Outten & Golden: Empowering Employees in the Workplace

Reducing Unemployment with Work-Sharing

September 24th, 2010 | Nicole Woo

CEPR LogoWith news that jobless claims are up, Dean Baker points out that “employers are already hiring more than 4 million workers a month. The problem is that roughly 4 million workers a month are also leaving their jobs, half voluntarily and half involuntarily.”

So while it’s important to reduce jobless claims, the unemployment rate would also be lowered by working on the other side of the jobs equation — by preventing some of the 2 million layoffs that happening every month.

This is where the idea of work-sharing comes in.  As the NY Times noted in a recent article on Germany’s quick rebound from the recession,”A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis,”

Ezra Klein picked up the article earlier this week, saying that “saving jobs makes a lot of sense, and that’s why it’s so crazy that we’re going to allows states to fire hundreds of thousands of public-sector workers.”  He noted that Tyler Cowen also approves of Germany’s successful strategy: “In a highly specialized modern economy, it is much easier to prevent jobs from being destroyed than to create them again.”

As it turns out, the bipartisan duo of Dean Baker of CEPR and Kevin Hassett of AEI have been promoting similar work-sharing concepts here the U.S.  In this joint op-ed in the LA Times, they explain the good reasons to use work-sharing to create jobs and avoid layoffs.

In a nutshell, Dean’s work-sharing tax credit proposal would pay employers to keep workers’ pay constant while reducing hours, which would reduce layoffs as well as incentivize new hiring.  So, for example, rather than laying off 10% of her employees, an employer would reduce all of her workers’ hours by 10% and get a tax credit to keep their pay whole.  Dean ‘s rough estimate is that this tax credit would create a net total of 1.3 and 2.7 million jobs.

It would also help state and local governments, since the credit is available to any employer, whether it operates in the private, public, or non-profit spheres.  In this way, the widespread adoption of the credit could go a long way towards helping cash-strapped states and localities limit their public sector employee layoffs and furloughs.

And if Baker, Hassett, Klein and Cowan aren’t enough to convince you, last fall in the NY Times both Paul Krugman and Mark Zandi wrote that work-sharing is deserving of consideration.

There are work-sharing bills in Congress now, with Rep. Conyers sponsoring Dean’s employer tax credit idea, and Sen. Reed and Rep. DeLauro proposing an expansion of current state-level work-sharing unemployment programs nationwide (currently only 17 states have such programs).

This article was originally posted on CEPR Blog.

About The Author: Nicole Woo has worked on domestic hunger policy as the Associate Director of the New York City Coalition Against Hunger and as a Senior Policy Analyst at the Food Research and Action Center. She also has worked as a fundraiser and director of administration for several non-profit organizations in New York City and Washington, DC. She received her B.A. from Harvard University, where she concentrated in Government.

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3 Responses to “Reducing Unemployment with Work-Sharing”

  1. government jobs Says:

    Its going to be tough to stem the tide of layoffs and firings when the american worker costs 4 times as much. With the internet making the world smaller, and ready able workers in places like the Phillipines, I say that the american worker is in trouble. Especially with the lazy handout culture that we have nowadays. Think about it this way, workers overseas are hungry and eager and honestly have a better work ethic than many americans right now. You are paid what you are worth in the marketplace. Thats called reality.

  2. Deborah Chalfie Says:

    FYI, AARP has a new issue brief out on the many benefits of Work Sharing programs, at http://www.aarp.org/work/work-life/info-09-2010/i200-economic.html.

  3. Charles J Read Says:

    Miss Woo:

    I missed something here. My Local MegaTropolis Dallas, Texas is laying off several hundred workers. So instead they apply to the Federal Government for a tax credit. But Dallas does not pay taxes to the Federal Government, so where does the credit go. Don’t you just mean a cash subsidy provide by the National taxpayer because the local taxpayer is smart enough to know that the tax increase to keep the workers is not worth the return. So Washington knows better what is good for Dallas than do the people who live, work and pay taxes here do?

    Local political patronage has swelled the job ranks in Dallas during the good times. Finally the National crisis is making its self felt in the local political arena. Many of these jobs funded by taxpayers are unnecessary and the pay is above average in the area. These are not jobs that the taxpayer wants saved. They never should have been created in the first place.

    There is an ongoing debate on public versus private jobs and pay in this blog. Where I don’t find the debate is among taxpayers. The vast majority of taxpayers I talk to, as a CPA I talk to lots of taxpayers and don’t talk to non taxpayers, our in favor of privatizing almost everything that local governments do to increase accountability and lower costs. The politicians don’t because it takes away patronage and paid for votes.

    Instead of job sharing paid for by the government cut my taxes and allow me to keep more of my money. That will allow me to hire more people and expand. Drive my competitors out of business throwing their employees out of work; I will grab the best of them. That is the American way. It is dirty and ugly at times. But it is by far the most successful economic system in the world. Keynesian economics does not work so why keep pushing it under multiple disguises?

    Regards,

    Charles

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