There’s a Program That Can Save Thousands of Jobs, If Businesses Use It
There’s a Program That Can Save Thousands of Jobs, If Businesses Use It
(Bloomberg) -- Unemployment is surging amid a nationwide avalanche of layoffs in the U.S., but there’s a way companies can keep their employees.
Smith Gardens, a flower and plant grower in Washington state, has used the state’s short-time compensation, or shared-work, program to help it retain trained staff members during the ebbs and flows of seasonal labor needs. SharedWork has been in existence for decades in the state but the arrangement -- and others like it -- offer a potential model for others to adopt to soften the economic blow of the coronavirus.
“It’s been our biggest stress-reliever, acting very much like an emergency plan when we need it,” Virginia Gonzalez, a human-resources generalist at the more than 110-year-old family-owned company, said on a podcast.
Washington is among at least 26 states with operational shared-work programs, which provide partial unemployment benefits to employees whose hours have been reduced. This helps make up for workers’ lost wages, while allowing them to keep their jobs. Businesses can better weather a downturn without having to go through the process of rehiring and retraining.
To spur broader participation, the federal stimulus package passed last month provides $100 million in grants for states to set up and promote shared work. For states that already have programs -- and those that pass legislation for new ones -- the stimulus includes funding to reimburse 100% of the short-time compensation paid to affected workers through December 31.
‘Win-Win’
The programs are a “win-win” and should be encouraged among more employers, said Heidi Shierholz, director of policy at the Economic Policy Institute and a former Labor Department chief economist. It’s “absolutely in businesses’ best interest to take up, and it’s clearly in workers’ best interest.”
Washington began its program in 1983 and has actively publicized it to employers. As a result, about 2,500 participated during the Great Recession, supporting almost 50,000 jobs. With the spike in coronavirus cases and social-distancing measures, new applications soared to 848 during March 8-26, compared with 147 from January through March 7.
“It really is a business-preservation, job-retention program,” said Cheryl Brown, supervisor of Washington’s shared-work program.
The concept is embraced widely in European countries, including Germany. Policies there are more liberal than in the U.S.: German businesses can cut employees’ hours to zero and still qualify for government wage support.
They’re “not laid off; they’re temporarily not working any hours,” said Katharine Abraham, an economist at the University of Maryland and former economic adviser to President Barack Obama. “But you’re preserving the employer-employee relationship.”
Saving Jobs
In the U.S., eligibility depends on employees still consistently working some hours, and even though participation has been more limited than in Europe, the Labor Department estimates short-time compensation programs saved about 570,000 jobs from the beginning of the Great Recession to early 2016.
The lower involvement stems in part from how new some of the programs are.
In 2007, only about 17 states had passed the needed legislation. In 2012, the federal Middle Class Tax Relief and Job Creation Act encouraged states to participate by covering 100% of short-time compensation for a few years and offering grants for implementation and promotion.
Ohio launched SharedWork Ohio in 2015 to offer companies an alternative to layoffs and cushion the blow in a future downturn; the jobless rate there had hit a post-recession peak of 11.1%, compared with 10% nationwide. Between January 1 and March 14 this year, the program received 22 applications. From March 15, when Governor Mike DeWine closed restaurants and bars to dine-in customers, through March 26 it got 174.
Short-time compensation is gaining traction in other states as well. New York, which has the highest number of confirmed Covid-19 cases in the U.S., saw applications jump to 350 between March 16 and 20 after Governor Andrew Cuomo announced crowd restrictions and closed restaurants and bars to dine-in customers. Applications the previous week totaled 23.
There is an added up-front cost for companies compared with layoffs because they must continue to provide the same health-care and other benefits for employees while they’re using the program. This could give some business the incentive to go ahead with layoffs to cut costs. But rehiring and retraining workers carries a cost, too.
For states offering it, shared work ultimately may offer a way to get Americans back on the job faster. This could mean the unemployment rate -- which is expected to rise into the mid-teens from 4.4% in March -- may come down more quickly.
“There’s nothing to say that you can’t bring your employees back and put them on a work-sharing plan rather than just recalling some and leaving others on layoff,” said Abraham, the former Obama adviser.
©2020 Bloomberg L.P.