Fossil fuel layoff: The economic and employment effects of a refinery closure on workers in the Bay Area
On October 30, 2020, the Marathon oil refinery in Contra Costa County, California, was permanently shut down and 345 unionized workers laid off. We surveyed (n=140) and interviewed (n=21) these refinery workers to document their post-layoff employment experiences. The findings in this report focus on these workers’ post-layoff job search, employment status, wages, and financial security. The Marathon refinery’s closure sheds light on the employment and economic impacts of climate change policies and a shrinking fossil fuel industry on fossil fuel workers in the region and more broadly.
In the aftermath of the refinery shutdown, workers were relatively successful in gaining post-layoff employment but at the cost of lower wages and worse working conditions. At the time of the survey, 74% of former Marathon workers (excluding retirees) had found new jobs. Nearly one in five (19%) were not employed but actively searching for work; 4% were not employed but not looking for a job; and the remaining 2% were temporarily laid off from their current job. Using standard labor statistics measures, the post-layoff unemployment rate among Marathon workers was 22.5% and the employment rate was 77.5%. If workers who have stopped actively searching for work were included, the post-layoff unemployment rate was higher at 26%.
Former Marathon workers find themselves in jobs that pay $12 per hour less than their Marathon jobs, a 24% cut in pay. The median hourly wage at Marathon was $50, compared to a post-layoff median of $38. A striking level of wage inequality defines the post-layoff wages of former refinery workers. At Marathon, hourly pay ranged between $30 to $68. The current range extends as low as $14 per hour to a high of $69. Workers reported benefits packages comparable to their pre-layoff Marathon benefits.
Workers found jobs in a range of sectors. The single most common sector of re-employment was oil and gas, where 28% of former Marathon workers found post-layoff jobs but at wages 26% lower than at Marathon. These lower rates of pay stem from loss of seniority and non-union employment. The utility sector (electrical power, natural gas, wastewater management) was the second most common sector of re-employment. Workers reported that utility jobs were a good fit for their skills, reputed as “good jobs,” and highly sought after. The median hourly utility wage was $41. The third most common re-employment sector was chemical treatment. Less than half (43%) of all post-layoff jobs were unionized.
Overall, workers reported worse working conditions at their post-layoff jobs, even in higher wage jobs. Workers described hazardous worksites, heavy workloads, work speed-up, increased job responsibilities, and few opportunities for advancement. Above all, workers cited poor safety practices and increased worksite hazards as the most significant and alarming characteristics of degraded working conditions.
Workers had difficulty finding jobs that matched their skills when searching for work. They emphasized two primary frustrations: 1) employers’ lack of knowledge about refinery work and refinery workers’ skills and 2) workers’ inability to prove their skill or experience through certifications or a verification process.
Nearly all workers (91%) would consider job training. Approximately half (49%) said they would enroll in a job training program, 42% responded “maybe,” and 9% said they would not. Workers aged 40 to 49 reported the greatest willingness to enroll in training followed by workers aged 30 to 39. Hesitation was highest among workers over the age of 50. Workers’ most prevalent concerns about training were cost, needing to earn while training, and training program length. Many workers were apprehensive about the efficacy of training. Workers were uniformly uninterested in going back to school to earn degrees.
Workers reported increasing financial insecurity after the layoff. A full third of all workers described that they were “falling behind financially” a year following the layoff compared to only 3% before the layoff. Nearly one-third of all workers took early withdrawals from their retirement accounts to make ends meet following layoff. Most re-employed workers did not move to find jobs, likely associated with the high rate of home ownership among Marathon workers (81%). Many expressed deep anxieties about their long-term ability to make mortgage payments.
Laid-off workers are highly motivated to put their skills and experience to use in new jobs, in new sectors. They require coordinated assistance to transition successfully into new jobs and for the region to retain them. Our research findings identify four critical types of assistance that workers need most. First, third-party skill certification would facilitate more efficient and accurate skill matching between jobs and workers in the labor market. Certification would help workers communicate, and verify, their skills to new employers. Certification would aid employers who are unfamiliar with the refinery sector make better decisions about assessing their workforce needs in relation to the skills of former refinery workers.
Second, workers require targeted job search assistance that focuses on a broad scope of strategies, including effective job search techniques, resume and online profile preparation, and career counseling. Both workers and job counselors require an up-to-date and nuanced assessment of jobs and industries to which refinery skills transfer.
Third, a fair and equitable transition for workers out of the fossil fuel sector depends upon a robust economic development strategy that generates new jobs comparable in quality to the jobs these workers are leaving behind. Successful transition requires both transition assistance and high-road job growth. One without the other will leave workers, and the region, behind.
Lastly, regional economic development strategies aimed at reducing fossil fuel dependency must account for the adverse financial impact these strategies will have on workers and their families. Loss of income will invariably result. A just transition for working Californians needs to include financial support, in the form of cash assistance or wage replacement, to cover losses in wage income.
Recommendations to support displaced workers
- Extended cash payments to maintain pre-layoff income levels
- Financial support to cover the 24% average gap in workers’ pre-layoff wages and their post-layoff wages
- Bridge-to-retirement funding that provides full retirement benefits to workers eligible for early retirement within one year following layoff
- Third-party certifications to define and verify the skills of refinery workers, and facilitate more efficient and accurate skill matching between jobs and workers in the labor market
- Targeted, individualized job search assistance that focuses on a broad scope of strategies for identifying good job opportunities, and preparing for and applying for those jobs
- Targeted, short-term training for a specific set of occupations and industries, with income support for workers during training
- Short-term, stand-alone training modules to enable workers to maintain certifications they had earned on-the-job at the refinery, such as CPR and HAZMAT training certifications
- Counseling services for workers and their families during layoffs and job transitions