‘They just couldn't afford to bring us back’: Many furloughs turn into permanent layoffs

Anita Tallman worked for the same image processing company in Nevada for 24 years. What began as reduced hours at the start of the coronavirus pandemic — and then a one-month furlough as it wore on — ultimately turned into a permanent layoff.

“We were told that for one month, we would be back on April 20,” Tallman, 60, said. “I thought this is good for a month, we'll get a hold of this, and it'll be fine. But as you know, we couldn't get a hold of it.”

Tallman’s husband has a pre-existing condition, so staying home for a month and collecting unemployment was a smart option for their health. But she soon realized it would last much longer after the lab closed for good.

“I will no longer have [health] insurance on the 29th [of May],” she said. “They said: ‘That's it.’”

While more than 3 in 4 Americans see their layoffs as temporary, according to the Bureau of Labor Statistics, that may not be the case for many of the 38 million who filed unemployment claims in the last nine weeks.

Read more: How to file for unemployment insurance

More than 40% of the layoffs that have occurred since the lockdowns began will likely never come back, according to a recent paper from Becker Friedman Institute at the University of Chicago. That’s around 16 million jobs.

“We believe that it’s likely as the economic crisis continues and doesn't get better,” co-author Jose Maria Barrero told Yahoo Money. “Many of those layoffs that were intended to be temporary in April, may actually become permanent.”

‘Our expectation was that we were going to be brought back’

For 47-year-old Phoenix Haven who worked at a private doctor’s office, the transition to a permanent layoff was similar to Tallman. Her hours got cut first, then she was furloughed, and then, finally, the layoff became permanent.

“Our expectation was that we were going to be brought back once things were ramping up,” Haven said. “They said that they just couldn't afford to bring us back.”

She lost the health insurance tied to her job and is relying on unemployment benefits to pay her bills.

“The main worry is finding a job before my employment runs out because you only get it for six months,” she said.

For Tallman, finding a job is also a worry but she’s not looking for another job immediately, especially one where she’ll be exposed to crowds, because of her husband’s health.

Read more: Workers rights: Here's how the new coronavirus legislation protects you

“I'm not going to be looking for a job for at least a couple months,” Tallman said. “And if it gets really bad in the fallI, I will ride it out and then possibly next year in June, I can collect Social Security early.”

‘There is a cost to effectively paying people to stay home’

While job postings are still 37% lower than in 2019 as of May 15, according to the latest data by Indeed, new hires will help to offset some of the temporary layoffs that went permanent. There will be three new hires for every ten layoffs, according to the paper.

“There are firms that are hiring,” Barrero said. “There are new business models and new firms that are arising, or that need to arise during the recovery, and they need to hire new employees.”

While unemployment benefits have a very important role in the early period of the crisis, extending them for a long period may result in unintended consequences, Barrero said.

“The economy is going through a big transformation,” he said. “ As the economy begins to recover, there is a cost to effectively paying people to stay home and collect unemployment.”

That can potentially stunt the growth of these new ventures that are going to take the economy out of the crisis and increase productivity during the recovery, he said.

‘I may need to switch careers entirely’

Thirty-seven-year-old Geno Sapio is waiting to see if his temporary furlough from his banquet server job will turn into a permanent one.

“In April, there seemed to be some hope of returning around June/July,” Sapio said. “As optimism faded it became: ‘We’ll apprise you as the situation continues to unfold.’”

Sapio lives and works in Lakewood, Ohio, and was initially furloughed at the beginning of April. Before that, his hours had been reduced due to the seasonality of the banquet business.

“Let’s say I am lucky and not permanently laid off,” Sapio said. “Yes, you still have a job, and maybe next year business will be steady. But in the interim, you’re not earning enough monthly to cover your bills.”

Even if his employer opens for business, it will likely be at lower capacity as traveling has been reduced and many companies have cancelled events for the year. That doesn’t help a server like Sapio who gets most of his income from gratuity rather than hourly pay.

Read more: Coronavirus: How to find a job in a tough economy

“These leisure, hospitality, entertainment sectors have been hit the strongest,” Barrero said. “So there's going to be a shift away from these sectors and towards others.”

While many laid off workers may move within the same industry to meet the needed roles, Sapio is increasingly considering changing jobs and industries to find better pay and opportunities.

“I’m having to grapple with the reality that I may need to switch careers entirely,” he said. “This isn’t about my employer doing bad. It’s the entire industry.”

Denitsa is a writer for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekova.

Read more:

• ‘I'm looking at everything:’ Recent college graduates struggle to find jobs

• Coronavirus: What American workers should know about their rights as the economy reopens

• Read more personal finance information, news, and tips on Cashay

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and Reddit.