Short-Time Compensation as a Tool to Mitigate Job Loss? Evidence on the U.S. Experience During the Recent Recession

The goal of short-time compensation (STC) programs is to encourage work sharing in lieu of layoffs by allowing workers whose hours have been reduced for economic reasons to collect prorated UI benefits. In a paper appearing in the latest issue of Industrial Relations: A Journal of Economy and Society, Katharine G. Abraham and Susan N. Houseman present evidence from 17 states and Europe showing that an expansion of STC during the recent recession would have likely reduced the number of layoffs—particularly in the manufacturing sector. While STC use in U.S. states with such programs reached record levels in 2009, the levels of STC use in other countries were much higher. The figure below shows take-up rates of SRC programs in selected countries in 2009. The take-up rate of 3.17 percent for German employees implies that on average 3.17 percent of all German workers were on state-sponsored work-sharing plans during that year.
 


“With STC usage at German or Italian levels, as many as one in eight of the roughly 8 million jobs lost [in the United States] during the recession could potentially have been saved.”
—Katharine G. Abraham and Susan N. Houseman

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