Sharing The Pain Of Layoffs Means Losing Fewer Jobs
(This is Idea No. 6 in Huffington Post's ongoing America Needs Jobs series; see the introduction.)
Recessions are brutal on people -- and particularly on workers who have been laid off from their jobs. It's not just the loss of income, it's also the emotional trauma.
And studies show that even those who find work again never fully bounce back. Similarly, when the recession ends and sales go back up again, companies that laid people off have to deal with considerable hiring and training costs.
So wouldn't it be great if there was some way to limit the number of people who got laid off, even in a deep recession?
As it happens, there is. It's called work sharing. Economists widely consider it an obvious solution. Some 17 states do it already. And yet for some reason, it's never seriously entered the public's consciousness or the public-policy arena.
The details of work sharing vary, but the basic idea is that rather than lay off a portion of their work force, employers would reduce the hours of all workers. And a special Unemployment Insurance program would make up some or all of the workers' lost income.
"Doing work-share so reduces the human cost of a recession," said Heidi Shierholz, an economist with the Economic Policy Institute. "I think it's a real no-brainer."
And fortunately, it's not too late for work share programs to make a difference in this recession. Although, at long last, more jobs are being created than lost, there are still plenty of people getting laid off. There are still about 465,000 new unemployment claims each week; and according to the latest labor turnover survey, there were 2.1 million layoffs in July.
"They're still very high," Shierholz told HuffPost. "There's still something we could do if we could implement something like this."
But, she said, there's no denying the missed opportunity. "This is the one that makes me bang my head against the wall the most that it didn't happen on a big scale."
In a report the for the Center on Law and Social Policy, policy analyst Neil Ridley summarized the benefits of work sharing this way. It:
• Helps workers keep their jobs, maintain their benefits and continue to build their skills and experience while the overall labor market is weak.
• Offers distinct advantages for entry-level and less experienced workers who are especially vulnerable if a layoff occurs.• Enables employers to keep the workforce intact and retain skilled employees, greatly reducing the costs of recruitment and training when the economy recovers.
• Benefits the government by keeping more people employed and productive.
And, he noted:
There are additional reasons to encourage work sharing. A modest reduction in earnings spread across a large pool of workers is less likely to result in the significant hardships that jobless workers and their families may experience. Also, as employers become familiar with and participate in the program over time, they may adopt more thoughtful and responsible approaches to layoffs.
One of the foremost proponents of work sharing is Dean Baker, the co-director of the Center for Economic and Policy Research. He wrote in his Huffington Post blog:
This logic is as simple as it gets. The process is also quick and cheap. In principle, the government can go this route to save jobs at a cost of a bit more than $20,000 per job -- far less than the cost per job saved through the stimulus package.
Germany has used this policy to keep its unemployment rate at 7.6 percent, about the same as it was before the recession. Imagine if workers in the United States, like workers in Germany, were dealing with the recession by putting in four-day weeks (while getting paid for five) or getting an extra two weeks of paid vacation. This sure beats being unemployed.
Boston College sociology professor Juliet Schor points out that the idea has appeal across the political spectrum:
The politics of work sharing are encouraging for their broader application in the U.S. Such programs are cost-neutral for badly-stretched unemployment insurance funds, so they don't run afoul of anti-spending sentiment. Though they have historically been associated with the progressive side of the fence, they appear ideologically neutral. For example, Ben Bernanke has given them his seal of approval and businesses often like them because they save on re-hiring costs. They are also, rightly, perceived as fair -- rather than concentrating the pain of unemployment in a small number of people, they allow it to be shared equally. In the parlance of the day, they're generally considered to be win-wins.
Actually, as Schor notes, there's a third win. And it's a big one:
Reducing work hours improves work-life balance for many overworked, overstressed employees. Americans frequently report that what they most sense to be missing from their lives is the time necessary to enjoy them; research on well-being also indicates that adequate time is at the core of a healthy, happy life. Overworked employees report more family tension, less happiness, and more stress. This is a particular problem for Americans, who work between 100 and 350 more hours each year than workers in comparably wealthy countries.
