May 14, 2020
The federal Worker Adjustment and Retraining Notification Act of 1988 (the WARN Act) requires certain employers to publicly announce in advance that they plan to close a worksite and lay off workers. The public filings of these WARN notices create a unique database to analyze the impact of the COVID-19 pandemic on Michigan labor markets.
The WARN Act specifically requires firms with 100 or more full-time employees to provide at least 60 calendar days of advance written notice that a worksite is closing if it will result in the loss of employment of 50 or more workers for at least six months. Certain exceptions are allowed for unforeseen business circumstances and natural disasters.
The sudden, unexpected economic downturn of the past few weeks, as well as the government- mandated closing of employment sites, may be interpreted by some firms as unforeseeable business circumstances and thus an exception to the notification requirement. In other words, WARN notices do not provide a comprehensive list of business closures in Michigan. However, in practice, many WARN notices included a self-reported caveat that the firm was unclear about the unforeseen circumstance exception and had decided to file anyway.
Overall, these notices provide a rich database of mass layoffs in the state and provide insight into the reasons for closure and the industries affected. Starting from March 16, when bars and restaurants were first closed—foreshadowing the broader shutdown of the state economy—through May 2, there have been 126 WARN notices impacting 22,999 employees. By comparison, in 2009, during the height of the Great Recession, there were 164 notices issued over the entire year, impacting 21,547 employees.
Many firms will issue one WARN notice for multiple locations. The analysis below disaggregates these notices to identify each affected establishment, allowing examination of the geographic impact of the mass layoffs. Additionally, the causes cited for the layoff of employees have changed dramatically in recent weeks (see chart). Prior to Governor Gretchen Whitmer’s March 23 stay-at-home order, 79 percent of establishments announced mass layoffs as a result of plant closure, while 18 percent of closings were attributed to “other” reasons such as the sale of the business or company-wide restructuring. Following the stay-at-home order, 91 percent of establishments have identified COVID-19 as a factor in their layoff notice. At this point, one silver lining for employees of such establishments is that nearly all firms (92 percent) expect the closure to be temporary.
The map below shows the number of establishments listing COVID-19 as the cause of closure, with the time slider showing changes over the past few weeks. During this time the number and geographic distribution of WARN establishments increased significantly, especially since the governor’s stay-at-home order.
The state responses to the pandemic have also affected the type of industries announcing mass layoffs. As seen on the next map, prior to March 16, the primary industries issuing WARN notices were manufacturing and retail trade. Starting that week, food and accommodation establishments (restaurants and hotels) were quickly affected, with 20 establishments issuing notices by the end of March. As of May 2, 68 establishments have issued notices displacing 6,061 workers.
In almost every industry since mid-March, COVID-19 related reasons have dominated the reasons for closure. In manufacturing, this was true for 38 of 45 establishments announcing closure, and it held for all 10 establishments in the health care and social assistance industry.
WARN notices provide a glimpse into the scope and scale of mass layoffs in the state of Michigan. Over the past two months, the state has seen a dramatic and unprecedented increase in the numbers of establishments and people affected by worksite closures. While in some cases the COVID-19 pandemic has resulted in the permanent closure of establishments, in the vast majority of cases these closures are expected to be temporary. This may provide some hope that once the virus is contained, the economy may be able to scale-up quickly, restoring employment for many people.