State Programs Offer Alternative to Layoffs

As the nation's economy continues to grope toward recovery with thousands still applying for extended jobless benefits, some employee advocates say state unemployment systems aren't meeting the needs of many unemployed Americans.

According to Failing the Unemployed, a report issued last month by the National Employment Law Project, the Economic Policy Institute, the Center on Budget and Policy Priorities and the Center for Policy Alternatives, state systems are plagued by shortcomings and inequities, especially stringent eligibility standards that leave too many workers out in the cold.

State lawmakers can move on a number of reforms to help those workers, the report's sponsors say. The good news is that one of those concepts is already up and running in 19 states.

Work-sharing programs, also called shared work or short-time compensation programs, are currently in effect in Arizona, Arkansas, California, Connecticut, Florida, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, New York, Oregon, Rhode Island, Texas, Vermont, and Washington State.

North Dakota's program, enacted last year, is the most recent. It becomes effective in July and will run for one year.

The programs ease the pain of full layoffs by allowing employers to lay people off for part of their work time, collecting pro-rated unemployment benefits for the balance.

Rather than lay off 20 percent of the workforce full time, for example, an employer might reduce everyone's hours by 20 percent. Without a work-sharing program, employees couldn't collect benefits for this type of partial layoff.

But with a program, there are advantages on both sides of the employment relationship. Work-sharing allows employers to hold onto skilled employees, avoiding the expense of recruiting and training new workers, and preserving affirmative action gains. And for employees, the programs avoid the devastating effects of full unemployment on both their checkbooks and their morale.

In those states where programs are in full swing, the sour economy is spurring more employers to take a look.

"The program is booming here," says George Wentworth of the Office of Program Policy of the Connecticut Department of Labor. "We did a little publicity last October, and we must have hit a nerve. Now we're flooded with applications. The economic problems flowing out of 9/11 were a fit for this. Employers love it."

"It's really picking up here," says Earl Hobbs, Shared Work Coordinator for the Missouri Division of Employment Security. "Employees like it because it gives them a little money. Employers like it because it helps them get back on track when business improves."

But employers can't set up work-sharing programs automatically: state legislatures must pass legislation to enable them. California kicked off the idea by setting up its own program in 1978, and by 1982, Congress recognized the benefits of work-sharing and enacted a law (P.L. 97-248) allowing all states to try the idea.

The federal law allows states a lot of leeway in the design of their programs, but requires certain core features. For example, states must require employers to follow a formal application process, submitting their plans for approval by their employment security agencies.

No plan may reduce hours by less than 10 percent. All plans excuse employees from the availability for work and work-search requirements that would otherwise apply, but bar them from collecting more than 26 weeks of benefits in any 12-month period.

Benefits are charged to employers' accounts in the same manner and to the same extent as other jobless benefits, but employers must continue to provide health and retirement benefits without reduction. Beyond those common features, there's some variation in the duration of plans, their renewability, and the amount of allowable work reductions.

In 1997, when the federal law enabling the state programs had been on the books for about 15 years, the U.S. Department of Labor commissioned a study to see how they were doing.

The report found that employers who used the programs were satisfied with them and would use them again. In fact, many companies did so repeatedly. And the programs didn't threaten the solvency of state unemployment trust funds. But the report also found that state unemployment security agencies didn't do all they could to publicize their programs.

Where key stakeholdersemployers, labor, lawmakers, and state UI officialsunderstand and support work-sharing, the programs faced minimal legislative opposition, and once under way, garnered the praise of those whom they were designed to help.

The U.S. Labor Department could take the lead in encouraging more states to look at the idea, the report concluded, raising awareness of the program, reassuring policy makers that work-sharing programs have negligible impact on state trust funds, and pointing out that concerns over administrative costs are overstated, especially if states automate their programs.

And state legislatures could take up the challenge.


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