Retraining Laid-Off Workers, but for What?

The New York Times


March 26, 2006

By LOUIS UCHITELLE

Layoffs have disrupted the lives of millions of Americans over the last 25 years. The cure that these displaced workers are offered — retraining and more education — is heralded as a sure path to new and better-paying careers. But often that policy prescription does not work, as this book excerpt explains. It is adapted from "The Disposable American: Layoffs and Their Consequences" by Louis Uchitelle, an economics writer for The New York Times. Knopf will publish the book on Tuesday.

JO GOODRUM, a thin, energetic woman older than her audience of aircraft mechanics — old enough, perhaps, to be their mother — got their attention with a single, unexpected sentence, which she inserted early in her presentation. Her husband, she said, had been laid off six times since the late 1980's. And yet here she was, standing before them, in one piece, cheerful, apparently O.K., giving survival instructions to the mechanics, who would be laid off themselves in 10 days.

They were, in nearly every case, family men in their 30's and 40's who had worked for United Airlines since the mid-1990's. Summoned by their union, they had gathered in the carpeted conference room at the Days Inn next to Indianapolis International Airport, not far from United's giant maintenance center, a building so big that 12 airliners could be overhauled in it simultaneously. That no longer happened. Most of the repair bays were empty. The airline was cutting back operations, and the 60 mechanics at the meeting were in the fourth group to be let go.

Confrontation had brought on the layoffs. Influenced by militants in their union local, Hoosier Air Transport Lodge 2294 of the International Association of Machinists, the 2,000 mechanics at the center had engaged in a work slowdown for many months, and then a refusal to work overtime. But rather than give ground, United responded by outsourcing, sending planes to nonunion contractors elsewhere in the country.

That scared the mechanics. They quieted down and, in effect, authorized the leaders of Lodge 2294 to make peace. Their hope was that if they cooperated, United would ease up on the layoffs and revive operations at, arguably, one of the most efficient, high-tech maintenance centers in the world. In this state of mind, the union was helping to usher the 60 laid-off mechanics quietly away. It had rented the conference room on this cold January evening in 2003 to introduce the men to what amounted to a boot camp for recycling laid-off workers back into new, usually lower-paying lines of work.

SIMILAR federally subsidized boot camps, organized by state and local governments, often in league with unions, have proliferated in the United States since the 1980's, and now many cities have them. Unable to stop layoffs, government has taken on the task of refitting discarded workers for "alternate careers." In deciding as a nation to try to rejuvenate them as workers, we put in place a system, however unrealistic, that implicitly acknowledged layoffs as a legitimate practice.

The presumption — promoted by economists, educators, business executives and nearly all of the nation's political leaders, Democrats and Republicans alike — holds that in America's vibrant and flexible economy there is work, at good pay, for the educated and skilled. The unemployed need only to get themselves educated and skilled and the work will materialize. Education and training create the jobs, according to this way of thinking. Or, put another way, an appropriate job at decent pay materializes for every trained or educated worker.

If the workers were already trained, as the mechanics certainly were, then what they needed was additional training and counseling as a transition into well-paying, unfilled jobs in other industries. If the transition failed to function as advertised, well, the accepted wisdom suggested that it was the fault of the workers themselves. Their failure to land good jobs was due to personality defects or a resistance to acquiring new skills or a reluctance to move where the good jobs were.

That was the myth. It evaporated in practice for the aircraft mechanics, whose hourly pay ranged up to $31. Not enough job openings exist at $31 an hour — or at $16 an hour, for that matter — to meet the demand for them. Jobs don't just materialize at cost-conscious companies to absorb all the qualified people who want them.

You cannot be an engineer or an accountant without a degree; in that sense, education and training certainly do count. Furthermore, in the competition for the jobs that exist, the educated and trained have an edge. That advantage shows up regularly in wage comparisons. But you cannot earn an engineer's or an accountant's typical pay if companies are not hiring engineers and accountants, or are hiring relatively few and can control the wage, chipping away at it.

For the mechanics at the Days Inn, the retraining process would begin in a few days with workshops in résumé writing and interviewing skills, personality evaluations and job counseling — and, for a lucky few, tuition grants to go back to school. The mechanics were being "counseled out" of their well-paying trade, as some of them wryly put it, and Mrs. Goodrum was the lead-off speaker in this endeavor.

