Work sharing could limit layoffs if Ohio legislature approves bill
Cleveland Plain Dealer - May 21, 2012
Ohio is trying to make it harder for employers to lay off workers.
Instead of giving workers the ax, employers would be encouraged to cut their employees’ hours under a bill pending in the Ohio House. In turn, employees would be able to receive unemployment benefits for their reduced hours.
The practice is known as work sharing or short-time compensation. Though it would be new to Ohio if it passes, work share has existed nationally for about 30 years. Its popularity is increasing, primarily because the federal government is providing money tostates where the policy is law.
“You don’t lay off people, so Mom and Dad don’t have to go back to their families and say ‘I lost my job today,'” said the bill’s sponsor, Republican State Rep. Mike Duffey of Columbus. “We can avoid all the dysfunction and costs layoffs create for individual families, communities and employers.”
State Rep. Ron Young, a Republican from Leroy Township and chair of the Commerce and Labor Committee, said he expects the committee to vote on the bill this week. A provision requiring companies with collective bargaining agreements to have unions approve work-sharing plans has led to disagreement among some lawmakers and groups who otherwise support the bill. Young is hopeful common ground can be found.
For the most part, work sharing has garnered bipartisan support and won the favor of liberals and conservatives in Ohio and nationally. The mostly liberal Policy Matters Ohio, and the mostly conservative Ohio Chamber of Commerce, for example, both support the concept. However, Policy Matters agrees with the union sign-off, while the Chamber opposes it.
A similar work-sharing bill did not make it out of committee in 2010, when Ohio’s unemployment rate for much of the year was at 10.6 percent, a post-recession peak. (Last month’s rate, released Friday, was 7.4 percent). Duffey said winning the support of his colleagues from both parties was easy this time since the federal government is picking up the tab.
Duane Morris, who was laid off from his job as a certified public accountant in 2010, believes work sharing is valuable. However, he said government funding should be focused on getting jobs for the underemployed and the long-term unemployed, whose predicaments he considers more pressing.
Morris of Northfield Center said tax credits to companies that hire the underemployed and long-term unemployed could help reduce their numbers.
“(Work sharing) already helps people in the payroll system,” he said. “By hiring the unemployed person or the long-term unemployed, you are helping those who weren’t paying taxes. That could produce a big jolt to the economy with a ripple effect.”
The Middle Class Relief and Job Creation Act that President Barack Obama signed into law in February allows the federal government to pay for unemployment benefits for residents in work-share programs. Washington will pick up the bill for up to three years, ending in 2015. About 25 states have already approved job sharing.
In addition to paying benefits, $100 million has been set aside to cover administrative costs that states incur for running the program. Individual companies would be allowed to have their employees receive work-sharing subsidies for a year.
“We want this to be a short-term model that businesses use instead of layoffs,” said Jane Oates, assistant U.S. Secretary of Labor for employment and training.
Oates said the one-year limit is designed to prevent employers from trying to take advantage of employees by paying them less in salary and benefits.
“It should not be a permanent model that businesses look to get subsidies from the UI (Unemployment Insurance) fund to keep more workers and only engage them for 20 hours a week or less,” she said. “We don’t want businesses to hire two part-time people for a full-time job.”
She recently wrote an issue brief on the topic with colleague Dean Baker, saying that states could save a total of $1.7 billion a year in UI costs. Ohio could save more than $71 million a year in UI costs, should legislators pass the bill, she said. Without legislative approval, Ohio would get half that, have to pay administrative costs and only receive two year’s funding.
Woo and Baker based their figures on the percentage of work sharing participation in Rhode Island, which has embraced the practice more than any other state. They reasoned states with work-sharing laws could save about 5 percent of their Unemployment Insurance costs with the federal subsidy, which is based on Rhode Island’s peak participation rate .
The Ohio Department of Job and Family Services doubts if the savings would be as big a Woo and Baker’s projection.
“During a good economy, when there would be fewer layoffs and therefore fewer opportunities for work sharing, the savings are likely to be smaller,” ODJFS spokesman Benjamin Johnson wrote in an e-mail. “Participation is also voluntary, and it is difficult to estimate how many employers would choose to participate in a work sharing program.”
