With tens of thousands of West Virginians losing their jobs and filing for unemployment insurance benefits as the COVID-19 pandemic disrupts the economy, there is renewed interest in “work sharing” programs.
Work sharing gives businesses the option of reducing the hours and wages of their employees instead of laying them off. Workers with reduced wages and hours are then eligible for partial unemployment benefits to help make up the lost wages.
While work sharing benefits do not fully replace lost income, the employee’s take home pay is much higher with work sharing than it is with unemployment insurance. For example, consider a worker who typically earns $800/week. Laid off, their weekly earnings fall to $400 per week, the amount they would be eligible to collect in unemployment benefits. Under work sharing, working four days per week and collecting one-fifth of full unemployment benefits, their weekly income is $720, 80% higher than if they had been laid off.
Paying out work sharing benefits puts no more strain on a state’s unemployment trust fund than paying out full unemployment benefits. While more employees collect benefits, they are only collecting a fraction of the benefits they would collect if they were laid off. For example, if a business with 100 employees earning an average wage of $800/week needs to reduce labor costs by 20% for a time, they could lay off 20 employees. Those employees would then collect a total of $8,000/week in employment benefits. Or the business could, under work sharing, have each employee work 4 days a week, and collect work sharing benefits on the 5th day. The total benefits paid would still equal $8,000, the only difference is that all the employees got to stay on the job. Further, the U.S. Department of Labor has found that work sharing does not appear to have any significant impact on state UI trust funds.
By using work sharing to avoid layoffs, employers are able to retain valuable and experienced workers while workers get to stay on the job, keep most of their income and keep access to their employer provided health insurance.
Currently 26 states, covering 70% of the nation’s workforce, offer a work sharing option in their unemployment insurance system. The recently passed CARES Act provides full federal funding for states that already have work-sharing programs and half federal funding for states that adopt temporary work-sharing programs, significantly raising the profile of work sharing programs.
In addition to preventing layoffs, the temporary financing of work share benefits is also an effective stimulus. Every dollar spent on temporary
federal funding of work sharing programs increases GDP by $1.64, a bigger “bang for the buck” than tax cuts or even infrastructure spending.
It is estimated that West Virginia could lose up to 91,477 jobs due to the economic impact of the coronavirus. If West Virginia acts quickly to enact and encourage a work sharing program, thousands of those jobs could be saved. With a participation rate matching states like Rhode Island or Minnesota, between 5,000 and 15,000 jobs could be saved in the coming months.
With layoffs mounting, now is the ideal time for West Virginia to launch a work sharing program. By acting now, West Virginia can create a program that benefits workers, employers, and the economy and be better equipped to handle this and future economic downturns.
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