Washington — As job losses continue to slow the nation’s economic recovery, labor experts and economists are urging Congress and the Obama administration to boost funding for a little-known program that 17 states are using to avert layoffs and keep workers in their jobs.
Mass layoffs of 50 or more employees claimed 278,000 jobs in the third quarter alone, according to new government data. All the laid-off workers were idled for at least a month and only one-third of their employers expected any of them to be recalled.
In the face of continuing business slowdowns, however, thousands of employers are forgoing layoffs and taking advantage of state “work-sharing” programs in which they cut the hours of full-time workers, who then recoup a portion of their lost wages — usually 50 to 60 percent — from unemployment insurance benefits.
The rules vary by state, but work sharing typically helps reimburse employees for wage reductions ranging from 10 to 60 percent.
For example, an employer that needs to cut 20 percent of its full-time work force could do so through layoffs. If those laid-off workers earned an average of $500 a week, they probably could expect roughly $250 a week in unemployment benefits.
However, if instead of layoffs those workers’ hours were cut by 20 percent through the work-sharing program, they’d each earn $400 a week. They would also be eligible for the program’s jobless benefits, which would make up about half of that $100 wage cut, or $50. With this approach, the worker’s earnings would be roughly $450 a week, a 10 percent cut instead of a 50 percent cut.
Employees like the program, which is sometimes called “short-time compensation,” because the wage reductions are absorbed equally among workers, avoiding the stress and income loss of layoffs. Employers like it because they can reduce payroll and retain experienced workers and don’t have to pay to recruit, hire and train new workers when the economy improves.
State governments like work sharing because participants receive less in cash benefits than laid-off workers do, easing the drain on state unemployment funds, which have been hard hit during the recession.
Work-sharing programs are available in Arizona, Arkansas, California, Connecticut, Florida, Iowa, Kansas, New York state, Maryland, Massachusetts, Minnesota, Missouri, Oregon, Rhode Island, Texas, Vermont and Washington state. Their popularity has skyrocketed since the economy tanked in December 2007.
In California, which established the nation’s first work-sharing program in 1978, nearly 183,000 workers were enrolled through the first nine months of the year, compared with a little more than 80,000 for all of last year.
The nation’s second-largest work-sharing program, in Washington state, has a record enrollment of more than 2,500 businesses and more than 50,000 workers who filed claims this year. The program already has paid out more than $31 million in unemployment benefits this year, compared with $4 million in 2008.
In New York, more than 1,800 companies have enrolled this year, compared with 483 last year. The increase has helped save an estimated 10,500 jobs through the first eight months of the year, more than 2 1/2 times as many as last year.
That surge in participation has convinced many that it’s time to take work sharing national.
“It should be an option in every state,” said Neil Ridley, a senior policy analyst at the Center for Law and Social Policy, a liberal research center in Washington, D.C. “It doesn’t work in every situation, but it should be an option that’s on the table for employers and workers.”
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