Work Sharing: The Quick Route Back to Full Employment

A 2011 report from the Center for Economic and Policy Research (CEPR) suggests that during difficult economic times, work sharing can be the most effective way to avoid widespread job loss and quickly return the economy to full employment with little additional spending.

“With the economy operating well below its full capacity, work sharing could be a significant factor in preventing layoffs and lowering the unemployment rate,” said Dean Baker, co-director of CEPR and author of the report. 

The report, “Work Sharing: The Quick Route Back to Full Employment,” describes a system of work sharing that would give employers an incentive to keep workers on their payrolls with shorter hours as an alternative to laying them off. This would be attached to the current unemployment insurance system, with short-time compensation as an alternative to unemployment compensation.

“We have already seen that work sharing works in the example of Germany,” Baker continued. “While most countries saw their unemployment levels spike during the recession, Germany, which already had a work-sharing system in place, saw its unemployment rate fall 0.4 percentage points below the rate at the start of the downturn.”

Work sharing is a practical, but underutilized, policy option here in the United States. Senator Jack Reed (D-RI) plans to soon reintroduce legislation along these lines to incentivize work sharing domestically.

Most nations in the Organisation for Economic Co-operation and Development (OECD) have some experience with work sharing, and 21 U.S. states already have work sharing programs in place. While recognizing the need to address a variety of implementation issues to make work sharing more attractive, the report presents hypothetical take-up rates and the likely impact of work sharing on productivity in the United States.

Perhaps due to a misplaced focus on deficits rather than jobs, the U.S. economy remains weak and growth is tepid at best. With threats of a possible double-dip recession and more rounds of layoffs looming, work sharing may very well be the most economically and politically viable means of lowering the unemployment rate.