She presented herself as one of them. Her husband's wage slid from $25 an hour in his heyday as a factory worker in the 1980's to $10 an hour in his latest job in a watch store. To supplement that falling income, she had taken part-time work as an "education presenter" for the Consumer Credit Counseling Service of Central Indiana.

In this capacity, it was her task to explain how easy it would be for the departing mechanics — separated from salaries of $55,000 a year and up — to sink deeply into debt. The glimpse that she offered of her husband's downfall suggested that she had learned these lessons herself.

Distinguish, she said, between needs and wants. Rent, food, insurance premiums — those are needs. Cable television is a want; cancel it. Day care can be a want or a need. It's a need for parents with jobs, but a want for the soon-to-be-laid-off mechanics who would now have more time to watch their children themselves.

In the blue-collar world, aircraft mechanics are at the top, and these were painful economies for them. They are the highly skilled people who repair and overhaul the nation's airliners. Each mechanic in the room had completed two years of collegelike schooling to qualify for the exacting task of dismantling and rebuilding airliners every five years, the work carried out at the maintenance center. Several compared their role proudly to that of a pilot, claiming as much credit as the pilots for the safety of air travel.

Now they were falling out of this high-level world, in most cases for good. They were unlikely to match or come close in their next jobs to the level of pay that would soon cease. They would be newcomers again in the work force. They must learn how to get a foot in the door, the speakers that evening unceremoniously told them. Their careers were gone, and the grief at this loss must be absorbed in order to move on.

Recognizing their vulnerability, Mrs. Goodrum spoke to the mechanics in the simplified, encouraging language that a skilled teacher uses to instruct children who are just learning to read, or that a speech therapist adopts to guide stroke victims struggling to speak again. Did the mechanics realize, she said, that credit card companies and mortgage lenders give special consideration to laid-off workers? She held up a "sample letter to a creditor" in which the writer announces his layoff, says he expects to be working again in three months and proposes to reduce his payments in the meantime. "It is very important that you negotiate now," she said, "and not when you are 60 days behind on a debt."

When Mrs. Goodrum had finished outlining in step-by-step detail the various survival strategies, Ben Nunnally, then 44 and the president of Lodge 2294, rose and without moving from behind the head table inserted into the proceedings some impromptu advice of his own, exercising his authority one last time as their union leader. While he had the mechanics in one room, Mr. Nunnally said, he wanted to caution them about the unemployment checks they would soon be getting. If they did not file promptly on Jan. 25, their last day, they could waste two weeks in collecting the first check.

Even if the unemployment pay arrived on time, it would be little enough: $336 a week for 26 weeks, way below the nearly $1,100 a week or so that the mechanics had been earning at United. Mr. Nunnally, however, made no mention of either amount. "We have no choice but to offer as little conflict as possible with United and hope that will avoid more layoffs," he said afterward.

It was a wasted hope. Three months later, in April 2003, United abruptly laid off the 1,100 remaining mechanics, including Mr. Nunnally. On May 4, it said it would abandon the maintenance center completely. Outsourcing had won, hands down, and although Mr. Nunnally stayed on as the president of the much-diminished union local, he, too, applied for unemployment pay.

Mr. Nunnally had experienced the center's glory days. He joined United in 1989 as a 30-year-old mechanic in San Francisco and transferred to Indianapolis in 1994, drawn by the lower cost of living and the recently opened center. The mechanics in Indiana worked mostly on Boeing 737's, but as United expanded the operation — opening more repair bays, hiring more mechanics and extending the legs of the L-shaped building until each was nearly a half-mile long — they also overhauled other so-called narrow-body aircraft, including Airbus 319's and 320's and the larger Boeing 757's.

With morale high in the 1990's and the mechanics willing to work hard, they put airliners through their periodic overhauls in record time. The stem-to-stern refurbishing of a 737 normally required 22 days at other maintenance centers. The mechanics at Indianapolis cut that to 11 days for a 737 going through its first heavy maintenance and to less than 20 days for older planes. "We had overhaul bays that kind of competed in a friendly way to see who could do the best," said Frederick L. Mohr, general manager of the Indianapolis center from 1997 until 2002.

The rapid turnaround meant an infusion of passenger revenue from the additional days that the plane was in service, helping to justify the mechanics' pay of $26 an hour in the late 1990's.

