Sharing Work When Times Are Tough

Who wants to think about the next economic slowdown? No one, that's who. With Americans still struggling to recover from the last recession, there is little enthusiasm for thinking about how to deal with another one. According to employment data from the Bureau of Labor Statistics, about 2 million fewer Americans had jobs in July than at the start of the Great Recession, even though it has been officially over for more than four years. Some 11.5 million Americans, nearly 1.7 million of them aged 55 or older, were unemployed last month. Getting dislocated workers, especially older ones, back to work has been no easy task.

In some respects, older workers have fared better than other age groups since the recession began. For one thing, their unemployment rate has remained lower. Still, the rate skyrocketed during the recession and is well above what it was at the recession's onset. And if older workers do lose their jobs, their chances of finding work have been pretty slim. Their average duration of unemployment is close to one year.

Can it come as any surprise that many dislocated workers drop out of the labor force, opting for early retirement and permanently reduced Social Security benefits because searching for suitable jobs is so discouraging? Some leavers do return, but that is difficult at older ages -- skills atrophy as time out of the labor force progresses, age discrimination rears its ugly head, and the job market is not always welcoming.

The problems older jobseekers face are not new. Nor are older Americans the only ones struggling to find work. One difference, however, is that they have relatively little time to recover from having exhausted their savings, having gone further into debt, or having withdrawn money from an IRA or 401(k) to pay bills. Although they may say that they will never be able to afford to retire, it is unlikely that many of them will be able to work forever.

Is there a way to protect some workers -- younger as well as older -- from job loss during economic downturns? While it's too late for preventive medicine to help those now jobless, some might be helped the next time around if more employers have access to and use a type of unemployment insurance known as short-time compensation or work sharing. Work sharing is exactly what it sounds like -- the sharing or spreading around of the available work within a firm or plant when times are tough.

Let's say that product demand has fallen, and an employer plans to lay off 20 percent of the company's employees to make ends meet. That is clearly bad news for the 20 percent, but it may not do much for the morale of the remaining 80 percent, who can't help but wonder if they might be next. Instead of layoffs, however, an employer might reduce everyone's work hours -- in this example by 20 percent -- and achieve comparable savings. If state law allows it, work sharers who are eligible for unemployment insurance can receive prorated benefits to offset some of the lost wages. States also require employers under new federal rules to continue to provide health and pension benefits to work sharers.

While workers on work sharing who would not have been laid off also experience a reduction in hours and earnings, losses should be temporary, and unemployment benefits make up for some of them. Work sharing spreads the burden of a downturn more evenly across more workers than layoffs do.

Work sharing has obvious benefits for the workers who would otherwise have been laid off: they aren't forced to look for work in a weak labor market; they maintain their skills; and they suffer relatively little lost income. They might even use their downtime to acquire new skills. Employers benefit, too. When demand picks up, businesses have skilled and experienced employees on hand to meet it. They aren't faced with the costs of hiring and training replacement workers and getting them up to speed. They can thus get back to full capacity with little effort or expense.

Work sharing requires amending state unemployment insurance laws, but once that has been done, a program can be easy to implement. The decision to use work sharing is up to an employer. Work sharing won't work for all types of jobs and, by itself, will not keep all firms from going under -- some just might not survive a downturn. However, in the last recession, some states found that work sharing did help save jobs -- an estimated 166,000 jobs in 2009 alone, as reported by the Center for Law and Social Policy (CLASP) and the National Employment Law Project. Admittedly, this was a small percentage of the total number of job losers that year, but for those employees whose jobs were saved, work sharing "worked."

Congress has made nearly $100 million in grants available to implement or improve work sharing programs in the states. At last U.S. count, 26 states had work sharing laws in place, the latest being Ohio, up from 17 at the height of the Great Recession. According to workforce development expert David E. Balducchi, "Work sharing is an employment policy backed by the Obama Administration and increasingly supported by Republican governors. It offers to employers a smart use of partial unemployment benefits to preserve rather than eliminate jobs."

A timely expansion to other states of laws that permit the payment of prorated unemployment benefits to work sharers could find those states better prepared to weather the next downturn, which they are likely to have to do eventually.

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