For Immediate Release: March 27, 2009

Under Used Work Sharing Program Could Help Curb Rising Layoffs

(Washington, D.C.) Work sharing, a program that allows employers to reduce work hours instead of jobs, could provide an alternative to layoffs and help ease mounting unemployment, according to Work Sharing-an Alternative to Layoffs for Tough Time, a paper published today by the Center for Law and Social Policy (CLASP).

Work sharing programs within the federal-state Unemployment Insurance system allow an employer to temporarily cut costs by reducing the number of regularly scheduled work hours for the entire workforce or business unit. For example, a firm faced with declining demand for its products or services could reduce the hours for all workers by 20 percent instead of laying off 20 percent of its workforce. In a typical state program, employees work four days a week, receive Unemployment Insurance benefits for the fifth day and retain employer-provided health and retirement benefits. 

"Work sharing benefits employees and employers," said Neil Ridley, CLASP senior policy analyst and author of the paper. "It allows employees to retain their jobs and benefits during tough economic times, it allows employers to retain their trained employees and it reduces the number of people out of work.

"Certainly, for many workers losing a day's pay has serious economic consequences," Ridley added. "This is why having unemployment insurance to help fill the gap is so critical."

Just yesterday, new data revealed that the number of workers continuing to file unemployment claims hit an all-time high. The nation's unemployment rate, which has reached more than 8 percent, is likely to go higher in the months ahead. Even if economic growth resumes later this year, the job market is not likely to recover until mid 2010 or beyond. This makes it all the more important to expand or put in place policy solutions that will help ease unemployment.

Currently, only 17 states operate work sharing programs. Used far less frequently than regular Unemployment Insurance, their use tends to increase when the economy weakens. In fact, states with these programs have reported a spike in program participation by employers and workers.

Between 2007 and 2008, the number of companies using New York's Shared Work Program increased by 60 percent, and the number of companies using a similar Rhode Island program increased by 119 percent. Further, use of work sharing has soared in states hard hit by the housing market collapse. Between 2007 and 2008, initial claims under work sharing rose by 171 percent in Arizona, 78 percent in California and 272 percent in Florida, according to data compiled by the Employment and Training Administration of the U.S. Department of Labor.

Policy Solutions

At a time of rising unemployment, more states should adopt work sharing programs. The federal government also should take action to expand the number of companies and workers participating in state-administered programs. A first step toward this goal is to address limitations of the federal law that allow states to adopt short-time compensation or work sharing programs. Another step is to increase technical assistance to states and provide direct outreach to employers, business organizations, unions and other groups. A third, more ambitious step would be to establish a temporary federal program that would stimulate expansion of current state programs and encourage more states to adopt work sharing.

"Work sharing programs have great promise and should be used more widely, but they are not a panacea for a declining economy or job market," Ridley said.

Work sharing is most useful for companies and industries in which it is possible to reduce hours and modify work schedules. It is a tool to respond to falling demand, but it is not designed to avert a permanent layoff or plant closing. In addition, there is potential for abuse if a work sharing effort is not carried out with input from workers or their representatives.

To read Work Sharing - An Alternative to Layoffs for Tough Times, go to: http://www.clasp.org/publications/layoffsfortoughtimespb.pdf.

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CLASP develops and advocates for policies at the federal, state and local levels that improve the lives of low-income people. We focus on policies that strengthen families and create pathways to education and work. Through careful research and analysis and effective advocacy, we develop and promote new ideas, mobilize others, and directly assist governments and advocates to put in place successful strategies that deliver results that matter to people across America

 

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