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Session Summary: Melding Hiring Incentives and Work Sharing

November 13, 2012 08:53 AM

Addressing Unemployment by Hiring at Reduced Working Hours

During the recent and continuing Great Recession, a number of states tried to reduce layoffs by a seldom used policy called work sharing. Moderator Susan N. Labin engaged speakers Randall Eberts, W.E. Upjohn Institute for Employment Research, and Carolyn Heinrich, University of Texas at Austin, in a fruitful debate about the positive attributes of this policy along with its potential to distort labor markets. The policy has now been incorporated at the federal level in the Unemployment Insurance (UI) program by the Middle Class Tax Relief and Job Creation Act of 2012.

The idea of work sharing is where a group of employees split the time worked on a reduced number of jobs. Those employees would receive some amount of unemployment insurance with the hope to return to full time employment when the economy improves. The main promise of this policy is to avoid mass layoffs in a downturn. There is some evidence for its effectiveness, such as during Germany’s recent recession.

One difficulty with work sharing is how to target the policy to disadvantaged workers without stigmatizing them. Heinrich expressed concern for younger workers and the long-term effects of unemployment. She thought a training component in the work sharing policy would have more take-up by disadvantaged, younger workers.

Randall Eberts commented that such a policy may affect structural growth by preventing necessary cuts from occurring, though he added that the Great Recession was more cyclical in nature.

A question from an audience member concerning the effect of work sharing on productivity prompted an interesting discussion with arguments on both sides. Although often viewed unfavorably for its worker productivity, France is actually very productive for the hours worked. On this anecdotal evidence, Heinrich suggested there may be positive gains to worker productivity, though more research is needed.

Contributed by Brent Gibbons, University of Maryland


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