Work sharing can save jobs in times of crisis

Reducing hours of work can have positive effects on employment levels during a severe economic downturn, preserve skills and sustain enterprises.

GENEVA (ILO News) – Work sharing has been widely used to preserve jobs during the Great Recession of 2008-2009 and its aftermath, and may even have the potential to generate new employment, according to a new ILO book.

Work sharing during the Great Recession, New developments and beyond – edited by ILO researchers Jon C. Messenger and Naj Ghosheh – shows that there has been a dramatic re-emergence of work sharing as an effective labour market policy tool to preserve existing jobs in times of economic downturn.

If crisis work-sharing policies are properly designed and implemented, … workers can keep their jobs.”

“If crisis work-sharing policies are properly designed and implemented, the result can be a ’win-win-win solution’,” explains Messenger. “Workers can keep their jobs; companies can survive the crisis and be well-positioned when growth returns, while governments as well as society as a whole can save on the costs of unemployment and social exclusion.”

Two types of work sharing

There are essentially two types of work sharing measures. The first is when a company decides to reduce working hours for their current employees, in order to spread a reduced volume of work over the same or similar number of workers to avoid lay-offs.

The best known example is perhaps the Kurzarbeit programme in Germany, which saved an estimated 400,000 jobs according to this volume and involved around 1.4 million workers at the height of the crisis in May 2009.

Japan also managed to keep an estimated 370,000 jobs thanks to its EAS work-sharing measures, which benefitted more than 2.5 million workers.

Meanwhile, Turkey’s Reduced Working Time programme, the largest in a developing country, saved around 100,000 jobs.

In the US, some 165,000 jobs were saved even though only a few small, state-level work sharing programmes existed in 2009, prompting the US Federal Government to recently enact a new work-sharing law.

Work sharing can help to promote increased employment, improved work-life balance, more sustainable enterprises and economies, and ultimately, more equitable societies.”

The success of these temporary, crisis-related work sharing measures in preserving jobs during the Great Recession raises in intriguing question: can more permanent similar measures also be used to increase employment?

This second type of work sharing happens when a government promotes reductions in working hours in order to encourage additional hiring and thus increase employment levels. It can be implemented at any time, not only in times of crisis.

Work sharing as a permanent measure

Such permanent measures range from legally-mandated reductions in the normal workweek in a country, to collective bargaining in specific industries, to the use of tax and other incentives (such as reduced payroll taxes or tax credits) for companies that comply.

The evidence presented in this volume suggests that modest employment gains can be achieved with these measures, a key finding given the continuing global jobs crisis.

The book also offers an in-depth analysis of crisis work-sharing programmes from around the world, both in Europe – specifically Austria, Belgium, France, Germany and the Netherlands – as well as in Japan, Turkey, the United States and Uruguay.

Factors of success
Based on this analysis, the volume also highlights that for work sharing programmes to be effective they must be strongly supported by governments and include:
•balanced eligibility criteria for companies and workers
•minimal administrative requirements for companies,
•flexibility in the volume and patterns of hours reduction,
•wage supplements for affected workers (called “short-time compensation”), and
•reasonable but fixed time limits on work-sharing subsidies to minimize “deadweight” effects (i.e. the risk of public work-sharing subsidies going to firms who would not have engaged in lay-offs in any case).

“Even though work sharing in both of its forms is no magic ‘silver bullet’, it can be one of a number of measures which help to promote increased employment, improved work-life balance, more sustainable enterprises and economies, and ultimately, more equitable societies,” concludes Ghosheh.