Economists Push for Federal Job-Sharing Program

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Wednesday, February 24, 2010 at 6:24 pm
House Financial Services Committee Chairman Barney Frank (D-Mass.) (EPA/ZUMApress.com)

House Financial Services Committee Chairman Barney Frank (D-Mass.) (EPA/ZUMApress.com)

As job creation continues to be the caboose of economic recovery, employment experts of all stripes are hiking the pressure on Congress to tackle the crisis by encouraging employers to cut hours rather than firing workers. And more and more lawmakers are taking heed.

Seventeen states have already adopted so-called “job-sharing” programs, which encourage employers to reduce workers’ hours in lieu of firing them outright. The state government, in these cases, then steps in to make up a portion of the lost wages. Between 300,000 and 350,000 workers are participating nationwide, saving roughly 100,000 jobs that would have otherwise been scrapped, according to Dean Baker, co-director of the liberal Center for Economic and Policy Research and a long-time supporter of the concept.

[Economy1] Yet that’s just a drop in the bucket relative to the 12-million-job crater the country is in, leading many economists — not all of them liberal — to push Congress for a much larger federal investment in job-sharing programs.

Kevin A. Hassett, director of economic policy studies at the conservative American Enterprise Institute, told lawmakers this week that such programs are among the most targeted and cost-effective ways to tackle the nation’s jobs crisis, which has left nearly one in five workers without a job or underemployed.

The concept is simple: Rather than laying off a few workers during lean times, businesses instead could spread the pain by reducing work hours for many. In Hassett’s example, if five workers had their hours cut by 20 percent it would prevent one worker from being fired at no cost to the company. And if Congress were to alter its policies surrounding emergency unemployment insurance, those workers could then access a portion of those benefits — in this case, 20 percent.

Workers benefit by keeping their jobs. Employers win because they don’t have to train new part-time workers. And states would gain because their share of the partial benefits would be less than they would otherwise have to pay.

“Right now the government only really shares in supporting that worker if you lay the whole worker off,” Hassett said Tuesday before the House Financial Services Committee, advocating for new stimulus spending that’s been attacked by the Republicans who invited him to testify. “By adopting job sharing, we could give firms an incentive to slow job destruction.”

The call is timely. Even as the nation’s unemployment rate fell to 9.7 percent last month, the number of long-term unemployed — those without work longer than 27 weeks — jumped to a historic high. Economists are projecting not only that unemployment will rise later this year, but also that it will remain above 8 percent even two years from now — higher than the peak jobless rate in either of the last two recessions.

Hassett pointed out that the job numbers coming out of the Labor Department each month are net figures reflecting the difference between the millions of jobs created and the millions of jobs lost — a constant churning that he says represents a vital opportunity for lawmakers interested in reducing unemployment.

“There is already a massive amount of job creation out there,” he testified. “If we can slow job destruction even a little bit, then we will have set the stage for big increases in net job creation.”

Reducing involuntary job losses by 10 percent, Hassett estimates, would be the equivalent of adding 200,000 jobs a month to the economy. Job-sharing policies in Germany have kept unemployment rates steady, Hassett said, even while that country’s GDP has tanked almost as drastically as that of the United States. And an additional perk: job sharing would be particularly beneficial to black workers, Hassett said, for the simple reason that blacks are often the first folks to be laid off in tough economic times.

Congress is paying attention. Financial Services Chairman Barney Frank (D-Mass.) called Hassett’s proposal “very useful.” Rep. Maxine Waters (D-Calif.) offered to give him an extra five minutes to testify. And Rep. Mel Watt (D-N.C.) called job sharing “a wonderful idea.”

“I turned to my staff and said, ‘Go draw me a bill that will do this kind of sharing, if nobody else has introduced that bill,” Watt said.

Turns out, the legislation is already out there. Bills sponsored by Rep. Rosa DeLauro (D-Conn.) and Sen. Jack Reed (D-R.I.) would provide more money to the 17 states already operating job-sharing programs, while offering additional funds to other states that choose to adopt similar initiatives. The White House, Baker said in a phone interview Wednesday, is supportive, though officials there seem intent to let Congress design its own jobs legislation.

Not everyone, though, is on board. Republicans, claiming that the first stimulus hasn’t done anything to help the economy, are near-united in opposition to another large spending bill — regardless of what it contains.

“I’m really surprised that we’re even debating the need for a new stimulus in light of our experience with the old stimulus,” said Rep. Spencer Bachus (Ala.), senior Republican on the Financial Services panel.

Rep. Jeb Hensarling (R-Texas) agreed, arguing that the Democrats’ $787 billion stimulus bill was “a complete failure.”

“I’m not even sure that John Maynard Keynes would have [supported] that particular stimulus program,” Hensarling said. “And here we are contemplating another one.”

Testifying before the House panel Tuesday, Mark Zandi, chief economist at Moody’s Economy.com, carried another message, warning lawmakers that current interest-rate and deficit-spending levels leave policymakers will few remedies should the country slip back into recession. With that in mind, Zandi urged panel members “to be aggressive” in crafting more stiumulus measures.

“If we have another recession, we will have no policy response,” he said. “We have to err on the side of doing too much.”

Comments

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