Important change to unemployment comp on the way
June 1, 2012
By Joe DeSantis
Michigan seems assured of soon joining 23 other states in instituting a Work Sharing program. “Work Sharing” is the generic term for a program designed to enable employers to avoid layoffs during business downturns. They do it by reducing all employees’ hours and enabling those employees to draw partial unemployment benefits to cover part of their lost wages.
Gov. Snyder touted Work Sharing in a speech last fall about rebuilding Michigan’s workforce. President Obama’s Jobs for America bill also promoted Work Sharing. The governor saw it as a way for Michigan employers to hold onto their talent through downturns when they would otherwise be forced to lay people off permanently. And it will provide cost savings to the state, and ultimately its employers, from reduced benefit payouts.
Michigan’s Work Sharing bill, SB 1094, recently cleared the Senate in Lansing. It currently sits in the House Commerce Committee. The Senate version was introduced by a Republican (Sen. Bruce Caswell, Adams Township). The vote (24-13) went along party lines with only one Republican opposed; the only challenge to the bill during floor debate came from Sen. Vincent Gregory (D-Southfield) who nevertheless voted in favor of the bill when the roll was called.
Assuming the bill is enacted into law, it would work as follows:
- An employer faced with the need to cut labor costs by, say, 25% would reduce everyone’s weekly hours by that amount instead of laying off 25% of its employees. Those employees would then be able to draw an unemployment benefit equal to 25% of the amount they would get if they were fully laid off. The amount of the benefit drawn would not count against an employee’s 20-week eligibility for benefits should he or she be laid off in the future.
- The employer would not be able to lay off any employees for the duration of the program, and the program could only be used one time for a maximum of one year.
- Employers that are unionized would have to negotiate the right to set up the program.
The philosophical argument against Work Sharing is that it reduces the level of marketplace churn that ends up creating new jobs and workers qualified to perform them. The more practical form of opposition is likely to come from veteran employees, especially in a union environment, who would otherwise escape being laid off because of their seniority. Some of them will resist losing a portion of their income that they otherwise would not lose, even though they would gain more time off as an offset.
Supporters of the concept of Work Sharing believe that employers would not use it unless they believe that demand for their products will eventually rebound and therefore they ought to hold onto their employees if they can. But, for example, an event such as the Great Recession could convince them that the changes to the economy will be systemic and not cyclical; in that belief they would likely reduce their workforces permanently through standard layoffs.
The next step would be to clear the House Commerce Committee with or without changes and go to the House floor, which is majority Republican, for debate and voting. The committee met Tuesday May 29th to consider the bill.