Tuesday, April 10, 2012
By Derek Thomas, Policy Analyst
dthomas@incap.org
During the 2011
legislative session of Indiana General Assembly, the Institute helped to draft House Bill 1151—a bill aimed at
saving jobs. Unfortunately, the bill, known as work sharing, did not get a
hearing.
This particular
policy has proven itself to be successful (both empirically and anecdotally), is
cost-effective, and continues to gain increasingly rare bi-partisan support
from economists and governors
alike. Since 2009, six states (CO, ME, NH, NJ, OK and PA) have all passed
Work Sharing legislation.
The Institute
reminded lawmakers that because manufacturing is still the largest share of
Indiana’s economy, coupled with our heavy reliance on exports (nearly one quarter
of Indiana manufacturing workers depend on exports for their jobs), an
increasingly unstable economy in Europe could spell trouble for Indiana’s
economic recovery.
However, the passage
of work sharing could
prepare employers and employees alike in the event of decreased demand and in
turn save hundreds to thousands of manufacturing jobs in Indiana. This uneasiness with the recovery is not limited
to the Institute; it is wide-spread, from Governor Mitch Daniels to a
number of well-respected economists.
Work sharing allows firms, who
typically respond to a loss in demand by firing workers, to spread a small
amount of the pain across many workers, at no significant cost to the
state. Simply stated, instead of
unemployment benefits that pay Hoosiers to NOT work, work sharing would be
paying for people to work shorter hours, saving employer’s money through
decreased turnover costs, and keeping Hoosiers working.
While the Institute
can’t help but wonder what other qualifications a jobs bill must possess to
gain traction—especially given the current economic environment—the
Institute is encouraged by the recent actions of the federal government.
According to a joint statement by CLASP and NELP: “On
February 22, 2012, President Obama signed the Middle Class Tax Relief and Job
Creation Act (H.R. 3630), extending the payroll tax cut and federal
unemployment assistance through the end of 2012. Included in the $143 billion
measure are provisions designed to expand a creative layoff aversion strategy
called work sharing.”
Among other things,
H.R. 3630 provides $500 million to states who adopt work sharing programs, and
is largely similar to the bill the Institute helped to write in 2011:
- Employer participation is voluntary;
- Employers reduce employee hours in lieu of layoffs;
- Employees whose hours are reduced by at least 10 percent but not more than 60 percent (as determined by the state) are not disqualified from unemployment compensation;
- Employees receive a prorated share of the unemployment benefits they would have received if totally unemployed;
- Employees meet work availability and work search requirements if they are available for their work week as required;
- If health and retirement benefits are provided, employers must certify that those benefits will not be reduced due to participation in the work sharing program;
- The employer must submit a written plan to the state UI agency describing how it will implement requirements of the work sharing program (including a plan to give advance notice, where feasible, to employees whose work week will be reduced), as well as an estimate of the number of layoffs that would have occurred but for the work sharing program and;
- The employer’s plan must be consistent with employer obligations under applicable federal and state laws.
As the Institute’s 2011 report stated, work sharing is a win-win-win strategy Indiana cannot afford to pass up in this time
of continued economic uncertainty. And
now, given the federal support, the choice is clear: Indiana should utilize
work sharing as one tool in a box of many to mitigate temporary
decreases in demand, now and for
future downturns.
