Today President Obama released his 2017 Budget, the final one of his presidency. Among many initiatives to strengthen the economic security of workers and retirees is one that CEPR’s been leading on for years: work-sharing (a.k.a. short-time compensation). The President’s proposal provides 1.8 billion dollars over ten years to expand work-sharing programs.
Since the depths of the Great Recession, CEPR’s Dean Baker has been promoting the concept of work-sharing, which prevents job losses by incentivizing employers to reduce workers’ hours, rather laying them off entirely. The workers, in turn, are partially compensated for those hours with pro-rated unemployment benefits.
Work-sharing has proven to be one of the few areas of bipartisan consensus that we’ve seen over the past few years. For example, Dean has regularly partnered with conservative economist Kevin Hassett of AEI in advocating this idea. A dozen states have passed work-sharing since 2009, mostly with bipartisan majorities, to bring the total number with work-sharing programs up to 28 states plus the District of Columbia. In 2012, a bipartisan vote in Congress passed the Middle Class Tax Relief and Job Creation Act, and it included temporary funding to support states’ work-sharing programs, which has since expired.
CEPR’s occasional analyses of work-sharing have shown that participation rates peaked during the recession and have dropped along with the unemployment rate, which is how the program is intended to work.
Meanwhile, in Germany, which has one of the most robust work-sharing programs in the world, the unemployment rate was back below pre-recession levels by mid-2010, and it has continued dropping. In contrast, the United States is now just reaching the unemployment rates that we saw pre-recession.
Some might think, with unemployment below five percent, that this is not the right time for the President to bring attention to and support for work-sharing in his new budget. That couldn’t be farther from the truth: Like a rainy day fund, now is exactly the right time to shore up programs that will help prevent mass layoffs in the future. Work-sharing is one of the most effective tools we have to do just that.