Wonk Room » Is Work Sharing A Viable Solution To The Unemployment Problem?

Is Work Sharing A Viable Solution To The Unemployment Problem?

By Pat Garofalo on Nov 16th, 2009 at 1:20 pm

Is Work Sharing A Viable Solution To The Unemployment Problem?

As the unemployment rate stubbornly refuses to come down, Congress has rightfully begun looking at ways to spur job creation or, if nothing else, prevent further job loss. One of the ideas that has gained a bit of traction is work sharing, or subsidizing employers who reduce workers’ hours (and maintain their pay) instead of laying some of them off:

A bill sponsored by Sen. Jack Reed (D-R.I.) would give unemployment compensation to employees who accept a reduced work schedule to allow their companies to avert layoffs or to hire more employees…Democratic Sens. John Kerry (Mass.), Paul Kirk (Mass.) and Patrick Leahy (Vt.) have signed on as co-sponsors. Reed’s plan calls for up to $600 million for the program, which would last for up to two years.

The Hill noted that “Rhode Island and 16 other states already have their own work share programs, which have saved more than 146,000 jobs this year so far, according to the Labor Department.” According to Reed’s office, “if all 50 states participated in work share programs, between 400,000 and 500,000 jobs a year could be saved.”

The most outspoken advocate of work sharing has been Dean Baker, co-director of the Center for Economic and Policy Research, who pointed out that the process is cheap, simple, and quick:

In principle, the government can go this route to save jobs at a cost of a bit more than $20,000 per job – far less than the cost per job saved through the stimulus package…Approximately 4 million people leave their jobs every month, half involuntarily. We have job growth if we either create more than 4 million jobs or reduce the number of jobs lost below 4 million. If a work share program reduced involuntary job loss by 20 percent, or 400,000 per month, it would have the same effect as adding 400,000 new jobs.

Both Baker and Paul Krugman point to the example of Germany, which has a work sharing program, along with strong labor protections. As Krugman wrote, the measures “didn’t prevent a nasty recession, but Germany got through the recession with remarkably few job losses.” Plus, as Peter Dorman at EconoSpeak noted, work sharing helps preserve human capital, as firms don’t have to re-hire and re-train workers down the line — they just increase their hours back to where they were previously.

All that said, this is still only a B- idea. (Krugman acknowledges this, calling it the “third-best” economic policy available, after committing to moderate inflation to lower interest rates or further fiscal stimulus.) In the absence of stronger stimulus measures, such as aid to states or a direct job program, it will do some good — and it may be the only thing that a deficit-crazed Congress is willing to consider. But it is inefficient, has the potential to be wasteful, and obviously does nothing for those already out of work. Work sharing isn’t terrible, but I’d like to think that we can do better.

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2 Responses to “Is Work Sharing A Viable Solution To The Unemployment Problem?”

Micah K Says:

Heard Jane Oates, Assistant Secretary of Labor for Employment and Training, remark that she wanted to see support for work sharing in the UI system. So there is at least some mild administration support for the proposal.
November 16th, 2009 at 3:45 pm
Tom Walker Says:

“All that said, this is still only a B- idea.”

Compared to utter failure, B minus looks like genius. In terms of “doing better” one first has to take stock of what “progress” might conceivably mean. I like to start with Adam Smith’s summary of “what constitutes the real happiness of human life”: ease of body and peace of mind. Then there is Thomas Jefferson’s prescription, “If we can prevent government from wasting the labors of the people under the pretense of taking care of them, they must become happy.”

Down through the ages, philosophers, theologians and even economists (Mill, Marx, Marshall, Veblen, Keynes…) have extolled the virtues of leisure and downplayed the accumulation of material possessions. The trauma of the 1930s Depression and the subsequent World War II seem to have locked the American psyche into the fixed idea that economic growth — by whatever means necessary — is the holy grail. This has produced six decades of what Dwight Eisenhower called “false prosperity”, that is to say increase of gross output, fueled by military spending and other wasteful indulgences, and heedless of its impact on the environment, the social fabric and the character of individuals.

Over 200 years ago, Benjamin Franklin observed,

“It has been computed by some political arithmetician, that if every man and woman would work for four hours each day on something useful, that labor would produce sufficient to procure all the necessaries and comforts of life ; want and misery would be banished out of the world, and the rest of the twenty-four hours might be leisure and pleasure.”

Nearly a century ago, in the wake of World War I, Stephen Leacock observed, “The nerves of our industrial civilization are worn thin with the rattle of its own machinery,” Leacock wrote, “The industrial world is restless, over-strained and quarrelsome. It seethes with furious discontent, and looks about it eagerly for a fight. It needs a rest.” Leacock argued that reducing the hours of work “should be among the primary aims of social reform,” and recommended “such a shortening as will strain the machine to a breaking point, but never break it.” Keynes concurred with a vision of a 15-hour work week as a realistic prospect for the future.

Two months before his assassination, President John F. Kennedy mused, “we are going to find the workweek reduced, and we are going to find people wondering what they should do…” Two years later, his brother, Bobby, delivered a famous critique of the GNP inability to measure a country’s health. The measure “counts special locks for our doors and the jails for those who break them” but not “the health of our children, the quality of their education or the joy of their play.” That speech, by the way, was cited by President Obama during the election campaign to illustrate his conviction that a “paradigm shift” was needed in economics before it became too late.

Just last March, the UK’s Sustainable Development Commission issued a report, “Prosperity or Growth?”, pointing out that the ongoing obsession with economic growth was making environmental catastrophe inevitable even as it was not delivering on its mythical promises of stability and reduction of poverty. The report called the continuing growth imperative, a delusion.

Even if work-sharing is “still only a B- idea” it is at least a step in the right direction and, perhaps, the thin edge of a wedge that will ultimately pull down the temple of idolatry dedicated to economic growth. The growth imperative’s ideological foundations in the Cold War NSC-68 doctrine and economic competition with the “Soviet Menace” have been long forgotten, even as their analytically-incoherent economic justifications have been elevated to the status of incontestable dogma.

An A+ idea would consist of consigning the entire putrefying economic paradigm to its appropriate dust bin. For now, we would do well to settle for B-.
November 18th, 2009 at 12:39 pm