The Indiana Institute for Working Families, a program of Indiana Community Action Association, has released its report, Work Sharing: A Win-Win-Win Strategy for Avoiding Job Losses. The report, supported by The Joyce Foundation, addresses: what is work sharing and how does it work; what are the costs and benefits associated with a work sharing program; what are some of the best practices of existing programs in the U.S.; and work sharing outside the U.S. and success. The report also includes seven recommendations for implementation of a work sharing program in Indiana.
Work sharing (also known as Short-Time Compensation) is an unemployment insurance (UI) benefit that explicitly targets job preservation. Work sharing provides employers with an alternative to layoffs during a temporary decline in business. A work sharing program allows an employer to reduce the hours and wages of all employees, or a particular group of employees (such as a department), usually by about 20 to 40 percent, to cut costs. To participate in work sharing, the employer would certify to the state that reduced hours are in lieu of a temporary layoff. If approved, the plan can last up to 52 weeks.
Work sharing is voluntary, so employees can choose whether or not to participate. Workers who participate will receive partial unemployment insurance benefits to supplement their paycheck. Work sharing programs are temporary and usually last six months to one year. Because work sharing benefits are experience-rated at least as well as regular unemployment benefits, the Institute's research shows that work sharing does not appear to have any significant impact on state UI trust funds.
Work sharing has become a viable alternative to layoffs in states that have these programs in place. It has recently passed unanimously in Republican and Democrat led states, and has the backing of conservative and progressive economists alike. Currently, 22 states, and Washington D.C., have work sharing programs. In total, five states have passed work sharing since 2009.
The report states that work sharing is a "win-win-win" strategy in that it benefits the state by mitigating further job losses; the employer benefits by reducing the high costs associated with turnover policies and by maintaining continuity within the firm; and the employee benefits by maintaining wages and reducing the devastating effects associated with long-term unemployment.
"It's really simple: this is a jobs program that has proven itself to be successful, is cost effective, and benefits the employer, the employee, and the state", said Derek Thomas, Policy Analyst at the Institute. Mr. Thomas also stated that "work sharing, unlike traditional UI, pays people to stay on the job."
The Institutes research also shows that manufacturing has particularly benefited from the program. Mr. Thomas stated: "given Indiana's large manufacturing sector and the continued increases in unemployment in Indiana, this is a program the state cannot afford to not implement."
Indiana has lost 194,000 jobs from December 2007 to October 2011, of which 89,800 were manufacturing job losses. Also, Indiana saw unemployment rates increase for the sixth straight month in October 2011, an increase to 9 percent-up from 8.9 percent in September. According to the report, work sharing could assist the state in coping with the continued loss of jobs and provide a proactive tool for future economic downturns.
Work sharing is also a component of the American Jobs Act. Under the proposal, states that have approved work sharing programs could receive up to three years of federal funding for implementation and administration.