Let the Workshare Cat Out of the Bag
A little-known program that’s perfect for COVID recovery
The best kept secret among the options available to businesses to help them reopen in a way that protects the health and incomes of their employees is a long-established program known as workshare, which seems tailor made for the COVID economic and health crisis. Workshare makes it easier for employees to return to work, social distance and still maintain their income. As businesses balance the risk to their employees and customers in reopening, it’s critical that workshare come out of hiding.
As their customers emerge from lockdown, businesses that had furloughed workers will face the difficult decision of how many employees to bring back. And with the Paycheck Protection Program only covering payroll for eight weeks, businesses who kept paying people may soon have to decide who to keep and who to let go.
Workshare, which began in California more than forty years ago, gives employers a third choice — to allow workers to work part-time and receive partial state unemployment. Economist Gabriel Zucman illustrates how this would work in practice: A restaurant that reopens at half capacity could bring back all its servers half-time, and have them collect 50% of their state unemployment insurance, instead of bringing back only half of them at full-time pay. And under the federal pandemic unemployment compensation program, all the returning staff would also collect an extra $600 a week through July 31st.
As American Enterprise Institute scholar Michael Strain, another supporter of workshare, points out, “Work-sharing would also help the economy recover faster from the pandemic by keeping the unemployment rate lower than it would otherwise be and would help mitigate the prevalence of long-term unemployment, and the financial, social and psychological devastation that accompanies it.”
But few employers know workshare exists; it is an optional program (formally known as Short Term Compensation (STC)), which only operates in 27 states plus the District of Columbia. Even in those states, it’s rarely used. In the last recession, it only made up 0.9% of the unemployment claims in the states with the program. In the best performing state, Rhode Island, workshare made up 4% of claims and 10% of benefits.
The CARES Act aimed to boost the use of workshare, with the federal government agreeing to pay 100% of the workshare benefit costs for states with established programs and 50% of the costs for any state that sets up a new program, along with providing $100 million for grants to help states get workshare off the ground or promote their program. Two states, Virginia and Kentucky, are standing up new programs. But much more needs to be done.
Some 105 economists sent a letter to Speaker Pelosi late last month, organized by the Economic Policy Institute, asking that the federal government: pay 100% for all states, including ones with new workshare programs; that workshare be expanded to allow workers to be only 20% on payroll; and to allow even very small businesses to participate (aimed at states that have restrictive programs that would exclude these businesses). These are good ideas. Workshare should be streamlined in other ways too so that states can rush benefits to employees during the crisis.
But what really needs to happen is for governors and members of Congress and business associations to start loudly promoting the workshare option. It should be made a key point in state business reopening plans. Every employer who received PPP funding should be told about workshare. In a short time, many other CARES programs have become widely known by the public. Workshare should get that same attention.
The quickest way to restore the economy will be to first to keep people safe, second to keep them connected to work, and third to keep money in their pockets. Workshare helps do all three at the same time. We need to let the secret out.
A few pieces I read that resonated with me this week:
Stay safe and healthy!