Capitalizing on the growing productivity, United itself got into outsourcing as a means of keeping the giant center busy during slack periods in its own operations. America West was sending 737's and 757's to Indianapolis for heavy maintenance, and by the spring of 1999 the work force had grown to 2,400 mechanics from fewer than 250 when Mr. Nunnally arrived in 1994. The fast turnarounds and reliable work justified the relatively high fees that United charged, and America West shifted maintenance to Indianapolis from a private, less expensive contractor in Portland, Ore., whose mechanics earned less.

It was outsourcing in reverse, an American victory in the global competition. "We had people visiting us from Europe to see what we were doing," Mr. Mohr said.

What these visitors saw as they approached the maintenance center was a strikingly futuristic light gray structure, trimmed jauntily in blue, that had risen in the rolling, grassy fields on the far side of the runways, opposite the terminal. The soaring entrance hall, designed to suggest a giant airliner cabin without seats, reflected the efficiencies that were built into nearly every aspect of the building. The mechanics came and went through this hall, where before or after a shift or during a meal break, they took care of nonproductive chores: banking at a credit union, visiting a personnel office, shopping at a small store.

On the eve of the closing, only Hangar 1A was active. A 737 was parked there, its interior gutted. It was the last airliner United would recondition in Indianapolis, and David Doucey, the maintenance center's operations manager, said matter-of-factly that although the mechanics had already received their layoff notices, they would finish the job seven or eight days faster than any other center could.

Parts from the dismantled interior were spread out on an unpainted wooden floor, a mezzanine that fit snugly around the plane just below the wings and stretched out 200 feet on either side. The servicing of many components removed from the cabin and cockpit took place there, eliminating the time required to send them to workshops elsewhere — the practice at other centers.

The time-saving features were numerous, and Mr. Doucey pointed them out. Hydraulic devices erect scaffolding around the plane in an hour, rather than the four hours required elsewhere. Parts are ordered by computer and delivered on an automated miniature railroad, rather than by hand or on bicycles as in other shops. A controlled climate permits mechanics to use fiberglass or graphite composites to patch a plane's outer skin without having to send the sections to special shops.

What drove away America West was the labor trouble that erupted over the Fourth of July weekend in 1999 and then mushroomed into a prolonged slowdown. In retrospect, that weekend was the turning point, the moment when the remarkable efficiencies that had been achieved at Indianapolis began to unwind, and labor-management tensions that had been accumulating suddenly asserted themselves.

IN an earlier era, the two sides would have tried to settle their differences through negotiation and would probably have succeeded. There was really no other alternative. The outsourcing of maintenance did not exist before the 1980's; airlines did their own maintenance. But now layoffs and outsourcing had become an easy and acceptable option. Everywhere in America, the barriers to layoffs came down one after another starting in the late 1970's, and by the turn of the century there was acquiescence.

The incident that started United down the road to outsourcing and layoffs seemed so minor. During the trusting years, the foremen had relaxed the restrictions on the number of mechanics who could take vacation days at the same time. For that Independence Day weekend, more than 100 mechanics had been granted time off — 10 times the prescribed number.

Mr. Mohr, the general manager, was himself on vacation in the days leading up to the weekend, and he called the office to remind his lieutenants to be careful about allowing too many mechanics to be away. Somehow that became a wholesale, last-minute cancellation of vacation time, outraging the mechanics. "To this day, they get upset when they talk about what happened that weekend," Mr. Doucey said.

The uproar over vacations stirred up other resentments — how United had gotten tough about sick days, how it had scaled back flexible hours, how it had substituted an 8-hour shift for a 10-hour one that allowed three- and four-day weekends, which the mechanics preferred.

"Once the vacation thing happened, that ignited a lot of small fires," Mr. Nunnally said. The militants in his local fanned those fires, arguing that the mechanics, because of their unique skills, were special people, essential to airline safety, and that United should be forced to recognize their value.

Mr. Mohr resisted this logic. "Anything we had to do to respond to the business environment was seized upon by the mechanics as something negative," he said. Mr. Nunnally, who was then chairman of the lodge's grievance committee, was caught between management and his members, his leadership challenged by the militants, who numbered nearly 300 mechanics. "I said to Mohr, 'I have to have some wins, too; I can't be beaten in every grievance and do nothing,' " Mr. Nunnally said. "I practically begged him to cooperate, and he could not do that."

