Expanding Pennsylvania’s use of work sharing—reduced work hours and pay combined with partial unemployment benefits so that workers experience a smaller income loss—could be instrumental in reducing unemployment during the current recession and accelerating a safe return to fuller employment. Such expansion would cost the state little or nothing because of 100% federal reimbursement for work sharing unemployment benefits through at least December 31, 2020, and nearly $4 million in grants available to Pennsylvania through 2023. This brief details executive and administrative actions that Pennsylvania could take to expand work sharing and mitigate the damage of the current recession to workers and families, businesses, and the state’s economy.
Work sharing, as defined here, spreads across more workers the pain of reductions in demand and in available paid work hours at businesses. Instead of one worker facing joblessness, two workers might see a 50% cut in their hours. By retaining the connections between workers and firms, work sharing also makes it easier for companies to increase output once aggregate demand recovers—instead of hiring new workers without a track record, companies can return work sharing employees to full time status.
Historically, the United States deploys work sharing very little. From 2007 to 2009, in the Great Recession, claims for work sharing rose from 10,000 to 110,000. In 2012, after Congress provided grants for additional states to establish work sharing, the number of states with work sharing rose from 21 to 27. The Center for Economic and Policy Research estimates that work sharing saved about 500,000 U.S. jobs in the recovery from the Great Recession. The United States’ use of work sharing, however, remains far below the levels of European countries. In 2009, for example, work sharing participants in Belgium topped 5% of the country’s employment, 25 times the “take-up rate” in the United States that year.
Pennsylvania enacted work sharing legislation in 2011 and modified its program to align with a new federal law in 2014. As in the nation, only a small number of Pennsylvania companies use work sharing. In just the past few months, however, use of work sharing has grown dramatically from its low starting point. From February to the end of June, work sharing unemployment compensation in Pennsylvania increased by a multiple of 86, from $19,135 to $1,648,832, and the number of employers participating in work sharing from 11 to 181.
To gauge the potential for expanded work sharing in Pennsylvania, Keystone Research Center interviewed Pennsylvania’s work sharing program staff, analyzed data on the use of work sharing across states, interviewed national experts, and researched experience in Washington state, where roughly a 10 times larger share of the workforce participates in work sharing as in Pennsylvania. We identified several immediate steps Pennsylvania could take to expand work sharing:
- Modify Pennsylvania’s rules to give employers more flexibility when implementing work sharing by allowing them to reduce hours 10% to 60%, the range permitted by federal guidelines, instead of the current 20% to 40%.
- Continue to seek and utilize U.S. Department of Labor (USDOL) funds to increase marketing and promotion of work sharing. Governor Wolf’s briefings provide one ideal opportunity to raise awareness of work sharing among employers and unions.
- Expand work sharing in local and state government, nonprofits, and unionized firms, capitalizing on the federal subsidy, especially if it is extended beyond December, and reducing the additional layoffs that result as tax revenues and nonprofit funding drop off in a longer recession.
- Increase staff of the work sharing unit within the Pennsylvania Department of Labor and Industry (L&I) to (a) ensure capacity exists for labor-intensive processing of additional work sharing plans, plan modifications, and claims and (b) allow L&I to quickly and efficiently capitalize on an upgrading of Pennsylvania’s unemployment system information technology system to automate more of the applications, certifications, and record-keeping for work sharing.
- Expand eligibility temporarily for newer employers (less than three years old) and for those with a small negative balance in their unemployment system reserve account.
Acting now to expand work sharing, while the CARES Act provides funding, would provide immediate benefits to Pennsylvania workers and businesses. It would also lay the groundwork for using work sharing in future recessions to reduce unemployment substantially. This would enable businesses and their workers, including in manufacturing, to come back stronger in future recoveries.