Work-share: Cure for COVID unemployment pain?
New UIUC-ILEPI study says fully implementing 2014 program would save jobs
A vacant parking lot outside a shuttered Starbucks closed during the coronavirus crisis. (One Illinois/Ted Cox)
By Ted Cox
A new study suggests that if Illinois were to fully implement a work-share program, allowing employees to claim partial unemployment benefits for reduced hours, that would save jobs and minimize the economic damage from the coronavirus crisis.
The Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign joined Tuesday in releasing the study, “Implementing a Work-Share Program in Illinois: Projecting Jobs, Boosting Incomes, and Saving Taxpayer Dollars.” It points out that Illinois enacted a work-share program in 2014 under Gov. Pat Quinn, but never fully implemented it under Gov. Rauner.
According to the study, “29 U.S. states and the District of Columbia have such programs in place.” A news release accompanying publication of the report stated: “In Illinois, unemployment benefits replace just 47 percent of the income of a full-time worker who is laid off. Under Illinois’s work-share statute, as an alternative to layoffs, employers could instead reduce their workforces’ hours by between 20 percent and 60 percent. At the median workforce hour reduction of 40 percent, workers would stay employed, receive 60 percent of their normal wages, retain their health and retirement benefits, and receive a prorated unemployment-insurance benefit to partially make up for their lost wages. The effect would be lower unemployment, higher incomes for those workers than if they had been laid off, and less state spending on unemployment benefits.”
Drawing parallels with the Great Recession of a decade ago, the study suggests work-share is uniquely suited to address dramatic but temporary economic downturns such as the shutdowns stemming from the coronavirus pandemic.
Only last Thursday, the U.S. Department of Labor reported a record 6.6 million job losses caused by the almost national shutdown, more than doubling the record of 3.3 million set only the week before and meaning almost 10 million U.S. workers lost their jobs over two weeks. Illinois reported 178,000 new unemployment claims last week, on top of 114,000 the week before, and that’s as the Illinois Department of Employment Security struggled to keep pace with those attempting to file claims.
At the same time, allowing employees to maintain their workplace health insurance is critical in minimizing the spread of COVID-19 and maximizing treatment. Federal relief packages already passed by Congress and signed by President Trump have tried to encourage that by providing incentives to businesses that furlough employees, allowing them to keep their health insurance, rather than laying them off entirely. Additionally, according to the news release, work-share programs are “fully reimbursed by the federal government through 2020 under the CARES Act,” one of those federal relief packages.
“While public health and social-distancing measures to contain the spread of COVID-19 may have already induced a global recession, work-share programs have emerged as an important policy innovation that can be used to mitigate the damage,” said study co-author and ILEPI Policy Director Frank Manzo IV. “By reducing the number of workers who lose their jobs entirely, the data show that these programs are far more economical for businesses, workers, and taxpayers.”
“Work-share enables employers to manage short-term downturns without sacrificing their ability to quickly and efficiently scale up operations during a recovery.”
Professor Robert Bruno
The study estimates that “full implementation of Illinois’s work-share program could save as many as 124,000 jobs, boost worker income by $1.3 billion, save businesses up to $1.2 billion in workforce turnover, and reduce Illinois’s unemployment-insurance costs by as much as $1.1 billion in 2020.”
The study cited the economic performance of Germany during the early days of the Great Recession in 2008-2009. Germany “has a robust national work-share program,” and saw 83 percent less growth in unemployment than the United States did, “resulting in an estimated 432,000 jobs saved.”
In the United States at the time, 17 states had work-share programs in place, with the “utilization rate,” meaning the percentage of all unemployment claims being minimized by work-share, being 5.6 percent in Minnesota and reaching a high of 16 percent in Rhode Island. The study estimated that at Minnesota’s participation rate Illinois would save 44,000 jobs, put $457 million in workers’ pockets, and save the state $380 million with the federal contributions from the CARES Act and $228 million after 2020. At the Rhode Island participation rate, meanwhile, the state would preserve almost 125,000 jobs, put $1.3 billion in workers’ pockets, and save $1 billion under the CARES Act and $647 million going forward after this year.
Illinois businesses would benefit from reduced turnover costs, with estimates running between $433 million under the Minnesota model and $1.2 billion under the Rhode Island model.
The study noted “that work-share programs have enjoyed broad support in both the business community and the labor movement, with both the Illinois Manufacturers Association and the Illinois AFL-CIO supporting enactment of state work-share legislation in 2014.”
“Fully 91 percent of employers who have participated in these programs have said they would do so again because they protect against the lost productivity and high turnover costs that accompany mass layoffs,” said study co-author and UIUC Professor Dr. Robert Bruno, director of the Project for Middle Class Renewal. “Work-share enables employers to manage short-term downturns without sacrificing their ability to quickly and efficiently scale up operations during a recovery. To minimize the economic damage from COVID-19, the key for Illinois is to implement its program in a way that maximizes utilization by businesses and workers.”
The study suggests the program seems almost tailor made to the coronavirus pandemic, stating: “Work-share programs allow employers to temporarily reduce the hours of their workers during recessions as an alternative to layoffs, enabling them to retain skilled workers until economic conditions improve. In the firms that participate in work-share programs, workers keep their jobs instead of being laid off and receive prorated unemployment insurance benefits to supplement the lost earnings from their reduced hours. Importantly, they also maintain their health and retirement benefits.
“Unlike previous economic shocks, the COVID-19 recession is an outcome of reasonable efforts to protect public health and save lives,” it adds. “By implementing Illinois’s work-share program and taking advantage of the federal government’s commitment to support these programs through the end of the year, policymakers can take a tangible step to withstand the current economic downturn. Effectively promoting the program as an alternative to mass layoffs, however, requires partnerships between the state of Illinois, business groups, the labor movement, and economic-development agencies. A fully implemented work-share program would improve the ability of Illinois employers to retain skilled workers, boost incomes, and save jobs while reducing unemployment-insurance costs borne by taxpayers.”