Short-time compensation: the AFL-CIO perspective.
In 1975, the proposal that shorter workweeks be financed through the unemployment trust funds was cautiously but favorably received by AFL-CIO President George Meany, who wrote to Lillian Poses that the Federation's ". . . general view is in favor of the plan as long as it remains voluntary and safeguards are included in state legislation to protect all parties.'
As high unemployment continued, States began cutting unemployment benefits and it became clear that using trust funds to pay for a reduced workweek would mean worse hardship to those totally unemployed. And because benefits had lagged far behind wages, it looked as though senior workers in higher wage classifications would lose a higher share of their incomes, and not just for a few weeks, but for months or years.
Blindness to these threats to well-paid workers with secure jobs on the part of those who continued to promote work sharing as a "win-win' solution to layoffs eroded support among labor leaders. Repeated citations of the great success of German and Canadian experiments with work sharing turned out to be overstated, if not misrepresented. Both the German and Canadian counterparts of the AFL-CIO, the Deutscher Gewerkschafts bund Bundesvorstand (DGB) and the Canadian Labour Congress (CLC), reported problems and shortcomings that made it clear that foreign experiences were irrelevant and nontransferable to the American scene. The AFL-CIO then set about formulating its own concept of how short-time compensation could be made to work in the United States.
While discussions were going on within the AFL-CIO and jointly with the Department of Labor, the California legislature adopted the experimental short-time compensation law which has been extended three times since 1978 and will run through 1986. Although the California AFL-CIO neither supported nor opposed the Shared Work Unemployment Compensation bill, the plan proved more positive than might have been expected in that time and place, and a number of labor leaders strongly supported its passage and extension. Many workers gained from the bill under existing contracts --about 20 percent of the agreements allowed employers to reduce the workweek before resorting to layoffs. Previously, when employers exercised this option, considerable numbers of workers lost income without being able to qualify for unemployment compensation. In meeting this need, California's shared work bill opened the way for further development and experimentation and helped lay the foundation for the executive council's resolution of August 5, 1981, endorsing the concept of short-time compensation and outlining the conditions needed to make the concept's promise a reality.
First, the council said that short-time compensation must not be viewed as an alternative to active government programs to stimulate employment opportunities and the economy. This is vital because work sharing redefines employment while creating no new employment opportunities. This tends to hide a large part of the unemployment problem by inflating the statistic, "Working part-time for economic reasons.' In 1985, there were 5.4 million workers in this category, and although it is better than being unemployed, it reflects the failure of our economy to provide full employment. This general concern is strongly shared by the German and Canadian labor movements.
Secondly, the needs of those completely unemployed must be given the highest priority. If short-time compensation increases costs to the unemployment insurance fund, as it certainly may, legislators face the options of either reducting benefits to the unemployed in one way or another or of increasing revenue. And in today's political climate, it is nearly impossible to raise revenue for social needs. This approach--of looking at the costs to the fund--regards unemployment insurance and short-time compensation as a closed system. The meaningful cost-benefit analysis would fit work sharing into the total cost of unemployment to society.
Although the benefits of short-time compensation warrant increasing the funds available for this purpose, well-meaning supporters want to sell it to the employer as a cost-free benefit. This is unrealistic. Work sharing is in the best interest of the States and local governments, most workers, and many farsighted employers. But to do the job well will require additional funding. A fair-cost analysis that looks at all of the costs to State and local governments for unemployment, including lost taxes, the cost of support systems, and the wasted worker's skills, will demonstrate the value of a strong, well-funded program.
Overall, the AFL-CIO supported the short-time compensation concept as a tool in dealing with the multiple consequences of unemployment, but not as a no-cost or even low-cost, "win-win' solution. The problem is that too few employers support it or use it at all, as long as they can get most of the benefits of work sharing costs by just transferring the burden to workers. Workers should be entitled to short-time compensation, through unemployment insurance or some other funding, any time the workweek is reduced due to a lack of work. Absent this, work sharing will only be used by few forward-looking employers, willing to sign up for the program and then after they have laid off the more easily replaced workers.
