…and I wanted to make sure folks were aware of it.
The bill that extended the payroll tax break and Unemployment Insurance (UI) contains a provision for something called work sharing, a variation on UI that a) makes a lot of sense, and b) played a major role in holding down German unemployment during the recession (their current jobless rate is in the mid-fives right now, compared to ours in the mid-eights).
Work sharing, also called short-time compensation, is a way to use the UI system to avoid layoffs, or more accurately, dilute the pain of layoffs by substituting reduced hours across a group of workers as an alternative to laying people off. UI benefits then kick in to help offset part of the lost pay.
For example, suppose in the midst of recession, depressed demand leads an employer to consider laying off a fifth of her workforce. Under work sharing, she could cut everyone’s hours by 20%–or move to a four-day week—and not layoff anyone. Then each affected employee earns 80% of their pay and 20% of the weekly UI benefit for which they’re eligible (workers with health benefits maintain full coverage).
Over 20 states already have work sharing programs. Employers often like how the flexibility enables them to react to dips in demand without losing valuable workers, and workers can avoid layoff, keep working and drawing a paycheck. True, relatively to traditional UI, most workers in examples like that above who would have been held harmless take a small hit to keep others on the job. But the anecdotal evidence I’ve heard from the states suggest folks are generally OK with that.
Learn more about it here.