BY the fall of 1999, the mechanics were engaged in a slowdown. That is not difficult when airline safety is at issue. If an inspector, drawn from the ranks of the mechanics, finds fault with a newly refurbished wing flap assembly or some other repair, he writes up a ticket reporting the flaw or a potential malfunction; even if there isn't a problem, time has to be spent to investigate the issue to the satisfaction of the Federal Aviation Administration.

As the mechanics had intended, turnaround time inched up, soon reaching 15 days and eventually more than 20 days for a 737. America West stopped sending planes to Indianapolis, as the mechanics had hoped. To regain the lost business, they expected United to restore some of the lost perquisites and thus win back the mechanics' cooperation. Jobs would be preserved, and on the mechanics' terms. That did not happen, and as the slowdown dragged on, work backed up on United's own airliners. For the first time, planes were parked on the tarmac outside the center, out of service — and not generating revenue — while awaiting overhaul.

Then, in July 2000, the mechanics slowed work even more by voting to withhold overtime, to protest what the militants viewed as management's recalcitrance in negotiating a new contract to replace one that had just expired. Mr. Nunnally, as grievance chairman, had spoken against withholding overtime, and worked it himself, in defiance of his militant members, but his point of view did not prevail.

Soon after, the outsourcing began. United diverted work from Indianapolis to private contractors in Alabama and North Carolina, contractors who employed nonunion mechanics — in most cases, at lower wages and with fewer benefits. "The outsourcing was a business decision," Mr. Mohr said. "The cycle time had gotten to the point that if we did not outsource, we would have aircraft continuously parked, waiting for maintenance."

When United and the union finally signed a new contract in March 2002 — 20 months after the old one expired — and the mechanics in Lodge 2294 lifted their ban on overtime, United continued to outsource maintenance, gradually shrinking the operation in Indianapolis. Under the new agreement, the mechanics' combined wages and benefits rose to more than $60 an hour, an increase of roughly $20. While that was the first increase in five years, the new total was double the labor cost of nonunion contractors. It was too big a spread for the mechanics in Indianapolis to overcome — unless they could return to the record turnarounds achieved in the late 1990's. But the old efficiency did not reappear.

Even if it had, the outsourcing would not have stopped, and for a reason quite apart from labor costs. United would not submit again to the leverage over maintenance operations that the mechanics in Indianapolis had exercised. Outsourcing had become too easy an alternative, and the airline crisis that followed the terrorist attacks of September 2001 only encouraged the practice.

What had started as an escape from a unionized, often militant work force took on a second function. The outsourcing of heavy maintenance became a means for the airlines to cut costs, and nearly every major airline gradually moved that way. In an earlier era, before layoffs and outsourcing were acceptable options, United might have weathered the crisis by taking in work from other airlines, as it had once done with America West. But layoffs and outsourcing were now standard practice, and rather than pursue economies of scale, United sought heavy maintenance at the lowest immediate cost. As work shifted away from Indianapolis, the layoffs multiplied.

The 60 mechanics gathered at the Days Inn that January evening were in the fourth wave to lose their jobs, bringing the total to 1,200. The recycling of former mechanics into new lines of work was now in full swing, and Mr. Nunnally, when he had finished speaking about the importance of filing promptly for unemployment benefits, introduced Tori E. Bucko. She turned out to be the main speaker, the chief of the boot camp that the mechanics were being encouraged to enter.

Given her responsibilities, Ms. Bucko was surprisingly young — only 30. But as the manager of a federally subsidized program for processing laid-off airline workers in Indianapolis, she would soon play a more important role in the lives of many of the mechanics than Mr. Nunnally or the union they were leaving behind.

The program that Ms. Bucko directed was sponsored by the Indianapolis Private Industry Council, a coalition of companies, unions, government agencies and civic groups. Virtually all of the funding comes from Washington, which sends less than $7 billion a year to the states to recycle laid-off workers back into jobs. In Indiana's case, the state distributes its share of the federal money to 16 regional work-force investment boards. The Indianapolis Private Industry Council is one of these boards, and the council in turn paid a private, nonprofit company, Goodwill Industries of Central Indiana, to do the actual work.

