staring at the walls at the JOBS bank," Art Luna, former president of UAW Local 602, wrote in a 2005 newsletter to members.

"If you are bored, let one of them know."

Simon, who did community service during his time at the jobs bank, said that while some of the employees there had been active, others preferred just watching TV. He said one case in particular stood out. "There was one guy, you'd give him something to do and he'd almost go nuts, he was almost shaking, because he couldn't believe he was being asked to do work. That just amazes me."

Many say that even the scaled-down program is too wasteful and contributes to the higher costs that American car companies face.

"Basically, the contracts have to allow us to align the Detroit companies' costs with Honda," Morici said, pointing to the $72 an hour that the average Detroit 3 worker receives, compared to the $44 an hour that the non-unionized employees make at Japanese car plants in America.

Dziczek, however, argued that jobs banks were a "very small part" of the cost of hiring workers and that Toyota has been known to voluntarily pay its workers when they are not working after plant shutdowns.