A little-noticed provision in the Middle Class Tax Relief and Job Creation Act, which President Barack Obama signed into law in February, aims to change the situation. The idea, known as work sharing, is that you can get partial benefits when your company cuts part of your job. Because the prorated compensation will make workers less reluctant to accept shorter hours, economists reason that it is likely to shift the incentive from firing people to cutting hours.
It’s one of those rare win-win reforms. For workers, it means avoiding the despair of joblessness. For employers, it means that when weak demand next hits, it will be easier to hang on to the investments they have made in finding, hiring and training the right people…
The experience of Germany offers good evidence that work sharing yields a more resilient workforce. During the Great Recession, the country experienced a similar decline in output as the U.S. Yet unemployment rose by only about half a percentage point, and quickly snapped back, thanks in large part to work-sharing programs. In the U.S., the jobless rate increased by more than five percentage points and has yet to recover.
The full benefits of the German program may not transfer easily to the U.S., where unions and collective bargaining are less dominant. A more relevant example might be Canada, where a work-sharing program helped limit the recessionary increase in unemployment to about 2.5 percentage points. The country has since reversed about half of that loss.
Join the conversation as a VIP Member