"WorkSharing," To Avoid Layoffs

Imagine getting a pink slip...for just one or two days a week. That's basically what's happening under a little-known federal program, called "WorkSharing."

Companies can trim full-time employees back to part-time, and workers then collect unemployment from the state, but only for the hours they're not on the job.

The program has become popular with Bay State businesses during the current economic downturn.

WBUR's Business and Technology Reporter Curt Nickisch reports.

TEXT OF STORY:

CURT NICKISCH: Gloucester Engineering is a company that makes machines that produce plastic films. LeRoy Pina works in the stockroom there. He says the company's sales lately have been, well, very thin.

LEROY PINA: It's been slow. Spend a lot of time pushing a broom some days, just to have something to do. There's a lot of guys just sitting around just reading the newspaper, to put in their hours to get paid.

NICKISCH: But instead of laying off employees, Gloucester Engineering decided instead on WorkSharing. That's where employees, LeRoy Pina included, work less: four days a week instead of five. They do keep full benefits: health care and 401ks. But for the fifth day they're not on the job, they collect unemployment from the state.

Gloucester Engineering's not alone. The number of Massachusetts employees enrolled in WorkSharing has shot up more than a third so far this year.

[Sound of manual "punch" machine]

NICKISCH: It's a similar story just down the road from Gloucester Engineering. Not too many machines are running nowadays at Modern Heat. Bernard Savo runs this sheet metal shop. He says the sluggish economy has really cooled sales.

BERNARD SAVO: When we didn't have enough money coming in to take care of payroll, we knew that we had to do something at this end to cut the overhead. The insurance still goes on, the electric still goes on, but the payroll was what was killing us.

NICKISCH: Typically, cutting payroll means cutting workers. But Savo did NOT want to do that. His seven employees have been with the company for years. To have to hire and train replacements in maybe six months when Savo thinks business will recover would be a huge loss. With WorkSharing, he can keep his workers, but still save. And when business does come back, he can ramp back up again quickly.

[Sound of "bending" machine]

NICKISCH: None of Savo's workers are exactly thrilled. Longtime employee Alex Monell says the unemployment he gets only makes up about half of what he would have been earning the two days he's been cut back.

ALEX MONELL: I don't have a family or a mortgage, so I'm not in too bad a shape. And it comes at a time of the year, when it's sort of nice to have some extra time off. But in general, I'm living on my savings; it's dropping.

NICKISCH: For another employee, it was too much. The welder with a family to support left for another job. Still, for most, a three-day workweek is better than a no-day workweek.

EDWARD MALMBORG: It's good for the economy here because these people do have a job to go back to.

NICKISCH: Edward Malmborg runs the state's Division of Unemployment Assistance. He says WorkSharing really paid off in the last recession in 2002. Most companies were able to return employees to full-time when the economy got better.

MALMBORG: That's what we really like to see. Doesn't always work out, but in a large number of cases, we've seen that it has.

NICKISCH: And Malmborg says WorkSharing doesn't appear to drain the state's pool of unemployment money any more or less than conventional layoffs.

But it's not necessarily a wash for the companies themselves. Paul Osterman is a labor market economist at MIT's Sloan School of Management. He says businesses don't immediate save as much as they would through regular layoffs, because they still have to pay full benefits.

PAUL OSTERMAN: The downside is that the costs don't fall proportionately with the hours. So if you have to still maintain benefits for people and you still have to administer those benefits and so on... Two half-time people are still more expensive than one full-time person.

NICKISCH: At least businesses in Massachusetts have the option. The Bay State is just one of eighteen nationally that have such a program. Osterman says the fact that Massachusetts companies are increasingly choosing the flexibility of WorkSharing indicates they expect the economic downturn to be relatively short-lived.

For WBUR, I'm Curt Nickisch.