An unprecedented 10 million people applied for unemployment insurance across the country over the last two weeks with more likely to come. Many employers are responding to shutdown orders, lack of cash flow, and the crisis by laying people off. Leaders have enacted measures to encourage employers to avoid more layoffs, such as conditioning business loans on maintaining payroll and providing tax credits for payroll expenses.
There is a little known program within our existing unemployment system, however, that would enable us to avert more layoffs. Most companies and workers have not heard of it, but work sharing, also known as “short time compensation” is a way to avoid layoffs and keep people employed while reducing payroll. It was widely used during the Great Recession.
In the book “Policies to Address Poverty in America,” Melissa Kearney and Ben Harris noted that work sharing programs “played a substantial role in ameliorating the rise in unemployment in many countries” when the Great Recession hit hard. Rhode Island has made good use of work sharing, with claims accounting for a sixth of state unemployment claims in 2009. This proven approach should be getting far more attention right now.
How does the program work? Instead of laying off, for instance, half of the workforce, a company would decrease the hours of its employees by half. These workers would then be paid for 50 percent of their time and would receive unemployment compensation for the other 50 percent. More than two dozen states already have working sharing programs up and running, along the broad political spectrum, from California to Nebraska.
Work sharing allows employers to avoid layoffs while still decreasing their payroll, helps with morale, and enables them to maintain at least some of their workforce. It allows workers to keep their jobs and benefits, both of which are so crucial. It also allows workers to maintain their attachment to the labor market. Moreover, it likely has significant mental health benefits for workers, given the traumatic impact of losing a paycheck. Finally, work sharing benefits the national workforce as a whole by reducing barriers for the ramp up when the economy finally starts operating again.
Work sharing is not a solution for the magnitude of the problem facing our country. The pause in most economic activity requires a massive stimulus even greater than what has already passed and unlike any we have seen in our lifetime. For employers likely to be shuttered for a long period of time, work sharing may be infeasible. But the crisis facing us needs an “all of the above” approach to make a difference. For industries likely operating for the rest of this crisis, including grocery stores, medical supply factories, food delivery companies, and restaurants that have scaled back to take out only, work sharing could certainly make a big difference.
The Cares Act makes it even easier for states to implement and run work sharing programs. Under the new law, the federal government will cover the costs of benefits provided through work sharing programs for states that already have them and a significant portion of the funding needed for other states to put such programs in place. Work sharing needs to be far more widely used. States without such programs in place should quickly adopt them. Employers and workers can press for such programs, which the Labor Department will process in an expedited manner.
States with work sharing programs should loudly publicize this option in every way they can, as Texas recently did when its workforce commission encouraged employers to adopt work sharing instead of layoffs, receiving media coverage as a result. Where paid work is available, employers need to take advantage of these programs as much as possible and tell other companies about it. Workers, unions, and advocates should press their employers to adopt work sharing as an alternative to layoffs.
Such programs are an important part of keeping as many workers and businesses afloat as we ride out this pandemic. We know that we are in this fight to survive together. Work sharing programs bring this spirit of alliance to jobs and businesses. Let us make the most of it.
Sharon Block is the executive director for the Harvard Labor and Worklife Program. Terri Gerstein is the director of the State and Local Enforcement Project there and is also a senior fellow with the Economic Policy Institute.