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Short-Time Compensation as a Tool to Mitigate Job Loss? Evidence on the U.S. Experience during the Recent Recession

Author

Listed:
  • Katharine G. Abraham

    (University of Maryland)

  • Susan N. Houseman

    () (W.E. Upjohn Institute for Employment Research)

Abstract

During the recent recession, workers were eligible for UI benefits only if they were laid off in most states. At the start of the recent recession only 17 states offered short-time compensation (STC)—pro-rated unemployment benefits for workers whose hours are temporarily reduced for economic reasons. The severity of the recession, however, has sparked interest in STC as a tool for mitigating unemployment during downturns. New federal legislation enacted in 2012 will encourage more states to adopt STC programs and will promote greater use of work sharing among all states. In this paper we review arguments concerning the desirability of expanding STC programs in the United States and present new evidence on the use of these programs during the recent recession. Our evidence indicates that jobs saved as a consequence of STC could have been significant in sectors like manufacturing that made extensive use of the program. We conclude, however, that, with the possible exception of Rhode Island, the overall scale of the STC program operating in the 17 states was too small to have substantially mitigated the aggregate job losses these states experienced in the recent recession. Expansion of the program within STC states as well as to states without the program is necessary for STC to be an effective countercyclical tool in the future.

Suggested Citation

  • Katharine G. Abraham & Susan N. Houseman, 2013. "Short-Time Compensation as a Tool to Mitigate Job Loss? Evidence on the U.S. Experience during the Recent Recession," Upjohn Working Papers and Journal Articles 12-181, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:12-181
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    References listed on IDEAS

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    1. David Altig & Lawrence Christiano & Martin Eichenbaum & Jesper Linde, 2011. "Firm-Specific Capital, Nominal Rigidities and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, pages 225-247.
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    Cited by:

    1. Andrea Brandolini & Francesca Carta & Francesco D'Amuri, 2014. "A feasible unemployment-based shock absorber for the Euro Area," Questioni di Economia e Finanza (Occasional Papers) 254, Bank of Italy, Economic Research and International Relations Area.
    2. Cahuc, Pierre & Nevoux, Sandra, 2017. "Inefficient Short-Time Work," IZA Discussion Papers 11010, Institute for the Study of Labor (IZA).
    3. Daniel Borowczyk-Martins & Etienne Lalé, 2015. "How Bad is Involuntary Part-time Work?," Bristol Economics Discussion Papers 15/664, Department of Economics, University of Bristol, UK, revised 13 Jan 2016.
    4. Daniel Borowczyk-Martins & Etienne Lalé, 2016. "The Welfare Effects of Involuntary Part-Time Work," Sciences Po Economics Discussion Papers 2016-05, Sciences Po Departement of Economics.
    5. Andrea Brandolini & Francesca Carta & Francesco D'Amuri, 2016. "A Feasible Unemployment-Based Shock Absorber for the Euro Area," Journal of Common Market Studies, Wiley Blackwell, vol. 54(5), pages 1123-1141, September.

    More about this item

    Keywords

    short-time compensation; work sharing; unemployment insurance; manufacturing;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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