Work Sharing Could Save States $1.7 Billion Per Year

Though the unemployment rate ticked down slightly in April, the latest data show that millions of Americans continue to be laid off from their jobs. Work-sharing programs could help curb some of these job losses and shave billions of dollars off state budgets across the country. A new CEPR issue brief examines the work-sharing provisions of new federal legislation and the potential savings.

Work-sharing programs, also known as short-term compensation, can be beneficial to both employers and employees. Rather than laying off workers, employers can shorten workers' hours. The workers, in turn, receive pro-rated unemployment insurance (UI) benefits for the hours not worked and remain employed. Employers are able to retain trained employees, and, when demand picks up, avoid the costs of hiring and training new workers by simply increasing the hours of existing staff.

Provisions of the recently passed Middle Class Relief and Job Creation Act offer federal support for work-sharing programs, giving states more incentive to promote work sharing. Prior to passage of the law, states had to pay the regular UI benefits provided to workers in work-sharing programs. Under the new law, the federal government provides 100 percent of work-sharing UI benefits for up to three years in states that already have work-sharing programs and 50 percent for up to two years in states that enter an agreement with the federal government to provide work sharing.

Though take-up of work sharing is low at the moment, potential savings of $1.7 billion dollars per year nationwide may make the programs more attractive. Participation has varied from state to state, with Rhode Island seeing over 20 percent of UI claims from work-sharing when the program was at its peak in 2009. If other states saw similar levels of participation, the savings would be substantial. Among states that already have work-sharing programs in place, California could realize savings of $319,377,200. New York could save $158,581,600 and Pennsylvania could save $136,180,800. Among states that do not currently have work-sharing programs, New Jersey could save $57,359,700; Illinois could save 53,976,600 and Ohio could save 35,620,300.

With millions of workers still being laid off every month, the work-sharing provisions could make an important and positive difference in the lives of millions of workers, employers, their families and communities. These provisions mean states can also improve their finances by promoting work sharing. However, states will need to work to take full advantage of the new law in order to reap these benefits.