Panel Paper: Short-Time Compensation as a Tool to Mitigate Job Loss? Evidence on the U.S. Experience During the Recent Recession

Thursday, November 7, 2013 : 3:20 PM
Salon III A (Ritz Carlton)

*Names in bold indicate Presenter

Katharine G. Abraham, University of Maryland and Susan N. Houseman, W. E. Upjohn Institute for Employment Research
During the recent recession, workers were eligible of unemployment insurance benefits only if they were laid off in most states. At the start of the recession, only 17 states offer short-time compensation (STC) – pro-rated unemployment benefits for workers whose hours are temporarily reduced for economic reasons. The severity of the recession, however, has sparked interest in STC as a tool for mitigating unemployment during downturns. New federal legislation enacted in 2012 will encourage more states to adopt STC programs and will promote greater use of work sharing among all states. In this paper, we review evidence on the use of these programs during the recent recession. Our evidence indicates that jobs saved as a consequence of STC could have been significant in sectors like manufacturing that made extensive use of the program. We conclude, however, that, with the possible exception of Rhode Island, the overall scale of the STC program operations in the 17 states was too small to have substantially mitigated the aggregate job losses these states experience in the recession. Expansion of the program within the STC states as well as to states without the program is necessary for STC to be an effective countercyclical tool in the future.