NC needs to adopt this job preservation tool that’s available in 27 states

As North Carolina continues to grapple with the destructive economic impacts of the COVID-19 recession, state leaders should embrace a tool to help keep people working. At present, businesses in 27 states have the option to implement “work sharing,” a voluntary program for employers that provides an alternative to layoffs when business declines. Here are some basic facts about this extremely useful system:

What is work sharing?

Work sharing, or short-time compensation, is established and administered through the federal-state unemployment insurance (UI) system. Work sharing allows an employer to reduce the hours of all or some workers instead of laying off a portion of the workforce. Workers with the reduced hours are then eligible for partial unemployment benefits to supplement their paychecks. For example, instead of laying off five workers, an employer can reduce the schedules of 25 workers by 20 percent.

Work sharing is a win-win for employers and employees.

Work sharing enables employers to temporarily reduce payroll costs during business slowdowns without losing skilled employees. It allows employers to remain in ready mode and avoid the cost of hiring and training new employees when the economy improves. And, by avoiding layoffs, work sharing can positively affect employee morale and loyalty. At the same time, work sharing allows employees to maintain crucial income and, in many cases, their health benefits.

Work sharing can reduce the severity of unemployment in future economic downturns

Work sharing is a job-retention option employers can use when the next economic downturn hits. Data shows that established state programs have been successful in saving jobs, particularly in such industries as manufacturing. According to the U.S. Department of Labor, between 2008 and 2012, work sharing programs saved over 500,000 jobs nationwide.

Working sharing does not have a significant negative impact on UI trust funds.

Work-sharing benefits are paid out of the UI trust fund, like regular unemployment benefits, and can be charged to employers in the same way as regular UI benefits. Since employers choose work sharing as an option when there would otherwise be layoffs, there is generally no impact on UI trust funds.

Work sharing has been embraced by more than half the states, including Virginia, Texas, Florida, Wisconsin, Michigan, and Ohio.

There are work-sharing laws on the books in 27 states. The number of states has increased dramatically as a direct result of the severity of the Great Recession. Prior to the Great Recession, 17 states had established programs, and between 2007 and 2009 work sharing claims activity increased by ten-fold in these states. Since 2010, eleven new states and the District of Columbia have enacted programs. When Ohio adopted the program, the bill had almost unanimous support in the Ohio House and Senate and was endorsed by the Ohio Chamber of Commerce.

Economists and policy experts across the political spectrum have pointed to work sharing as a key strategy in maintaining employment stability

Mark Zandi, chief economist of Moody’s Analytics, recommends work sharing due to its “large bang for the buck, since distressed workers are likely to quickly spend any aid they receive.” The Brookings Institute recently suggested that work sharing can “support workers and employers as they reduce, rather than eliminate employees work hours.” Kevin Hassett, who chaired the Council of Economic Advisers in the Trump administration, has been a long-time proponent of work-sharing and wrote that work sharing would “lift net job creation” and “accelerate the recovery” following the Great Recession.

Bill Rowe is General Counsel and Deputy Director for Advocacy at the North Carolina Justice Center.

General Assembly still needs to address the deficiencies NC’s unemployment insurance system

Not even the worst economic crisis in generations, with more than
1 million North Carolinians out of work, could move House negotiators on COVID-19 relief legislation to agree to a small, positive step to fix the state’s broken Unemployment Insurance (UI) program.

This past weekend, state House conferees refused to accept the Senate’s provision in SB 704 (COVID-19 Recovery Act) that would have increased the maximum weekly UI benefit from $350 to $400 and temporarily changed how the state calculates UI weekly benefits. This formula was adopted in 2013 for the sole purpose of reducing the assistance available to those out of work through no fault of their own. North Carolina is the only state to use such a harsh formula in calculating UI benefits.

Hopefully, the General Assembly will address the deficiencies of North Carolina’s UI system. It has the unwelcome distinction of being one of the worst in the country for the amount and duration of benefits, along with a rock-bottom “recipiency” rate of less than 9% of North Carolina’s unemployed receiving benefits.

