Could expanding short-term compensation mitigate job loss during downturns? The report presents new evidence on the use of these programs during the 2009 recession.

"Unemployment insurance (UI) rules in the majority of U.S. states discouraged the use of work sharing. In most states, workers were eligible for UI benefits only if they were laid off.... The severity of the recent recession, however, sparked significantly greater use of short-time compensation (STC)" (p.1). The researchers "review arguments concerning the desirability of expanding STC programs in the United States and present new evidence on the use of these programs during the recent recession" (p.2). They seek to answer the question, whether and to what extent, by encouraging hours reductions, an expansion of STC programs similarly could prevent employment losses during future recessions in the United States. "Although [the researcher's] data do not permit [them] to test the employment effects of STC directly, the collection of indirect evidence presented in this paper suggests that there may have been significant effects in at least some of the states’ manufacturing sectors" (p.2). (Abstractor: Author and Website Staff)

Full Publication Title: Short-Time Compensation as a Tool to Mitigate Job Loss? Evidence on the U.S. Experience during the Recent Recession Year

Major Findings & Recommendations

"Although the usage of short-time compensation programs by U.S. employers has been low by international standards, interest in these programs has grown: Among states with STC programs, weeks paid relative to regular UI benefit weeks paid was generally higher in the recent recession than in previous recessions; several states have enacted STC programs since the onset of the last recession; and new Federal legislation will facilitate the expansion of STC programs to other states and generally promote the use of work-sharing as an alternative to layoff" (p.19). Our evidence indicates that jobs saved as a consequence of short-time compensation (STC) could have been significant in sectors like manufacturing that made extensive use of the program. We conclude, however, that, with the possible exception of Rhode Island, the overall scale of the STC program operating in the 17 states was too small to have substantially mitigated the aggregate job losses these states experienced in the recent recession" (p.20). (Abstractor: Author)