Rapid Response - Solutions for Economic Transition
Apr 22

Imagine that, a program that pays for itself!

The ROI of Rapid Response and Layoff Aversion

By Rob Gamble

Most would agree that layoff aversion has not been the everyday option for Rapid Response. For many of us, even those whose careers date back to the Job Training Partnership Act (JTPA) days, layoff aversion has always been a complicated, rarely used aspect of the legislation populated with ESOPs and incumbent worker training programs.  But over the last couple of years Workforce Boards across the country have taken on the challenge and are making a positive impact, possibly even more than they realize (more on that later) but first a crash course in the “New Vision of Layoff Aversion.”

In June of 2010, Assistant Secretary Jane Oates issued TEGL 30-09, the subject is “Layoff Aversion Definition and the Appropriate Use of Workforce Investment Act Funds for Incumbent Worker Training for Layoff Aversion Using a Waiver.” In a mere 58 words the TEGL profoundly redefines layoff aversion and the way we should look at Rapid Response:

Definition of Layoff Aversion
ETA considers a layoff averted when: 1) a worker’s job is saved with an existing employer that is at risk of downsizing or closing; or 2) a worker at risk of dislocation transitions to a different job with the same employer or a new job with a different employer and experiences no or a minimal spell of unemployment.

If you don’t immediately see it, don’t worry; it took me a while to recognize the full extent of the change. The pertinent phrase is this:

“…or a new job with a different employer and experiences no or a minimal spell of unemployment”

Think about it: that phrase significantly alters the traditional view of layoff aversion and expands it to mean so much more than incumbent worker training, employee buyouts, furloughs or job-sharing.  For many of us – the nation’s Rapid Response practitioners – this creates a whole new ball game.  It transforms the role of Rapid Response from the recruitment arm for the One-Stop and UI systems, and broadens it to include preventing and, most interestingly, minimizing unemployment.  If we can help save a business, great; but now layoff aversion includes saving employment too… meaning it includes helping workers transition from a disappearing job directly to a new opportunity. This approach is an open door to direct labor exchanges, “pink slip parties” and any number of proactive reemployment techniques.  It is a game-changing concept; we are now fully in the unemployment prevention business.  Granted, this is by no means an easy task and, regardless of what we do, some layoffs will remain irreversible, HOWEVER, by focusing on the proactive and employing the full array of aversion strategies we can eliminate some unemployment and deliver services that literally pay for themselves… and possibly much more.

A little quick math the paints an amazing picture…

First the data:

  • The average weekly UI benefit in the US in $309.60
  • The average duration of a claim is 18.8 weeks
  • Rapid Response, nationwide, costs approximately $200 million per year.
  • The math: $309.60 x 18.8= $5820.48
  • So, one lost job costs, on average, $5,820.48 in UI benefits alone.

Currently, there are about 8,299,810 unemployed Americans.  For the sake of argument let’s say 80% are unemployed due to layoff (we can be very conservative with our numbers and this still works).

80% of 8,299,810 = 6,639,848

Now, if through layoff aversion strategies we are able to prevent just 1% of those employees slated for layoff from needing to collect unemployment -- just 1 out of every 100 at-risk jobs -- we can save more than enough to fund Rapid Response activities for the entire country.

1% of 6,639,848 = 66,398.48

66,398.48 x 5,820.48 = $386,471,024.87

This is over $386 million in cost savings in just UI benefits. Considering that there are other financial implications to unemployment, including lost tax revenue, this is a very conservative depiction of potential return on investment.

Imagine that, in these very budget-conscious times, a program that pays for itself… and more.

I understand it’s not going to be easy. It is a challenge to be sure; it will require a whole new approach to Rapid Response and managing economic transitions. To maximize the impact of the “new vision of layoff aversion” we must be vigilant and persistent in seeking out opportunities to prevent or minimize unemployment in every response. Layoff aversion must become a state-of-mind for all Rapid Responders.

Comments (1)

Nuno Albuquerque's avatar

Nuno Albuquerque on Tue, November 22, 2011 - 5:29:34 PM 1

Imagine that subscription!

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