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

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.

Short-Term Effects of Short-Term Work: Dynamics in Fatigue across Two National Lockdowns

“…Known as Kurzarbeit, this government sponsored program provides supplemental income to workers during periods of lower employment demands, allowing more individuals to stay employed with their organization (albeit for fewer hours) and receive between 60 to 70% of their pay during challenging economic times, for up to 24 months. This labor market policy has been lauded and recommended for other contexts and nations 18 , most recently during the COVID-19 pandemic 19 . However, little research has considered how short-term work may affect well-being 20 , and, relatedly, to what extent these programs result in meaningful and sustainable benefits for individuals (vs. economies) during challenging events, transitions, and crises.…”

Short-Term Effects of Short-Term Work

“…This labor market policy has been lauded and recommended for other contexts and nations, 18 most recently during the COVID-19 pandemic. 19 However, little research has considered how short-term work may affect well-being 20 and, relatedly, to what extent these programs result in meaningful and sustainable benefits for individuals (vs economies) during challenging events, transitions, and crises.…”

“…Known as Kurzarbeit , this government-sponsored program provides supplemental income to workers during periods of lower employment demands, allowing more individuals to stay employed with their organization (albeit for fewer hours) and receive between 60% and 70% of their pay during challenging economic times, for up to 24 months. This labor market policy has been lauded and recommended for other contexts and nations, 18 most recently during the COVID-19 pandemic 19 . However, little research has considered how short-term work may affect well-being 20 and, relatedly, to what extent these programs result in meaningful and sustainable benefits for individuals (vs economies) during challenging events, transitions, and crises.…”