Home Commentary Op-ed EASING THE INEVITABLE PAIN

EASING THE INEVITABLE PAIN

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Given Governor Turnbull's stated goal — to reduce V.I. employment by 25 percent over five years — some layoffs of current government employees are inevitable. The general assumption is that attrition alone cannot possibly meet the goal. This paper will examine several alternative layoff management techniques that would allow the government to meet the governor's goal with the minimum of pain. No recommendations are made here; just a discussion of the alternatives, some of which may be additions to the existing dialogue.
There would be appear to be four basic approaches to layoffs:
1. Corporate. A corporate manager, unhindered by political considerations and union contracts, would simply drop or shrink the less-useful departments and dismiss the least-effective workers. Elected officials rarely follow such an approach; among other thing,. telling the dismissed worker that he or she is, in effect, less than useful complicates the process considerably. On the plus side, however, this approach makes the entity slimmer and more effective.
2. Union. Unions tend to resist the corporate approach and prefer buyouts and attrition; if these do not do the trick, they seek a formula, usually one that protects union members vs. non-union members or, within the union, those with the most seniority. This produces a layoff system which protects older workers and union members and does not tend to make the entity stronger; among other things, the average age of the work force increases to the extent that seniority is used.
3. Household based (H-B). Rather than using competence or seniority to determine who among the unwilling lose their jobs, one might approach the problem from a household basis by causing layoffs only in households with two or more V.I. employees. The notion is that the households with the most government workers should take the brunt of the layoffs; this would be an effort to spread the pain equitably.
There may well be enough households where one of three or more employees could be laid off so that the H-B approach, coupled with attrition, would meet the governor's goal without need for other layoffs. Perhaps not. There would need to be a rigorously applied system within the households to determine who gets laid off; it should be fair to both men and women, and perhaps, on the seniority system, give protection to older workers, in most cases the parent as opposed to the child.
If eliminating the three or more employees-per-household system does not meet the goal, then one would move to a presumably random selection of two-worker households, with care taken that neither men nor women were unduly impacted. At this level, the program would become considerably more controversial.
The resulting impact on the character of the government work force would probably be to lift the average age a bit; it probably would not have any impact on the competency of the remaining workers. The H-B system might be the hardest on low-income families, because it would hurt large families the most and would tend to shelter families where the principal worker had a large enough salary so that others in the family do not need to work.
4. Benefits-eligibility based (B-E-B). These plans would make use of existing retirement and unemployment systems — and thus need no federal or local appropriations –to ease out those who would suffer the least by the loss of a job. The criteria for layoffs would be the workers' eligibility for benefits.
It would appear that one or more of these four major systems (and perhaps some minor ones) could come into play when a government worker is laid off:
– Social Security, for workers over 62 (and for some younger in specialized situations)
– Federal unemployment insurance for workers on 100 percent federal funding
– Local retirement benefits for eligible workers
– Local unemployment insurance for local government workers whose jobs are privatized and thus eventually eliminated. This last scenario is complex and is described more fully below.
It is noteworthy that many people do not retire when they first become eligible for benefits. Further, it appears that both the V.I. government employees retirement fund and the island's unemployment insurance funds may have a little more strength than the V.I. treasury. And the other two sources of support for the newly retired or laid off, the federal unemployment insurance and Social Security funds, are very robust. So it might make sense to organize a layoff program along the B-E-B lines, impacting the systems that can best afford to make the payments.
Perhaps the simplest tack would be to lay off all employees eligible for Social Security benefits; or, more gently, those who are immediately eligible for some minimal benefit level of, say, $700 a month. (In 1997 the average monthly Social Security retirement check in the territory was for $598.) This approach would tend to decrease the average age of the territorial work force but would probably result in the early retirement of some useful senior managers.
A more complicated scheme would be based on privatizing some parts of the government, then later laying off some of the workers involved. If government workers become private sector workers and then meet the minimum working requirements of the private-sector unemployment system (typically 26 or 39 weeks of work), they could draw benefits against the general unemployment insurance program if laid off. If they were to be laid off from their government jobs, they would draw their benefits, in effect, from the V.I. treasury, and thus be a short-term burden to those funds. So, if there is to be privatization, and if some jobs are to be lost as a result, the privatization should be arranged in such a way that all workers losing jobs do so only after they become eligible for private sector unemployment benefits.
While this maneuver would help such workers and not burden the treasury, it would delay financial relief for the newly privatized enterprise for six to nine months.
Here's an even more attractive, if sneaky, wrinkle: The territory could lay off federally funded employees, see to it that they draw unemployment checks from the federal unemployment system (which costs the local taxpayers nothing), and then replace those laid-off workers with workers from elsewhere in the V.I. government who had previously been supported by local funds. There would be some down-side considerations here, such as the probable displacement of civil servants who know a particular program by less-knowledgeable ones, but that is an almost inevitable consequence of any governmental layoff.
A downside of these B-E-B systems is their inherent complexity; some part of the V.I. government would need to know enough about the various systems to create a detailed plan and then apply it, with benefits counseling, to a group of civil servants. The Household-based program is considerably simpler but does not draw on existing social insurance programs to ease the pain. And the B-E-B strategy need not be implemented as the sole criterion for layoff; its elements could be combined with other systems.
5. The Asian Development Bank sweetener (ADB). Any layoff plan could be made more attractive by using a variation on a system in play in the Marshall Islands, a U.S.-affiliated island nation in the Central Pacific which has a bloated governmental work force. Using a low-interest loan from the Asian Development Bank (ADB), a number of discharged government workers were given two full years' salary to ease the transition to private life. The only possible source of funds for such an approach in the Virgin Islands is the federal government, which probably would only think about such a plan if it were: (a) a one-off scheme linked to a comprehensive local financial reform plan, and (b) less generous in its terms. The ADB approach, if available, could be linked to any of the four layoff systems described above.
The prospect of involuntary government layoffs is not pleasant, but the use of a little public sector in
genuity could make the inevitable a little less painful.

Editor's note: David North, a resident of Arlington, Va., is a former assistant to the U.S. Secretary of Labor; he has had extensive governmental experience in labor-management, social insurance and insular affairs.

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