A run on the bank: GM’s jobs bank goes to unemployment

In 1984, labor contract talks between the United Auto Workers (UAW) and the Big Three automakers resulted in a major concession to the labor union in order to improve productivity through technology. Workers who fell victim to these technology improvements (i.e., were no longer needed) would continue to be paid nearly their entire salary ... for doing nothing.

While the details are more complicated than that (you can read this 2005 article from The Detroit News for more information), the automakers essentially paid for employees that were no longer needed to be productive - in addition to the costs of implementing more advanced technology to achieve a new level of productivity.

This protective policy was called the "jobs bank."

To comply with the conditions set forth by the government’s multi-billion dollar loan last year, General Motors Corp. announced yesterday that the jobs bank is shutting its door for good. Chrysler LLC recently announced this same plan, and it is expected that Ford - even though the company did not accept loans from the government - will follow suit to remain competitive.

The 1,600 GM workers in the jobs bank will be effectively laid off on Monday, Feb. 2, and will need to file for unemployment. Under unemployment, they will continue to receive 72 percent of their salaries through GM subsidies and state unemployment benefits - which usually last for just under a year.