While Mass Layoffs Remain High, Bankruptcy Filing Rates Likely to Continue to Climb
At least as early as 2000, the United States Senate looked to the high level of mass layoffs occurring across the United States in its debate over bankruptcy reform. The Bureau of Labor Statistics (BLS) was then reporting 874 mass layoffs for October of 2000, with 103,000 workers affected during that one month.
Since a "mass layoff" is defined by the BLS as any layoff impacting 50 or more employees, mass layoffs account for only a portion of the actual layoffs impacting the U.S. economy at any given time.
Six years later, Congress has acted on the bankruptcy reform measures that were debated for nearly a decade, and the impact appears not to have been what the government-and the credit card industry-had hoped. While there are many factors pushing consumers to consider bankruptcy, including the extensive problem of uninsured medical expenses, high credit card interest rates that prey on those who can least afford them, and unexpected life crises like a death in the family or divorce, the continuing problem of mass layoffs across the United States alone makes it clear that the bankruptcy problem isn't going to go away as easily as creditors had hoped.
According to evidence introduced on the floor of the Senate 6 years ago, nearly 75% of displaced workers were forced to accept lower-paying or part-time jobs, or had found no replacement job at all. More than 67% of people filing bankruptcy listed employment issues as one of their primary motivators for bankruptcy.
Nonetheless, Congress ultimately decided that making it more complicated to file for bankruptcy would somehow solve the problem. Now, less than a year after the new bankruptcy laws took effect, filing rates are rapidly climbing toward pre-reform numbers. That shouldn't come as a surprise to anyone, since the underlying problems remain.
Specifically, the mass layoffs some Senators pointed to as a major contributing factor in 2000 have increased since that time. In July, 2006, the BLS reported 1,125 mass layoffs impacting 114,895 employees across the country-a significant increase over the 874 mass layoffs and 103,000 that concerned Senators six years ago. So long as more than 100,000 Americans are deprived of their source of income each month, it's going to take more than a more complicated filing process to solve the "bankruptcy problem".