Saving Jobs Through Work Sharing

According to a new PPI Insight on the Issues by Sara E. Rix of the AARP Public Policy Institute, workers of all ages have suffered greatly since the start of the recession in 2007—unemployment rates have soared as has duration of unemployment.  Older workers have been particularly hard hit; half of the unemployed aged 55 or older have been out of work for more than six months.  Some workers have benefited from a program known as work sharing or short-time compensation (STC), which is a work arrangement that spreads reductions in work hours among employees in an effort to eliminate or alleviate the need for layoffs during economic downturns.  Workers who might have been terminated remain on the job, and when the economy improves, employers can quickly increase work hours. 

Interest in work sharing has grown since the start of the recession.  In the past few months, the governors of three states have signed legislation allowing work sharing and the payment of prorated unemployment benefits to work sharers.  The big advantage of work sharing to employers involves the preservation of human capital; work sharing helps employers retain skilled workers who might otherwise not be available for recall when the economy recovers.  Work sharing benefits communities because workers maintain a greater ability to buy, which stimulates the economy.  The continuation of employer health coverage, which is common with STC, reduces dependence on the state for support.

This Insight on the Issues explains how this little known program works; how employers and employees can benefit from it; where it fits in the toolbox of responses to high unemployment; and what is needed to make work sharing more available.