WASHINGTON – A plan to promote work-sharing arrangements, where firms suffering from the recession would keep all present workers on board, but cut their hours – with unemployment benefits partially making up for lost pay – was inserted into the payroll tax cut-jobless benefits extension law that President Obama signed Feb. 22.
The job-sharing plan is another attempt to cut the impact of joblessness even in a weak recovery, say its authors, Rep. Rosa DeLauro, D-Conn., and Sen. Jack Reed, D-R.I. It’s modeled on plans now operating in 23 states and a national plan in Germany.
There, in the depth of the recession, job-sharing meant unemployment stayed far lower than it did in the U.S., never reaching double-digit percentages. German workers facing layoffs instead took wage cuts, but companies paid them anywhere from half-pay – if there was a total layoff – to 67 percent, with jobless benefits topping those sums.
“Work-sharing programs provide employers with an alternative to layoffs,” said Dean Baker, co-director of the pro-worker think tank, the Center for Economic Policy and Research.
Until now, Baker elaborated, laid-off U.S. workers collect up to 50 percent of their wages in jobless benefits, though the figure is far lower in some states. “Under work-sharing, struggling companies can cut back hours rather than workers and unemployment insurance benefits would pay 10 percent of their lost wages. This means that instead of a worker losing their job and receiving half their pay, they would now stay on their job after having their hours cut by 20 percent and get 90 percent of their pay,” Baker said.
The worker would still take a slight cut, rather than being laid off and suffering a huge cut, Baker added. When demand resumes and lets the firm again need a full-time workforce, the workers would be there already.
“That benefits both employee and employer,” Baker said. Employers “won’t have to hire and train new people, they just increase hours for the existing staff.”
A fact sheet from DeLauro’s office says the legislation is modeled not just on the German program but on work-sharing arrangements now existing in 23 states, all of which use jobless benefits to help partially replace lost wages.
“Work-sharing is an innovative and strategic way for companies to move forward without laying off workers. It is essential that we save the jobs that we can, preserving our workforce and ensuring that our nation and our workforce will weather this tough economy,” DeLauro said when she introduced the legislation in August 2011.
Reed pointed out their idea would not only keep workers on the job, and ready to resume full-time employment when demand picks up, but it would also save both states and the federal government money they would otherwise spend on full jobless benefits. Otherwise, the states or the feds would be on the hook for half the worker’s pay.
The feds would pay for 100 percent of work-sharing costs for up to three years, the fact sheet on their bill says. States would also get grants to administer and promote work-sharing, and to enroll workers. And the program is targeting full-time workers facing layoff, as it bans participation by employers whose workforce is seasonal or temporary.
The measure authorizes $100 million to pay for the work-sharing program’s costs.
States with work sharing laws are Arizona, Arkansas, California, Colorado, Connecticut, Florida, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, New Hampshire, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, and Washington.
The main sections of the measure extend jobless benefits and the payroll tax cut for 160 million workers through the end of this year. That means only 4.2 percent of their pay is deducted for Social Security withholding. The extended federal jobless benefits will exist for a shorter time than they do now. Workers laid off from March through May are eligible for 89-99 weeks of coverage, while those laid off from June-September can get up to 79 weeks. Those laid off after September are eligible for 73 weeks.