New Jersey's New Work-Sharing Law Will Help Workers and Employers

An important boost for New Jersey’s workers and employers was lost in the flurry of activity as the 2010-2011 legislative session wrapped up last week. The Garden State became the sixth state in the country to adopt a work-sharing law since the onset of the recession when Gov. Christie signed S1301. The bill modifies the unemployment insurance system, allowing workers who have had their hours cut to receive partial unemployment benefits.

As Center for Economic and Policy Research co-director Dean Baker explains in a statement, the idea behind these policies — now active in 24 states — is to give businesses an incentive to reduce work hours rather than let workers go completely:

The motivation for these laws is quite simple. The standard unemployment insurance (UI) system effectively encourages employers to lay off workers rather than shorten work hours. If a worker is laid off, she is typically able to receive close to half of her wages, with the duration of benefits lasting for up to 99 weeks. On the other hand, if an employer attempts to meet a shortfall in demand by having her workers put in fewer hours, the traditional UI system offsets none of the loss in income.

While the traditional system encourages layoffs rather than a reduction in hours per worker, from a social standpoint, the latter would generally be better. The worst outcome is for a worker to be unemployed for a long period of time. During an extended layoff, workers are not keeping up their skills and often lose contact with the labor force. They may find it difficult or even impossible to find new employment.

On the other hand, if a worker stays employed by working fewer hours, she will remain part of the labor force. They are continuing to upgrade their skills and keep up with whatever changes are taking place at the workplace.