Goodwill employed Ms. Bucko as the manager in charge of the recycling program for laid-off airline workers in Marion County, whose boundaries encompass the city of Indianapolis. Goodwill also recycled men and women laid off in other industries in Marion County, recruiting them as they signed up for unemployment benefits at state-run offices. But in the winter of 2003, outcast airline employees, two-thirds of them United's mechanics, were still getting special attention in what was called the AIR Project, the short name for Airline Industry Re-careerment Project, a title that suggests just how awkward and difficult recycling is.

Ms. Bucko's task, in this initial presentation at the Days Inn, was to encourage the 60 mechanics to take the next step. There would be no help for them if they failed to show up at the AIR Project's center, in an industrial park not far from the airport. There, they would be asked to fill out a detailed enrollment application and submit to a series of workshops and evaluations.

What Ms. Bucko did not mention was the pressure on her employer, Goodwill Industries, and on herself, to meet the employment goals specified in the federal grant — to get most of the mechanics re-employed at 90 percent of their previous wage. Meeting this goal was a condition for getting more federal money once the initial grant expired. In the end, Goodwill managed to put together enough money to string out the AIR Project for nearly four years. But the employment goals were not met. They could not be met; they were too optimistic, mythically optimistic.

Ms. Bucko knew that as she struggled to meet the standard. So did Carolyn Brown, vice president of the Indianapolis Private Industry Council, the agency that picked Goodwill Industries to run the project. "When large numbers of people are laid off, there just isn't any occupational cluster that is waiting out there to receive them," Ms. Brown said.

Job training, as a result, became a channeling process, channeling the unemployed into the unfilled jobs that do exist, with a veneer of training along the way. Yet job training is central to employment policy. It has been since 1982, when Congress passed the Job Training Partnership Act at the urging of President Ronald Reagan. President Bill Clinton took job training even further, making it available to higher-income workers — including the aircraft mechanics in Indianapolis.

Saying that the country should solve the skills shortage through education and training became part of nearly every politician's stump speech, an innocuous way to address the politics of unemployment without strengthening either the bargaining leverage of workers or the federal government's role in bolstering labor markets.

But training for what? The reality, as the aircraft mechanics discovered, is painfully different from the reigning wisdom. Rather than having a shortage of skills, millions of American workers have more skills than their jobs require. That is particularly true of college-educated people, who make up 30 percent of the population today, up from 10 percent in the 1960's. They often find themselves working in sales or as office administrators, or taking jobs in hotels and restaurants, or becoming carpenters, flight attendants and word processors.

The number of jobs that require a bachelor's degree has indeed been growing, but more slowly than the number of graduates, according to the Labor Department, and that trend is likely to continue through this decade. "The average college graduate is doing very well," said Lawrence F. Katz, a labor economist at Harvard. "But on the margin, college graduates appear to be more vulnerable than in the past."

The Labor Department's Bureau of Labor Statistics offers a rough estimate of the imbalance in the demand for jobs as opposed to the supply. Each month since December 2000, it has surveyed the number of job vacancies across the country and compared it with the number of unemployed job seekers. On average, there were 2.6 job seekers for every job opening over the first 41 months of the survey. That ratio would have been even higher, according to the bureau, if the calculation had included the millions of people who stopped looking for work because they did not believe that they could get decent jobs.

So the demand for jobs is considerably greater than the supply, and the supply is not what the reigning theory says it is. Most of the unfilled jobs pay low wages and require relatively little skill, often less than the jobholder has. From the spring of 2003 to the spring of 2004, for example, more than 55 percent of the hiring was at wages of $13.25 an hour or less: hotel and restaurant workers, health care employees, temporary replacements and the like.

That trend is likely to continue. Seven of the 10 occupations expected to grow the fastest from 2002 through 2012, according to the Labor Department, pay less than $13.25 an hour, on average: retail salesclerks, customer service representatives, food service workers, cashiers, janitors, nurse's aides and hospital orderlies.

The $13.25 threshold is important. More than 45 percent of the nation's workers, whatever their skills, earned less than $13.25 an hour in 2004, or $27,600 a year for a full-time worker. That is roughly the income that a family of four must have in many parts of the country to maintain a standard of living minimally above the poverty level. Surely lack of skill and education does not hold down the wages of nearly half the work force.

Something quite different seems to be true: the oversupply of skilled workers is driving people into jobs beneath their skills and driving down the pay of jobs equal to their skills. Both happened to the aircraft mechanics laid off by United.

* Copyright 2006The New York Times Company