Solving the Reemployment Puzzle: From Research to Policy

Ch 9 - Work Sharing

341 9 Work Sharing with David E. Balducchi INTRODUCTION Work sharing—also called short-time compensation (STC)—was the experiment that did not happen.1 As work sharing emerged as a U.S. public policy issue in the 1970s, the Carter administration announced a 1977 plan to have the federal government take a leadership role by launching a rigorous demonstration project using experimental methods . Soon after it was launched the plan fizzled. The demonstration was canceled, and it was left to the states to pursue and lead this program. Since then, both the states and the federal government have wielded leadership at different times in work sharing policy, and while the USDOL conducted two program evaluations, it has not pursued a rigorously evaluated demonstration. Work sharing attempts to reduce layoffs by compensating a larger number of workers with partial unemployment insurance (UI) benefits in place of a total layoff for a smaller number of workers. For example, an employer can place 50 workers on a 20 percent hours reduction—to a fourday week—instead of achieving the same hourly reduction by temporarily laying off 10 workers. In 17 states, individual firms, with the support of their employees, can file work sharing plans with a state UI agency. If the state agency approves the plan, work sharing can be used for a period of time, generally up to one year. During that time, workers can receive work sharing benefits for weekly work reductions of 10 percent or more, usually a one-day reduction. Work sharing benefits are calculated as a prorated share of a worker’s weekly UI benefit amount. Work sharing benefits are deducted from the total normal entitlement workers have for UI benefits, and work sharing plus UI benefits cannot exceed that entitlement during a one-year period. The benefits paid are charged to the employer in accordance with normal state UI experience-rating provisions. 342 Wandner Work sharing has been advocated by some policy analysts as a program that could improve the behavioral impact on workers in relation to the UI program. The American UI program has been found by some analysts to have a pro-layoff bias. Factors mentioned as contributing to this bias include incomplete UI experience rating, which encourages additional layoffs once firms reach maximum tax levels, and a UI partial benefit formula that permits only very limited hours of work per week. The effect of these disincentives sits heavily with the UI program, so it is not surprising that reforming the UI program has been seen as part of the solution. One proposal has been for greater adoption and utilization of work sharing (Abraham and Houseman 1993, pp. 132–147). For a state to adopt a work sharing program, the state legislature must enact work sharing provisions as part of the state UI statute. In the absence of special legislation, workers who experience a modest reduction in their weekly hours of work would not receive UI benefits under regular state UI partial benefit formulas. These normal partial benefit formulas are designed to pay benefits to workers whose hours are so sharply reduced that they are in need of income support, so they are usually only available to workers who work no more than one or two days a week. Work sharing has the effect of suspending and superseding these normal UI partial-benefit payment provisions. Work sharing is available in a number of European countries and in Canada. It was first implemented in the United States in 1978 in California . Today, it is an optional UI program that states can adopt as part of their UI system. The program was authorized by Congress through legislation enacted in 1982 and again in 1992. Nationally the program is small and infrequently used, but it is more important in a small number of states, and it represents an additional, targeted program used by employers to ease the problems associated with unemployment. WORk ShARINg IN OThER COUNTRIES Work sharing was first developed in Germany in 1927, and it operated briefly under the Weimar Republic. After World War II, Germany reestablished work sharing, and work sharing spread throughout Western Europe and to Canada. It was a popular program in Europe for Work Sharing 343 several decades, but prior to the Great Recession of 2007–2009 it had declined in usage as Europe became more concerned with labor market flexibility and less concerned with job security. Given work...