Work-sharing could help tens of thousands of employees to avoid layoffs. Here, an argument for how the American worker might spread the wealth—and the pain—during tough economic times.
Anyone who has been around kids knows that sharing doesn’t exactly come naturally. That goes for toys and, because keeping a tight hold on all of one’s stuff seems like one childhood instinct that never really disappears, for salaries as well.
But would you accept a small pay cut if it meant a big increase in job security, along with a whole lot more free time?
My response to such a question would be the question: And I sign where?
An op-ed written by a couple of economists in the LA Times argues that U.S. employers should seriously consider work-sharing programs as an alternative to plain, old-fashioned cold-blooded layoffs. This is how business has been done in Europe for years:
In Germany, for example, which has used work-sharing aggressively in this downturn, a typical company might reduce the hours of 50 workers by 20% rather than laying off 10 workers. The government would then provide a tax credit to make up for most of the lost pay, with the employer kicking in some as well. In a typical arrangement, a worker might see his weekly hours go down by 20%, and his salary go down by about 4%.
You had me at “his weekly hours go down by 20%.”
But how could the hours go down so much more than the percentage of wages? The government gets involved, which isn’t ideal. Then again, the government would be involved anyway—because unemployment benefits follow layoffs. (Workers hope so, anyway.) Here’s how work-sharing would work with the gov’s assistance:
Work-sharing should be familiar to Californians because it’s a variation of the furlough policy that state and local governments have used to avoid further layoffs. The big difference is that the furlough policy means workers take pay cuts that are proportional to the length of their furlough — 20% fewer hours, 20% less pay.
By contrast, with a work-sharing arrangement, workers would keep their jobs while effectively dividing up the unemployment benefits that they could receive if they were laid off. For example, if a furlough requires them to take every fourth week off, instead of a 25% cut in pay, their pay would fall only 5% to 10%. The additional money could come from either the state unemployment insurance program or a new federal tax credit.
The cost to the government of going this route would be roughly the same as with the current unemployment insurance program. The big difference is that instead of unemployment benefits that effectively pay people for not working, we would be paying people for working shorter hours.
Hmmm … is it better to pay people for working? Or for not working?
The writers say that if work-sharing policies could reduce the number of layoffs by 10%, it would basically be the equivalent of creating 200,000 jobs a month.
And what would those workers do with what amounts to one more non-work day per week? Perhaps go snowboarding. That’s what a lot of California employees are doing, thanks for specially discounted “Furlough Friday” promotions.