Monday, February 02, 2009


More so than at any time in my memory, this downturn has brought plenty of discussion of furloughs as a way to cut costs. While they aren't the worst of all things, I'm not a fan.

In the context of budget cuts, furloughs are defined as mandatory unpaid leave, usually for sporadic, short periods. (That's different from its original context, which was military, and which involved being paid.) Every employee has to take a day or two each month without pay for a year, say. The idea is to reduce payroll without reducing the number of employees, and to share the pain proportionally. The highest paid employees lose the most, but they have the most to lose, so there's a basic fairness there.

Furloughs feel like pay cuts at the time, but with two important differences. First, they're supposed to come with time off. (I've heard of colleges expecting employees to work through their furloughs, which strikes me as abusive in the extreme.) Unlike a pay cut, in which you get less pay for the same work, a furlough gives you less pay for less work – or at least, less pay for less time at work. (One of the great frustrations of many office jobs is that when you come back from time off, the work simply piled up in your absence. Even if you're paid for your time off, you pay for your time off.)

Second, they don't affect your base salary. That means precisely nothing in the moment, but it means a lot when raises are given in percentage terms. A furlough affects this year's pay, but shouldn't have any meaningful carryover into future years. An actual salary cut reverberates forever. (There may be an impact in terms of a retirement account, but at least the salary will recover.) Furloughs are closer to 'temporary' than pay cuts are.

All of that said, though, they're much more complicated than they seem at first blush.

In the collective-bargaining environments I've seen, sick days, vacation days, and personal days are calculated as multiples of hours worked. (The calculations get truly silly, often carried out to five or six decimal places.) There's an argument to be made that those shouldn't change when a furlough hits, since the furlough is involuntary. But there's also an argument to be made that those benefits are (literally) functions of hours worked, and with fewer hours worked, those benefits must be reduced accordingly. As unpopular as unpaid time off is, adding “and we're reducing your paid sick time, too” makes it just that much worse.

I've heard of colleges that present furloughs as 'deferred compensation,' rather than unpaid leave. The idea is that you'll get the money you're owed, but not until x years later. Presumably, the money will be interest-free, meaning that you're making the college an involuntary interest-free loan. I'm told that the tax implications of deferred compensation are not comprehensible by mere mortals, though I'll admit not having done the slog myself. I've spoken to some of my counterparts at colleges that have actually done this; they uniformly report that keeping reliable records for that long is simply beyond most workaday systems. Invariably, when paytime rolls around, there's a mad flurry of claims, counterclaims, paper shuffling, and bickering over just what, exactly, was said, meant, or implied x years ago. And of course, employee turnover during the deferral period makes things even worse.

There's also the basic fact that people count on a certain income level, and make commitments accordingly. “Two days a month” sounds trivial, until you realize it's almost ten percent of your pay. Given that landlords, mortgage companies, utilities, daycare centers, grocery stores, and property tax collectors don't cut any slack for furloughs, these can really hurt. Yes, it would be lovely to assume that everybody routinely saved thirty percent of their take-home pay, but that's just not reality.

(I shouldn't complain, though. I'm told that California is on the verge of issuing scrip. Scrip! The largest state in the most powerful country in the world is reduced to play money. I've mentioned before that the California system is unique, and uniquely strange, but it's bordering on Mad Max territory at this point. Elect a post-apocalyptic action hero, get post-apocalyptic action. Very strange.)

I can see furloughs as a way to buy a little bit of time to make serious strategic decisions. By that I mean, time to decide what to eliminate altogether. As anything more than a very brief stopgap, though, I think they're dangerously irresponsible.

Wise and worldly readers – what weird consequences have you seen from furloughs?