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The best way to stimulate the economy is by keeping workers on the job through work sharing. The return is greater than infrastructure investments or tax cuts, according to Moody’s Analytics.
A work sharing program—available in 28 states—is a voluntary and cost-equivalent alternative to traditional unemployment insurance that allows an employer to have the option of reducing the hours and wages instead of laying off a portion of its workforce to match decreased demand. The reduction in wages would be supplemented by a portion of unemployment insurance benefits—typically equal to half of lost wages.
American Enterprise Institute’s Kevin Hasset said it best: “Instead of unemployment benefits that effectively pay people for not working, we would be paying people for working shorter hours.”
This alternative better reflects the ebb and flow of our closely connected 21st century economy than traditional unemployment insurance (an outdated system that actually encourages layoffs), particularly for a state such as Indiana that relies so heavily on manufacturing exports, which “exposes the state to economic downturns” (Fitch’s Ratings).
This vulnerability isn’t lost on most Hoosiers; despite a relatively strong rebound, manufacturing employment is still down nearly 25,000 jobs since the recession started and 150,000 jobs since the year 2000. Given these enormous losses, providing flexibility for businesses and families to better weather these slumps should be of the highest priority.
While it’s a relatively small dent, our analysis shows that if work sharing had been available during the Great Recession, approximately 2,000 to 10,000 mid- to high-wage jobs—mostly in manufacturing—could have been saved from 2007 through 2010.
Because work sharing is a win-win-win, it’s harder to find a program with wider bipartisan support from economists, governors and state legislators. In Indiana, the Indiana Chamber of Commerce, the Indiana AFL-CIO, employers such as Subaru Indiana and lawmakers from both political parties (federal and state) all support work sharing.
It’s easy to see why.
The employer reduces costs of recruitment, hiring and training workers once normal business resumes. It also affords employers greater control over unemployment insurance charges by reducing schedules only as required by production demand in any given week. As the state grapples with skilling-up our workforce, retaining skilled workers is why Michigan Gov. Rick Snyder signed work-sharing legislation in July 2012.
The employee wins by maintaining wages, health benefits and avoiding the ranks of the unemployed. That’s why Wisconsin Gov. Scott Walker signed legislation. “Instead of getting a pink slip during an economic downturn, workers now have an opportunity to stay on the job and receive unemployment benefits for the hours they lose,” Walker said.
Finally, the state wins by avoiding the secondary job losses—and the accompanying revenue losses—that inevitably result from layoffs.
During the Great Recession, Hoosier families saw some of the greatest increases in poverty (still rising) and child poverty, and some of the largest declines in household income (still declining), in the nation. How we fare during the next recession depends on thoughtful policies today.
Since World War II, economic expansions have lasted an average of 58 months—the last three have lasted 95 months.
After more than three years of debate, including multiple study committees and the lost opportunity that was millions of dollars in federal support, we are now 68 months into our post-recession economic expansion without a plan to protect jobs when the next, inevitable, recession hits.•
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Thomas is a senior policy analyst at Indiana Institute for Working Families and author of “Work Sharing: A Win-Win-Win Strategy to Avoid Job Loss.” Send comments on this column to ibjedit@ibj.com.
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