New Report Suggests Work Sharing as Best Means of Preventing Layoffs and Lowering the Unemployment Rate

With the unemployment rate at a painfully high 9.1 percent, the majority of Americans list jobs as their number one economic concern. A new report from the Center from Economic and Policy Research (CEPR) suggests that in the current economic climate work sharing may be the most effective way to avoid many layoffs and quickly return the economy to full employment with little additional spending.

"The labor market in the United States is still suffering the effects of the last recession," said Dean Baker, co-director of CEPR and author of the report. "With the economy operating well below its full capacity, work sharing could be a significant factor in preventing layoffs and lowering the unemployment rate."

The report, "Work Sharing: the Quick Route Back to Full Employment," describes a system of work sharing that would give employers an incentive to keep workers on their payrolls with shorter hours as an alternative to laying them off. This would be attached to the current unemployment insurance system with short-time compensation as an alternative to unemployment compensation.

"We have already seen that work sharing works in the example of Germany," Baker continued. "While most countries saw their unemployment levels spike during the recession, Germany, which already had a work-sharing system in place, saw its unemployment rate fall 0.4 percentage points below the rate at the start of the downturn."

Work sharing is a practical, but underutilized, policy option here in the United States. Senator Jack Reed (D-RI) plans to soon reintroduce legislation along these lines to incentivize work sharing domestically.

In addition to most nations in the Organization for Economic Cooperation and Development (OECD) having some experience with work sharing, 21 states in the United States already have work sharing programs in place. While recognizing some implementation issues could be addressed to make it more attractive, the report presents hypothetical take-up rates and the likely impact of work sharing on productivity in the United States.

Perhaps due to a misplaced focus on deficits rather than jobs, the U.S. economy remains weak and growth is tepid at best. With threats of a possible double-dip recession and more rounds of layoffs looming, work sharing may very well be the most economically and politically viable means of lowering the unemployment rate.