Despite these troubling facts, there are still positive signs that progress can be made. The state Senate deserves credit for its bipartisan and unanimous support for these improvements, and the North Carolina Chamber has said it is willing to consider supporting changes that lift the state’s UI system from being the stingiest for workers when they need it most.

What is unclear at this point is if the leaders of the House will ever consider doing the same. That uncertainty is incredibly disappointing and quite remarkable during these unprecedented times. We hope the next time the General Assembly comes back into session in a few weeks, action will be taken to repair North Carolina’s broken UI’s system.

Bill Rowe is General Counsel and Deputy Director of Advocacy at the North Carolina Justice Center. He has worked in the field of unemployment insurance on behalf of North Carolina workers for more than three decades.

Veteran attorney explains specific upgrades NC should make to its unemployment insurance system

[Editor’s note: For more than 30 years, Bill Rowe, general counsel and deputy director for advocacy at the North Carolina Justice Center (parent organization of NC Policy Watch), has been one of the nation’s leading state-level experts on the laws and regulations governing unemployment insurance. As North Carolina grapples with the COVID-19 recession and its devastating impact on the state’s workforce, PW asked Rowe to share the following specific recommendations for updating and improving North Carolina’s unemployment insurance system.]    

As North Carolina enters a period of economic recession brought on by the COVID-19 pandemic, it will be imperative for the state to make significant adjustments and improvements to its unemployment insurance (UI) system in order to prevent mass suffering. At present, North Carolina UI benefits are near the bottom of the 50 states with an average weekly benefit of  $265 (and a maximum of $350) and the maximum term of eligibility is capped at a nationwide low of 12 weeks (most states provide up to 26 weeks of benefits).

Happily, thanks to recent congressional action in the CARES Act, the federal government is poised to cover 100% of the cost of an array of extended and improved benefits, but in order to maximize the impact of these changes, state lawmakers should take several additional actions.

Here’s what the CARES Act does:

The new federal law basically creates three UI programs, all paid for by the federal government with all claims being “non-charged,” meaning employers’ UI tax rates on employers will not be impacted:

  1. Pandemic Unemployment Assistance (PUA) – This will cover workers not eligible for UI under current law, like independent contractors, small business owners and workers who have exhausted all benefits. Benefits will be available for up to 39 weeks, which includes PUC & PEUC (see below).
  2. Pandemic Unemployment Compensation (PUC) – Workers will get $600 per week on top of the miserly amount North Carolina currently pays. Once a worker exhausts under North Carolina’s duration limit (12 weeks currently), they then move to PEUC.
  3. Pandemic Emergency Unemployment Compensation (PEUC) – PEUC provides 13 weeks of benefits to workers who have exhausted regular UI benefits under PUC, which is easy to do with our duration currently at 12 weeks. Once the worker exhausts the 13 weeks of PEUC, they may be eligible for PUA and can receive benefits for a cumulative total of 39 weeks.

It appears workers will move to the particular program when they exhaust benefits, with PUA being the last program to provide assistance.

All three programs provide an “add-on” benefit of $600 per week until July 31. The duration of all benefits is a cumulative 39 weeks for PUA, PUC and PEUC.

Attorney Bill Rowe has advised law and policy makers regarding unemployment insurance rules and regulations for over three decades. Photo: Clayton Henkel.

Note: North Carolina’s way of calculating the weekly benefit amount (no other state does it our way) will shortchange workers in the three federal programs. The $600/week add on ends on July 31, so we should both change the manner of calculating benefits and increase the maximum benefit amount of $350 to help workers post July 31. When that supplemental benefit ends July 31, workers will then receive an average weekly benefit amount of $265 with a maximum limit of $350 unless the law is changed. 

Kansas, Georgia and Michigan have changed their duration to 26 weeks – click here to learn more. If indeed COVID-19 becomes cyclical as many public health professionals suggest and should a full recession in the national and state economy occur, it is critical that jobless workers in North Carolina have the same duration as most workers in states across the country—26 weeks so that they don’t get pushed into poverty and can consider retraining and new careers.

Recommended changes to North Carolina UI laws: Read more