Provides an overview of Short-Time Compensation as a strategy to avoid layoffs, its legislative history, and actions needed to take to revise the 1992 permanent law authorizing it.

“Short-time compensation (STC) is a program within the federal-state unemployment compensation system. In the 20 states that operate STC programs, workers whose hours are reduced under a formal work sharing plan may be compensated with STC, which is a regular unemployment benefit that has been pro-rated for the partial work reduction. Although the terms “work sharing” and “short-time compensation” are sometimes used interchangeably, the term “work sharing” refers to any arrangement under which workers’ hours are reduced in lieu of a layoff. Under a work sharing arrangement, a firm faced with the need to downsize temporarily chooses to reduce work hours across the board for all workers instead of laying off a smaller number of workers.…

Currently, only 20 states operate STC programs to support work sharing arrangements. Three of the 20 STC states—Colorado, New Hampshire, and Oklahoma—enacted their STC programs in 2010. Through the end of 2008, the STC program rarely reached 1% of unemployment benefits paid annually across the United States. This ratio was 2% in 2009 and 1.2% in 2010. The reasons for low state and employer take-up of the STC program are not completely clear, but a key cause would appear to be ambiguity in the 1992 federal law that authorizes STC. Because of this ambiguity, the U.S. Department of Labor (DOL) has not provided guidance or technical assistance on STC to the states since 1992. A more active public policy would require either DOL reinterpretation of the 1992 law or congressional action to either clarify federal law or give the Secretary of Labor authority to determine needed additional provisions” (p.2). (Abstractor: Author)

Major Findings & Recommendations

“As noted above, DOL has not issued model state legislation or provided guidance to states since 1992, although it has not challenged state programs. Most states do not actively promote STC either, with some notable exceptions like Rhode Island. STC is currently only implemented in about one-third (20) of the 53 states and territories that have UC programs, and in those states it has never reached a large number of workers, although there is evidence of increased use in 2009 and 2010. The Balducchi and Wandner study concluded that, ‘Federal work sharing [STC] policy is at a stalemate and dormant until political leaders elevate the apparent statutory deficiency and either the executive branch reinterprets federal law or the Congress passes legislation to address the policy concerns.’ STC is unlikely to ever play a great role in the unemployment compensation system, but there is room for it to expand. Better marketing of the program in STC states might improve awareness and use. But this is unlikely to happen unless Congress, or perhaps the executive branch, decides to take action to break the impasse over interpretation of the 1992 permanent law authorizing STC” (p. 15-16). (Abstractor: Author)