Employment and Jobs

Developing Pre-Crisis Strategies to Mitigate Disruption and Manage Workforce Transition

July 29, 2019  • Alastair Fitzpayne & Ethan Pollack

This blog post is an excerpt from the Future of Work Initiative’s report Automation and a Changing Economy, released April 2019. The report is divided into two parts. Part I: The Case for Action, explores the impacts and history of automation, why this time may be different, and why action must be taken to maximize opportunity, minimize disruption, and ensure that the gains of automation are broadly shared. Part II: Policies for Shared Prosperity proposes 22 policy solutions to ensure that our increasingly automated economy is also one that promotes greater opportunity and broadly shared prosperity for all. Throughout the year, the Future of Work Initiative will republish many of these policy solutions.

When businesses restructure, not all layoffs can be avoided. However, employers can take a more active role in mitigating the impacts of their changing employment needs, while also doing more to help workers transition in the event of displacement. Employers seeking to automate work have a responsibility to their workers and communities to do it in a way that is most beneficial and least disruptive to all stakeholders. Employers should:

  • Plan Ahead: Employers have a responsibility to understand the implications of automation in their business operations and need to be proactive in planning ahead. This should include anticipating changing skill needs and potential workforce disruptions, and developing strategies to address them, especially if those needs can be met by reskilling current employees. Businesses that are automating work should develop multi-year strategic plans that include ways to address expected challenges. They need to act now to help workers remain employable when displacements or restructuring occurs.
  • Give Advance Notice: The Worker Adjustment and Retraining Notification (WARN) Act requires businesses to notify its employees and the government at least 60 days in advance of a plant closure or mass layoff event, but businesses should aspire to do better. The more lead time workers have to plan ahead, to seek retraining, and to begin their job search, the less disruptive layoffs will be. For example, Swedish businesses provide up to six months of advance notice before any layoff. This notice is a key component of its highly successful reemployment system for displaced workers (over 85 percent of Swedish workers are reemployed within a year, compared to about half in the U.S.).
  • Try Work Sharing: Work sharing is when businesses looking to cut costs forgo layoffs and instead reduce the weekly hours of multiple workers. Though more individual workers experience a reduction in hours and pay, no worker experiences full unemployment. For the business, work sharing can help retain workers they would otherwise lose, and give them greater flexibility to quickly increase hours back to full-time when demand increases. And though work sharing can be used anywhere, 27 states and the District of Columbia already work with businesses to provide workers whose hours are reduced with partial unemployment benefits. As work is automated, businesses should pursue work sharing as a way to smooth transitions and avoid layoffs. Federal policymakers should offer incentive grants to encourage all states to adopt work sharing programs.
  • Provide Transition Supports: Severance packages should not be limited to highly-compensated employees. Career counseling, training vouchers, even financial assistance during unemployment can be offered by employers to laid off workers to help smooth their transition. For workers who are laid off because their roles are replaced by automation, providing an ownership stake in the business would mean the worker shares directly in the savings.

There are numerous examples of actions businesses have taken to mitigate disruption and help their workforces transition. In 2011, Nokia responded to increased global competition in the smartphone market by reducing operations, affecting 5,900 workers. Due to a combination of social responsibility, Finnish labor law, and business interest, Nokia created the Bridge Program to provide workers with seed capital, training, counseling, and other resources to help them find another job or start their own company. The result was that 85 percent of affected workers participated in the program, 60 percent of affected workers knew their next step the day they lost their job, and workers started 1,000 new companies. The Brookfield Institute reports that three years later, 57 percent of respondents were reemployed, 11 percent were studying, nine percent were working as entrepreneurs, and 90 percent rated the Bridge program as valuable.

To help future-proof their workforce, IBM conducts quarterly skills planning assessments, in which it researches which skills are more or less in demand, which are leading edge, and which are lagging. It uses this analysis to inform ongoing reskilling efforts that total half a billion dollars annually. IBM CEO Ginni Rometty has argued that employers should commit to ensuring their workers remain employable, even if they cannot always guarantee employment at the company.

Some hotels have experimented with automating check-in, room service, concierge services, and more. After negotiating with the union, Marriott agreed to provide 165-day advance notice before implementing automation technologies, and to train workers whose hours are reduced as a result.

Policymakers should also play an important role by designing government supports for displaced workers that are available before a crisis, such as a mass layoff, occurs. As the Brookings Institution noted in a recent article, a key shortcoming of existing supports for displaced workers is that they tend only to be available after crisis hits. Federal and state policymakers should target additional retraining and counseling supports to workers whose jobs are deemed at greatest risk of automation before disruptions occur. For instance, government could co-fund proactive retraining efforts for workers in at-risk jobs by providing their employers with larger Worker Training Tax Credits, perhaps up to 50 percent.

In a proposal to create a Trade Adjustment Assistance for Technology, Andrew Stettner at the Century Foundation proposed establishing an independent commission to create an annually-updated list of occupations at risk of automation. The commission, which would be staffed by experts at the Department of Labor and the National Institute for Standards and Technology, would analyze O*NET data to develop risk scores for each occupation based on their task distribution, the capability of current technologies, and other factors. The list would enable quicker approvals of benefit applications when rapid job loss occurs in occupations above a minimum risk score. Such a risk score designation could similarly be used to target additional resources to businesses and communities at risk of disruption before jobs are impacted.