Home >News >world >Layoff alternative grows in popularity during coronavirus

Washington: A state-run program that helps businesses cut costs while retaining staff is becoming an increasingly common strategy to fight the economic toll of the coronavirus pandemic.

State labor departments are seeing a swift increase in employer applications for programs known as workshares that allow companies to reduce worker hours and employees to collect prorated unemployment benefits to help offset lost wages, avoiding full layoffs.

Such programs are available in more than half of states, which together account for about 70% of all U.S. payrolls.

States including Texas, Oregon, Colorado, Wisconsin and Arkansas say they have experienced a rise in company applications for the programs since the coronavirus caused businesses to begin shutting down in mid-March.

That has translated into a higher number of workers drawing on workshare benefits. Across the U.S., 26,000 people were receiving unemployment benefits through workshare in the week ended March 28, up from 9,000 in the same week from a year earlier, according to the Labor Department.

Still, compared with the millions of workers across the U.S. filing for unemployment benefits in recent weeks, the number using the programs across the country is relatively small. Less than 1% of the 8.2 million Americans claiming unemployment benefits in the week ending March 28 were drawing on work-sharing benefits, Labor Department figures showed.

Michael Herrmann, owner of Gibson’s Bookstore in Concord, N.H., started using workshare when the coronavirus forced his bookstore to close its physical operations to the public last month. Under the program, his 19 employees have stayed on board to answer phones, process online orders and manage shipments.

Gibson’s Bookstore workers are logging 40% fewer hours than in normal times and receiving unemployment benefits to help compensate for their shorter workweek.

“It was a great stopgap," he said. “While we were waiting for the federal government to step in, the state had a really nice solution for us."

Gibson’s also received small-business loans from the federal government earlier this week that should end its dependence on the program, at least in the immediate future.

Such programs are designed to help minimize the pain of an economic downturn and maximize the speed of an economic recovery.

“If people have been on worksharing, and they’ve remained attached to the business, it’s going to be a lot easier to ramp back up," said Katharine G. Abraham, economics professor at the University of Maryland who served as economic adviser to former President Barack Obama.

Employees under the programs also are eligible for the extra $600 a week in unemployment benefits that other Americans collecting regular unemployment benefits are starting to receive.

State law determines whether companies that have already laid off employees due to the coronavirus are allowed to rehire workers and implement the programs. States also determine by what percentage employers must reduce worker hours to be eligible.

For some state labor departments, the sharp run-up in applications for the programs is further straining outdated technology at a time when regular unemployment-benefits applications are reaching unprecedented levels.

Colorado had nearly 700 companies participating in its program by mid-April, up from about 10 companies before the coronavirus struck.

Cher Haavind, deputy executive director of Colorado’s Labor Department, said the technology behind the program wasn’t prepared to meet the sharp rise in demand.

“It’s not automated by any stretch of the imagination," Ms. Haavind said.

States such as Colorado and Wisconsin are reallocating staff to process company applications.

“We have never seen anything like the number of applications we have right now," said Emily Savard of Wisconsin’s Labor Department.

In Wisconsin, 2,240 workers have participated since mid-March, up from 130 workers in January through mid-March. Usage of the program has allowed 434 layoffs to be avoided since the coronavirus began triggering business closures, Wisconsin’s Labor Department estimated.

Research from the nonprofit research center Upjohn Institute said there is a lack of company awareness of the programs as an alternative to layoffs, a contrast from other countries like Germany where such short-time compensation programs are the norm.

Under the stimulus package President Trump signed into law in late March, the federal government promised to help states without the programs to set them up if they so desire. The federal government will also pay states with existing programs the full cost of workshare benefits they disburse through the end of the year.

This story has been published from a wire agency feed without modifications to the text.

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