Severance Insurance

Following up on my earlier blog about whether it would be cost effective for corporations to re-train obsolete workers rather than fire them, pay severance and hire new employees, the following data suggests that if the almost 60 year trend continues, the cost to corporate America, to state unemployment trusts, to the Federal Treasury is going to reach a tipping point. This all says to me that the current approach is broken and without a proactive effort to change the model, the future isn't very bright for anyone.

I'm trying to figure out how to include some graphs from the Bureau of Labor Statistics. They go back to 1948 and show the cumulative month by month data for four categories of unemployment duration:

What is interesting are the trends shown in these graphs. Fewer people are getting back to work in less than 5 weeks. The range of those who go back to work between 5 and 14 weeks has narrowed. The number of workers who are taking from 15 to 26 weeks to get back to work is growing, as is the number who takes more than 26 weeks. What I'm learning here is that the trends are not only against the workers trying to find new jobs but also against the state governments whose unemployment trusts are paying out unemployment insurance and corporate America that is finding premiums on state unemployment insurance increasing. The residual impact on Federal programs has to mirror this data, so it would seem.

Is the reason that unemployment duration is increasing because (i) there are more workers to employ (estimated 140 million today) or (ii) that rather than being retrained in place workers are being fired, thrown into the "system", trying to get re-trained and then getting re-employed?

Somebody besides me needs to be thinking about this.

If you want to see these graphs before I figure out how to include them:

• Go to http://www.bls.gov/
• Click on "Get Detailed Statistics"
• Click on "Schdeule A"
• Click Unemployment by Duration
• Bring up data
• Set time frame to 1948 through 2007
• Click on "Include Graphs"
• You should now be able to look at the graphs

Interesting stuff.

willy