Work-sharing or Kurzarbeit

Yet policies like those in Denmark are not as effective in maintaining well-being as programs that actually prevent the job losses in the first place. Perhaps the most successful strategy, especially in recessionary times, is the idea of work-sharing. In his inaugural addresss, President Obama congratulated workers who freely chose shorter hours and lower pay in order to prevent fellow workers from being laid off during the recession. But words are one thing and actions another. Obama might have done more by actively promoting a policy initiative pioneered in Germany.

The economist Dean Baker, director of the Center for Economic and Policy Research, argues that any further economic stimuli to reduce unemployment should include Kurzarbeit, or “short work,” a German policy that encourages employers to reduce hours rather than lay workers off when times are tight, by making unemployment funds available even when workers do not lose their jobs.21 Instead of cutting 20 percent of its workforce, a German company might reduce each worker's load by a day. Unemployment benefits kick in for the reduced work-time, so workers earn roughly 90 percent of their former incomes for 80 percent of the work.

Other countries have followed suit, and a bill sponsored by Democratic senator Jack Reed of Rhode Island and Democratic representative Rosa DeLauro of Connecticut would allow federal unemployment benefits to be used to top off salaries of reduced-hour workers in the United States. (Some seventeen states already allow this with their own unemployment dollars but cannot use federal unemployment funds to support such policies.) The business Web site 24/7 Wall St. ranked the idea number two in a recent editorial, “The Ten Things the Government Could Do to Cut Unemployment In Half.”22

When the bill was discussed in Congressman Barney Frank's House Financial Services Committee, Dean Baker testified in favor — no surprise since he's a liberal — but so did Kevin Hassett, an economist with the conservative American Enterprise Institute. Hassett pointed out that even though the German economy tanked like ours did in 2008, Germany's unemployment rate didn't rise — thanks to Kurzarbeit. The law allows companies to retain workers instead of having to rehire later, he said. It's good for them, good for the workers, and doesn't really cost any more than traditional unemployment payments. It's a win, win, win. Nonetheless, not a single Republican has supported the Reed/DeLauro bill and not all Democrats do either, so it remains in limbo.23

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