More than 30 million Americans have lost their jobs and signed up for expanded unemployment benefits over the last month, while a small business loan program has likely prevented millions of additional layoffs.
There’s another program that could help ― one that splits the difference between layoffs and job subsidies. It’s called short-time compensation, or worksharing. It’s not a new program, but Congress gave it a funding boost in the second coronavirus relief bill passed earlier this year.
It works like this: Instead of laying off a portion of its workers, a company can reduce their hours, and the unemployment insurance system pays for the missing time. Thanks to the new law, the federal government will cover the benefits in the 29 states that already have worksharing programs, and half the cost in states that set up new ones.
There’s been a sevenfold increase in the number of workers in worksharing arrangements since this time last year, according to the U.S. Labor Department, but that only amounts to 62,297 jobs. The concept could prove useful in the coming months, however, after a new loan program for small businesses expires.
“Rather than only having a fraction of their workforce on the payroll, the employer can have most people working short hours, and then have the government make up a large chunk of the wages lost from fewer hours,” said Dean Baker, a labor economist with the progressive Center for Economic and Policy Research and a visiting professor at the University of Utah.
“This way, when demand picks up, they have the workers on staff and just have to increase hours,” Baker said.
Baker and other economists who favor short-time compensation programs have often lamented that they’re not terribly well-known, likely part of the reason so few workers are enrolled. Progressive Democrats have said they want to ramp up worksharing as part of the next bill Congress passes.
Elizabeth Milito of the National Federation of Independent Business said she’s mentioned worksharing in webinars about the various government initiatives available, but hasn’t received a single direct inquiry from a business owner about how to apply for it. She said it might seem overly complicated for a small business without an HR department.
Another reason is that worksharing is incompatible with the Paycheck Protection Program, the government’s flagship response to the coronavirus recession, which provides forgivable loans to businesses that retain employees for eight weeks.
Richard Bodin owns Hudson Home, an interior design studio and showroom in Hudson, New York, with seven employees. Since New York is one of the states that already offers worksharing, when the governor ordered nonessential businesses to close in March, Bodin signed his workers up.
“We reduced their hours and they were collecting unemployment to make up the difference,” Bodin said. (Due to the shutdown order, they weren’t actually working.)
It was a good deal for the workers, most of whom are part-time employees. Kelly Bortoluzzi, 56, worked at Hudson Home three days a week in a sales support position. Her hours halved, she started receiving about $200 per week in unemployment benefits ― plus the extra $600 per week that Congress created as part of the Coronavirus Aid, Relief and Economic Stability Act.
Bortoluzzi described the extra money as a “godsend” for her and her husband, whose business is itself in trouble. The combined benefit was more than her pay at Hudson Home, and almost as much as she made from that job plus several other part-time gigs.
But then Bodin won approval for a loan from the Paycheck Protection Program, which meant he had to bring his workers back on payroll and cancel the worksharing arrangement.
Bodin initially liked the idea of bringing his workers back on payroll but now isn’t so sure, since the clock is ticking on the loan, and he won’t be able to have in-person customers until May 15 at the earliest. For now, there’s not much work for his workers to do.
Business advocacy groups have asked Congress and the Small Business Administration to give firms leeway on the timing of the payroll loans, considering much of the country is still shut down.
“My employees would have been better off on straight unemployment,” Bodin said. “I would like to keep as many people getting as much money as possible for as long as possible.”
Bodin said that when his PPP loan is up in June, he might try worksharing again.
Bortoluzzi, for her part, is glad she technically has a job, but wonders if she would be better off trying to file a regular unemployment claim that reflected the totality of her past wages from her other part-time jobs. She hasn’t been able to get an answer from the New York State Department of Labor.
“I don’t expect much help as someone at the bottom of the food chain,” she said. “I just really thought it would be rolled out in a smarter way, and I hate that we cannot have communication.”
At the all-time peak of enrollment in 2019, there 288,618 worksharing participants, according to the Labor Department. Most firms surveyed by the department said they had a good experience with the program.
States have a strong incentive to promote worksharing, said Till von Wachter, an economics professor at the University of California, Los Angeles. States pay for regular unemployment benefits through a tax on businesses, and if their unemployment funds run dry, those taxes can go up. States would therefore do themselves a favor by encouraging firms to use federally funded worksharing benefits instead of laying people off.
“The fact that states are slow in scaling this program risks increasing taxes on their businesses when the crisis is over,” von Wachter said.