Work Sharing Provision an Essential Part of Payroll Tax Cut Bill

Dean Baker is co-director of the Center for Economic and Policy Research and has worked for the World Bank, the Joint Economic Committee of the U.S. Congress, and the OECD's Trade Union Advisory Council. His latest book is The End of Loser Liberalism: Making Markets Progressive.

This week, Congress passed the Middle Class Tax Relief and Job Creation Act of 2012 that carried the essential provisions of work sharing bills proposed by Sen. Jack Reed and Rep. Rosa DeLauro. The bill would have the federal government pick up some of the expenses associated with state work sharing programs, thereby giving them more incentive to promote work sharing.

This is a rare victory of common sense and bipartisanship in Washington. The existing unemployment insurance system tends to encourage layoffs, since unemployed workers can typically collect benefits equal to half of their wages. Work sharing, or short-time compensation as it referred to in the bill, allows workers who had their hours reduced to receive benefits equal to half of their reduction in pay. From the standpoint of the worker, the employer, and the economy as a whole, it is likely to be a better outcome if workers can be kept on the job working shorter hours rather than being laid off.

[See a collection of political cartoons on the economy.]

There was support from across the political spectrum for this measure. One of the strongest proponents of work-sharing is Kevin Hassett, an economist at the American Enterprise Institute who has been an adviser to many prominent Republicans. Internationally, the conservative government in Germany is among the most enthusiastic supporters of work sharing.

Hopefully states will take advantage of the new provisions and flexibilities in the existing law to promote work sharing as aggressively as possible. Even with the economy improving, unemployment is likely to remain above normal levels for several years. Work-sharing can go far towards ameliorating the suffering.

• See a slide show of Mort Zuckerman's 5 Ways to Create More Jobs.
• Read: Payroll Tax Cut Deal Would Bolster Economy
• See the 10 best cities to find a job

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