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Dean Baker: The payroll tax law's best measure
The payroll tax law's best measure
Tucked in the small print of the payroll tax bill is a work-sharing plan that could save more than a million jobs this year
Dean Baker
One of the little-noticed items attached to the extension of the payroll tax cut was a provision that would promote work-sharing as part of state unemployment insurance systems. The provision, which is based on a bill introduced in the Senate by Jack Reed and in the House by Rosa DeLuaro, would reimburse states for money spent on work-sharing programs that are part of their unemployment insurance system. It would also provide funds for the states that do not currently have work-sharing systems to establish them.
<...>
Work-sharing gets around this asymmetry. It allows workers to be compensated for part of their lost pay when their employer reduces their work hours. This means that if an employer decides to reduce the work hours of 50 workers by 20%, as opposed to laying off 10 workers, the 50 workers can get half of their lost pay (10% of their total pay) covered by unemployment insurance. This means that workers will end up working 20% fewer hours for roughly 10% less pay.
<...>
The potential impact of work-sharing on unemployment is enormous. While the economy as a whole is adding jobs, we still have an enormously high level of churn every month: roughly 4 million workers leave their jobs, with 2 million leaving involuntarily. If the number of people being laid off can be reduced by 5%, this would be equivalent to adding 100,000 additional jobs each month, which translates to 1.2m by the end of a year.
Work-sharing has been used successfully elsewhere. Germany's unemployment is 1.5 percentage points lower today than it was at the start of its recession. This is not due to Germany's growth performance, which actually has been somewhat worse than the US. Rather, the difference is that Germany has been successful in persuading employers to keep workers on the job, even when this has meant a shortening of hours.
- more -
http://www.guardian.co.uk/commentisfree/cifamerica/2012/feb/27/payroll-tax-law-best-measure
Tucked in the small print of the payroll tax bill is a work-sharing plan that could save more than a million jobs this year
Dean Baker
One of the little-noticed items attached to the extension of the payroll tax cut was a provision that would promote work-sharing as part of state unemployment insurance systems. The provision, which is based on a bill introduced in the Senate by Jack Reed and in the House by Rosa DeLuaro, would reimburse states for money spent on work-sharing programs that are part of their unemployment insurance system. It would also provide funds for the states that do not currently have work-sharing systems to establish them.
<...>
Work-sharing gets around this asymmetry. It allows workers to be compensated for part of their lost pay when their employer reduces their work hours. This means that if an employer decides to reduce the work hours of 50 workers by 20%, as opposed to laying off 10 workers, the 50 workers can get half of their lost pay (10% of their total pay) covered by unemployment insurance. This means that workers will end up working 20% fewer hours for roughly 10% less pay.
<...>
The potential impact of work-sharing on unemployment is enormous. While the economy as a whole is adding jobs, we still have an enormously high level of churn every month: roughly 4 million workers leave their jobs, with 2 million leaving involuntarily. If the number of people being laid off can be reduced by 5%, this would be equivalent to adding 100,000 additional jobs each month, which translates to 1.2m by the end of a year.
Work-sharing has been used successfully elsewhere. Germany's unemployment is 1.5 percentage points lower today than it was at the start of its recession. This is not due to Germany's growth performance, which actually has been somewhat worse than the US. Rather, the difference is that Germany has been successful in persuading employers to keep workers on the job, even when this has meant a shortening of hours.
- more -
http://www.guardian.co.uk/commentisfree/cifamerica/2012/feb/27/payroll-tax-law-best-measure
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