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States consider new work-share programs as way to give employers alternative to laying off workers

by Laura Tomaka ~ October 2013 ~ Stateline Midwest »
Work sharing, also known as short-time compensation, is an unemployment benefit that gives employers an alternative to laying off workers when business is slow or temporary cuts in costs are needed.
A group of workers is kept on the job at reduced hours. To replace the lost income, these employees are then eligible for partial unemployment benefits.
The idea of work-share programs has won support across the political spectrum, with proponents seeing it as a win-win proposition. Employers are able to weather downturns by reducing payrolls while retaining skilled workers and avoiding the cost of hiring and training again when business rebounds. Workers, meanwhile, are able to stay on the job (albeit at reduced hours), maintain their skills, and often retain health and retirement benefits.

At the start of 2012, 23 states were operating work-sharing programs, including Iowa, Kansas and Minnesota in the Midwest. In February of that year, President Obama signed into law the Middle Class Tax Relief and Job Creation Act, which includes incentives for more states to adopt work-sharing programs.
Under the law, the federal government provides 100 percent of work-sharing unemployment benefits for up to three years in states that had a program in place, and 50 percent for up to two years in states that did not.
The Center for Economic and Policy Research estimates that if every state took part, $1.7 billion in federal dollars would go into state insurance funds. And Mark Zandi, an economist at Moody’s Analytics, estimates that every dollar spent on work sharing could add $1.64 in economic growth.
Last year, Michigan, which has the highest unemployment rate in the Midwest, became the 24th state to adopt a work-sharing program with enactment of SB 1094.
In some ways, Michigan’s new initiative is similar to programs in place in other states. For example, Michigan businesses must continue providing health insurance and other benefits for their work-share participants, and the state will decide the portion of lost income it will cover and the cap on total benefits to workers.
But unlike other states, Michigan will allow businesses to keep workers on the program with no penalty as long as federal funds are available for the program. (In other states, employers may be penalized with higher unemployment insurance taxes for keeping employees on work share for extended periods.)
This year, work-share legislation was introduced in 10 other states, including Illinois, Indiana, Nebraska and Wisconsin. But to date, only Wisconsin has passed a new work-share bill. AB 15 was signed into law in May.

 

Article written by Laura Tomaka, staff liaison to the Midwestern Legislative Conference Economic Development Committee. The committee's co-chairs are Michigan Rep. Eileen Kowall and Nebraska Sen. Heath Mello.