Work Sharing: An Idea Whose Time Has Come

We’ve all watched the unemployment rate stay far too high for far too long in the past couple of years. Since there seems to be no ability in Washington to “think outside the box” seeking solutions in this Great Recession we’re in, perhaps we could learn some things from other nations, and, indeed, from 17 of our own states.

Economists Dean Baker (co-founder of the Center for Economic and Policy Research) and Kevin Hassett(American Enterprise Institute) have explained one idea that is working in Europe a darn sight better than the unemployment payments we use in this country to alleviate the pain of being laid off. It’s called “work sharing.”

In an opinion piece in the Los Angeles Times, Baker and Hassett, coming from both the left and the right, endorsed the system in place in Germany, where work sharing has kept the unemployment rate far below ours. Let’s say a business needs to to cut back on employment because of reduced demand. Rather than laying off 10 workers, it might instead reduce the hours of 50 employees by 20%. The German government would then provide a tax credit that made up for most of the potential lost pay, with the company absorbing a bit more of the lost pay. So, those 50 workers might have a pay reduction of 4%, but the bonus would be a four-day work week.

That’s a win-win for everyone. The government shells out less money than in our unemployment insurance system, the corporation takes a small hit, as does the worker, but the worker gets a sweet reward – 8 hours of  free time, plus the ability to keep benefits, no small thing in our economy where health insurance is  so closely tied to employment.

Already in the U.S., 17 states have some form of a work sharing program, but only a tiny fraction of those eligible to use it are even aware that such a program exists. Connecticut, Washington State, Massachusetts, and Oregon are among states with work-share program, even though few businesses in them have taken advantage of it.

According to a June 15, 2009, New York Times article by Steven Greenhouse,

States have different unemployment insurance formulas, but generally, a worker being paid $600 a week, if laid off, might receive $300 in jobless benefits. With work-sharing, if that worker’s hours drop 20 percent, wages would fall to $480 and work-sharing would make up at least half of the lost wages ($60), for a total of $540 a week. With savings from reduced income taxes and from commuting fewer days, some workers nearly break even.

Employees, however, keep those vital benefits. There’s a special benefit to businesses, as well. They can retain trained and skilled workers, positioning the company to take quick advantage of a better business climate.

“The great thing about this program is you’re not decimating your company,” said Linda Saloom, business operations manager at Saloom Furniture, in Winchendon, Mass., whose employees are working 32-hour weeks. “Our company is not broken. The economy is broken.”

That is my final point. In a time of economic disruption as severe as this one, when the economy is broken, we can’t simply rely on tools created in the past that don’t seem to be working this time. It’s time to think outside that proverbial box, especially when a good idea proven to work is right in front of us. Bills have been introduced into Congress to federalize the work share program in order to replace unemployment insurance. Sadly, I don’t look for action to be taken after November’s election results on this or on any other good ideas out there.