Still, he said ODJFS is in favor of work sharing as long as “there aren’t any unexpected requirements for states that accept the funding.”
Woo said even though layoffs have dropped, she and Baker used the higher figure because every month, thousands of workers are laid off in Ohio. Also, the federal financing should serve as strong incentive for high levels of participation in work sharing, she said.
For most supporters, the compelling draw of work sharing is its ability to curb joblessness. Baker estimates the U.S. unemployment rate — which was 8.1 percent in April — would fall about 0.5 percentage points, based on the same participation rate used to calculate savings to the states.
Woo said perhaps millions of people nationally would not have lost jobs had an extensive work-sharing system been in place. She pointed to Germany, where she said the jobless rate is lower than when the economic downturn hit.
“Rather than lay off workers in the way that we saw in this country, Germany used work sharing very aggressively by encouraging employers to reduce the hours of their employees rather than lay them off,” Woo said.
James Sherk , a senior policy analyst in labor economics, at The Heritage Foundation in Washington, D.C., disagrees. In fact, he doubts the ability of work sharing to save jobs here or abroad.
“It is true that Germany’s aggregate unemployment rate didn’t go up as much, but in-depth studies have taken a look under the hood and found that the work-sharing programs contributed very little towards that,” he said.
Sherk also fears the subsidy will be used to prop up dying businesses and occupations. He said funding could better be used for online job training, which he said tends to be low cost. Money could also go toward not raising taxes to encourage business growth.
Oates said the program allows for workers to receive retraining while they collect jobless benefits. Besides, work sharing isn’t meant as life support for terminally ill businesses, she said.
“Quite frankly, for some companies, this is not going to be an appropriate model,” Oates said.
Work-sharing supporters say the program is good for both businesses and workers because it enhances stability. Several point to Lincoln Electric in Euclid which, for the most part, doesn’t lay off employees who have at least three years seniority and a good work history.
During the harsh economy of 2008-09, the company cut many employees back to 30 hours. During an economic uptick, employees have mandatory weekly schedules often of more than 55 hours. Ramping up was easy when the economy improved, said Doug Lance, vice president of Cleveland operations.
“We have a core competency or knowledge that gets to stay here through those down cycles,” he said. “It allows us to swing the pendulum back quicker.”
Employees at Lincoln Electric are cross-trained. During the downturn, many were moved from production to Research and Development, where they worked on products that could be manufactured once the economy improved. When companies suffer major layoffs, progress in all departments often slows down, Lance said.
“When the recovery came, we were ahead of the competition,” he said.
John Wasko, who works in R&D, remembers not experiencing the anxiety of many factory workers as layoffs were mounting during the recession.
“I have a lot of friends in the past at companies who have lost their jobs during down times,” Wasko said. “I know that once I perform at expected levels, I won’t lose my job.”
If Ohio had a work-sharing law, workers like Wasko would probably have been able to get jobless benefits for the reduced hours. Roy Morrow, Lincoln Electric’s director of corporate relations, said the company doesn’t want to comment on the bill or how it would affect its employees because officials hadn’t reviewed it.
Many businesses support the bill, said Tony Seegers, director of labor and human resources policy for the Ohio Chamber of Commerce. Still, they don’t support the provision requiring union approval before implementing work sharing.
“We shouldn’t be putting this into state statutes, especially since the federal law doesn’t require it,” he said.
Young, the House committee chair, said he believes the provision should be removed from the law because most union contracts already outline terms governing reduced hours.
Zach Schiller, research director at Policy Matters, which supports having a collective-bargaining provision, said Minnesota is the only state without one.
“I think this has become part of an ideological assault on labor,” he said.
“If workers want to collectively bargain, they have every right to do that,” he said. “I will fight for their right to do that. At the same time, companies should have the right to control their work force. If they can’t, they are not going to stay in Ohio.”
Despite the chasm, Young is confident an agreement can be reached before this week’s vote.