NCPA - National Center for Policy Analysis


December 11, 2009

With over 15 million Americans out of work Congress is searching for ways to reduce unemployment.  The latest idea, put forward by Sen. Jack Reed (D-R.I.) is "work sharing," says the Heritage Foundation.

Under work-sharing: 

  • Companies reduce the hours (and pay) of all their employees instead of laying off some workers and having the remaining employees work normal hours.
  • The government then gives workers a pro-rata share of unemployment insurance payments to partially compensate them for their lost earnings from their lost hours.
  • It prevents workers job skills from deteriorating and companies from having to retrain new workers when demand picks up.
  • It makes so much sense that several European countries have already tried it.

However, study after study has shown that European work sharing programs have done nothing to increase employment, says Heritage:

  • One study of 16 developed countries found no evidence that work sharing programs created or saved jobs.
  • If anything, the evidence suggests that work sharing slightly reduces the number of workers companies hire.

Sen. Reed wants to save jobs by cutting hours, but instead workers would work shorter hours in fewer jobs:

  • For example, if an individual electrician works 30 hours a week instead of 40, another electrician may work longer hours to pick up the slack.
  • But if all the electricians in a city work fewer hours then electricians will do less electrical wiring, leaving the city poorer.

Unemployment has continued to rise not because of increased job losses but because job creation has fallen.  The credit crunch and the risk of higher taxes and expensive regulation from Washington have reduced the incentive for and the ability of entrepreneurs to create the new jobs that unemployed workers would normally find.  More entrepreneurship -- not working fewer hours -- will create jobs and lower unemployment, says Heritage.

Source: James Sherk, "Why Work Sharing Wont Work," Heritage Foundation, December 10, 2009.

For text:


Browse more articles on Economic Issues