As the executive council resolution stressed, the AFL-CIO wants assurance that firms that use the concept do not lay off the recently hired and less-costly-to-recruit workers first, that is, women and minority group members.
This issue has been the hardest to deal with, and yet it would seem to be a fairly easy one on which to get support. In discussing this issue prior to passage of the Tax Equity and Fiscal Responsibility Act of 1982, the AFL-CIO sought a provision in the act requiring that employer progress toward Equal Employment Opportunity goals would not be reduced by layoffs prior to application for short-time compensation. Employers objected strongly on the grounds that it would encourage "EEOC fishing expeditions.' And, surprisingly, the civil rights groups which the AFL-CIO generally works with were willing to drop the issue on assurance that short-time compensation by its nature would be "helpful.'
The result was the present language in Section 194(d)(3) of the Tax Equity and Fiscal Responsibility Act of 1982, which suggests to States that their laws limit participation to employers who have not reduced their work force 10 percent by layoff in the previous 4 months. At the time, it seemed that this language would protect the newly hired youth, minorities, and women. This does not seem to be the case. Rather, it seems to have limited employer participation with little or no help for the newly hired.
The AFL-CIO and other supporters of short-time compensation often complain that employers fail to adopt the concept. Some feel that the low usage is due to employers' lack of knowledge. The Federation is sure this is not the case. The basic options to the employer are not work sharing versus layoff--they are layoffs with unemployment insurance, work sharing without unemployment insurance for their workers, and short-time compensation with unemployment insurance for their workers, or a combination of these options.
The evidence that too few employers use the short-time compensation concept is no surprise. The least cost options to many employers are to reduce the workweek, resort to rotating crews, simply shut down for a week, or require employees to use earned vacation time--all of which avoid adverse unemployment insurance experience ratings and increased costs--and then layoff the most easily replaced workers.
From March 1980 to March 1985, private-sector costs for unemployment insurance increased 15 percent. All other factors remaining equal, there has been a growing incentive for employers to avoid unemployment insurance increases and short-time compensation, just as they have avoided other labor costs. Therefore, if work sharing is to be useful to protect employment opportunities, it should be elective to employees, not employers. And this leads to the final two points in the AFL-CIO Executive Council Resolution, that workers participate voluntarily and that the income replacement be two-thirds of their individual gross pay for each day lost. Most workers would be willing to share their employment with others with lesser entitlements if the hardship is not too great in amount or in time.
Economic need can be just as great among individual workers with longer years of service as to those new to the work relationship. Some senior workers are paying college tuition. About 12 percent have pensions based on their last few years of work. Others have their homes paid for, their children have finished school, and they may well relish preretirement time off.
Elective work sharing is far more acceptable and a lot less devisable than any unilateral decision by the employer or even by a majority of workers in a local union. Thus, rather than force short-time compensation on senior workers, the far better solution is to attract them to it by a respectable income replacement level and maintenance of benefits. The two-thirds replacement rate of individual gross income is also somewhat less than that for the Steelworkers and Autoworkers Supplemental Unemployment Benefit. But the supplemental plan showed that senior workers volunteered for layoff when the income replacement rate was over 80 percent and benefits continued. The short-time compensation replacement rate could be lower, because these higher paid workers will still be working a good share of the week.
California, Arizona, Oregon, Washington, Florida, Maryland, and New York have adopted short-time compensation, and Kentucky, Ohio, Pennsylvania, Illinois, Wisconsin, and New Jersey have considered the concept. The AFL-CIO supports the concept, but delivery on a no-cost, low usage and low benefit basis has been far short of the promise of full employment made by this Nation.
The workers and their unions that have had experience with short-time compensation are pleased with the program and support its improvement as a part of the unemployment insurance concept. But if the full value of the concept is to be achieved for the community, the State, and the Nation, workers must be entitled to short-time compensation when the workweek is reduced, and the funds must be available to maintain benefits and wages while providing decent benefits for those who are totally unemployed.
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|Publication:||Monthly Labor Review|
|Date:||May 1, 1986|
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