Sen. Jack Reed (D-R.I.) last year introduced a bill that would provide federal funding for work-share programs and simplify the application rules. Rep. Rosa DeLauro (D-Conn.) did the same in the House.
Kevin A. Hassett, director of economic policy studies at the conservative American Enterprise Institute, is a fan. Referring to it as the German government calls it -- "Kurzabeit" or "short work" -- he told the House Committee on Financial Services in February:
The economic argument in favor of such a policy is powerful. When a recession strikes, firms are faced with a dilemma: sales and profits are down, and many workers are idle. But finding skilled workers is costly and time-consuming, involving large fixed costs. If a firm fires workers, it may incur large hiring and training costs when the recession ends and sales turn back up. Thus, a firm would prefer, all else equal, to hoard labor during a recession.
Firms might well prefer to respond to a 20 percent cut in sales by reducing everyone's work by 20 percent. That way, employees remain part of the firm, and ramping up production is less costly down the road.
Hassett said there was support for the program "from both sides of the aisle" and he added: "For me, the strongest argument for work sharing is that blacks bear a disproportionate share of layoffs, so slowing layoffs through expanded work sharing will benefit them the most."
But neither the House nor Senate version made it out of committee. The only thing job sharing doesn't have, apparently, is political mojo. Maybe it's because it somehow clashes with the American attachment to the Puritan work ethic. But for whatever reason, it's been a political nonstarter for decades.
In 1989, the late senator and progressive hero Eugene McCarthy and William McGaughey wrote a book pushing the idea of a shorter work week to create more jobs. They wrote:
This book is written in support of proposals to reduce work time in order to improve employment opportunities. It is written in defense of leisure, both as a component of living standards and as a stimulus to real and meaningful use of consumer products. Shorter work hours promise a better life to the contemporary American family, where increasingly both husband and wife must work to make ends meet or where a single adult householder bears the entire burden of such responsibilities alone. They are a means to full employment, improved income distribution, and a stronger consumer market. The pursuit of shorter hours is embodied in the best traditions of organized labor.
And McCarthy recalled how, back in 1959, he tried and failed to get such a proposal through the Special Committee on Unemployment that he chaired. "In retrospect," he wrote, "it is clear that the failure to reduce work schedules as unemployment rose was a significant policy mistake."
AND ONE IDEA FROM YOU READERS
Several readers have e-mailed me to suggest another job-creation measure that involves worker hours: Making overtime much more expensive for employers.
One step could be to simply increase overtime pay. J. William Thomas of Hartford, NY., suggested raising it to triple time, "in order to move large corporations towards hiring more people instead of abusing the overtime laws."
Reader Liam Hon from Seattle, who credited his father with the idea, suggested rolling back a 2004 law the Bush administration pushed through Congress, which barred an estimated six million workers from receiving overtime pay.
"This went mostly under the radar, but it basically added a large chunk of workers to the category of exempt for overtime claims who had formerly been in the non-exempt category," Hon wrote. "What this meant/means is that more companies were/are able to push workers in to longer hours, which enables them to be more productive with fewer workers. Not needing to pay these workers overtime provides a disincentive to hiring additional workers to fill the demand."
Indeed, as Richard Grabowski of McKinleyville, CA, wrote: "The primary reason for overtime laws was to create jobs. If an employer has to pay 1.5 to 2.5 as much per hour as hiring a new employee, then they have a very strong incentive to hire more employees."
NEXT IN THE AMERICA NEEDS JOBS SERIES: Getting Tough With China
(Want to learn more about the series? Read the overview. Got an idea you think we may have overlooked? Email froomkin@huffingtonpost.com.)
Dan Froomkin is senior Washington correspondent for the Huffington Post. You can send him an e-mail, bookmark his page; subscribe to RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get e-mail alerts when he writes.
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First Posted: 09/29/10 06:53 PM ET Updated: 05/25/11 06:55 PM ET