Governor Christie of New Jersey signed into law last week a work-sharing program which is a proven tool that keeps workers on the job even when economic growth is weak or nonexistent. This will be the 24th program in the nation.
The program works by reducing workers hours and using unemployment insurance benefits to pay a portion of the wages that employees lose. The programs are voluntary for employers and administered through the unemployment insurance system. A similar program in Germany kept that country’s unemployment rate below 7 percent despite a steeper economic decline there relative to the US experience.
Such an approach benefits both employers and workers. Employers are able to maintain a trained workforce that can quickly ramp up production when the economy turns around and do not incur the costs of retraining. Eighty percent of employers in a study of short-time compensation programs in the United States reported employees on short-time were either as productive as or more productive than non-short-time employees. Additionally, employees maintain their income and access to benefits such as health insurance and retirement plans. And because incomes are not significantly impacted, consumer demand remains relatively constant, thereby eventually supporting businesses to produce more goods and services. Estimates at the national level suggest that if employers of 60 million workers shortened their hours by 5 percent rather than instituted layoffs, 3 million jobs would be created.