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Short-Time Compensation: An Alternative to Layoffs during COVID-19

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  • Pawel Krolikowski
  • Anna Weixel

Abstract

We discuss the costs and benefits of short-time compensation (STC), an unemployment insurance program that allows workers with temporarily reduced hours to receive some unemployment insurance benefits. We describe the provisions for STC in the Middle Class Tax Relief and Job Creation Act of 2012 and the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act and report the utilization of STC before and after these acts. The number of states with STC programs has remained unchanged at 27 since the beginning of the pandemic, but STC utilization has recently risen to unprecedented levels, driven largely by increases in Michigan and Washington. However, these increases are small relative to increases in Germany’s popular Kurzarbeit program, suggesting that the United States’ STC program may still have scope for expansion.

Suggested Citation

  • Pawel Krolikowski & Anna Weixel, 2020. "Short-Time Compensation: An Alternative to Layoffs during COVID-19," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2020(26), pages 1-6, October.
    • Handle: RePEc:fip:fedcec:88958
    DOI: 10.26509/frbc-ec-202026
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    References listed on IDEAS

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    1. Tito Boeri & Herbert Bruecker, 2011. "Short-time work benefits revisited: some lessons from the Great Recession [‘Reversed roles? Wage and employment effects of the current crisis’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 26(68), pages 697-765.
    2. Katharine G. Abraham & Susan G. Houseman, 2014. "Proposal 12: Encouraging Work Sharing to Reduce Unemploymemnt," Book chapters authored by Upjohn Institute researchers, in: Melissa S. Kearney & Benjamin H. Harris (ed.),Policies to Address Poverty in America, W.E. Upjohn Institute for Employment Research.
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    Cited by:

    1. Herzog-Stein, Alexander & Nüß, Patrick & Peede, Lennert & Stein, Ulrike, 2022. "Germany and the United States in coronavirus distress: internal versus external labour market flexibility," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 56, pages 1-11.

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