With more than a million new unemployment claims still being filed each week, job growth slowing, and millions of workers about to lose emergency jobless benefits created through the CARES Act in March, it is imperative that Congress enact another COVID-19 emergency relief package as quickly as possible. In addition to key provisions such as aid to state and local governments and extending emergency benefits for unemployed workers, Congress should extend innovative provisions that helped prevent workers from being laid off in the first place — specifically the CARES Act’s federal subsidies for work-sharing.
Work-sharing provides a way for many businesses to cope with a drop in consumer demand without having to lay off staff. Under work-sharing, workers’ hours are reduced and they receive partial unemployment insurance (UI) benefits to make up a portion of their lost wages. For example, instead of laying off five workers, a business might cut in half the hours of 10 staff — achieving the same reduction in total work hours — and those 10 workers would all receive partial unemployment benefits from the state to make up some of their lost income.
By keeping workers on the job, work-sharing mitigates the impact of joblessness and reduces unemployment peaks in downturns. Now that coronavirus vaccines appear to be on the horizon, maintaining a connection between more workers and their employers for the first part of next year makes even more sense. As the pandemic is brought under control and regular consumer demand picks up, companies with work-sharing programs won’t have to go through a process of recruiting, hiring, and training new staff. They will be able to quickly ramp back up simply by restoring participants in work-sharing to full time.
Although work-sharing has not been widely used in the United States, it has been in other parts of the world. In Belgium, the country with the highest take-up rate, work-sharing participants equaled about 5.6% of employment in 2009, a huge cushioning of Belgian families and businesses from the impact of the Great Recession. For comparison, if the United States had the same take-up rate of work-sharing as Belgium, roughly two million jobs might have been preserved in 2009. In 10 other countries in 2009, work-sharing equaled 1% to 4% of employment in 2009 — five to 20 times larger than usage in the United States.
Because of its benefits for businesses and workers, the March CARES Act included a 100% federal subsidy for work-sharing in states that already have work-sharing programs (some 27 states) and a 50% subsidy for states to establish such programs. As a result of these subsidies, when customer demand declined and some businesses needed to operate below full capacity to allow employees to social-distance, use of work-sharing picked up after March. In July, U.S. Department of Labor data showed that 14,770 U.S. employers had approved work-sharing programs, six times more than in February. Employee work-share claims spiked as well, from 70,000 in February to 1.7 million in July.
The use of work-sharing varies by state — but, notably, in a nonpartisan way. The states that have used work-sharing the most to reduce unemployment in 2020 include Oregon and Kansas, Arkansas and Washington. The states that use work-sharing a little and could capitalize on an extension to use it more include two big red states, Texas and Florida.
Also enticing to the politically pragmatic, several “battleground states” rank in the middle or near the bottom for use of work-sharing among the 27 states with programs. Extending the CARES Act subsidy would allow Michigan, Ohio, Wisconsin, Minnesota — and Pennsylvania — to expand work-sharing and would likely boost their manufacturing sectors, since manufacturers are often the biggest users of work-sharing programs. The incoming Biden administration could give the Great Lakes states a multistate peer learning grant to expand work-sharing across the region, including in manufacturing.
Another reason to extend work-sharing: It’s cheap. It would cost less than $250 million to include work-sharing in the recent bipartisan proposal to extend the CARES Act’s UI provisions.
In closing, work-sharing has already made an important contribution to reducing unemployment in the COVID-19 recession. Failing to extend the work-sharing subsidies could sever hundreds of thousands of additional workers from their employers — right when we may be within sight of an end to the pandemic. This would be a form of snatching defeat from the jaws of victory.
Economist Stephen Herzenberg and sociologist Clair Kovach are researchers at the Pennsylvania-based Keystone Research Center.