These are tough times for small business owners. With the high cost of fuel, a still-challenging credit market, and rising competition from countries like China, many small business owners have trouble keeping their heads above water. Each day can present a new set of challenges for the mom-and-pop corner store in Chillicothe or the start-up manufacturer in Mansfield.
And unfortunately, one of the realities of our current recession is layoffs. Employers want to do right by their employees, and many do everything they can before laying off loyal workers.
During the last several weeks in Washington, we’ve seen a high-stakes debate take place over how to get our fiscal house in order. But when it comes down to it, the best way to reduce our deficit is to get Americans back into good-paying jobs—or ensure that they can keep the job they already have. After all, there are 14 million Americans who would prefer to pay taxes rather than depend solely on unemployment insurance.
That’s why I’ve introduced the Layoff Prevention Act, a bill to prevent further layoffs and job loss through new incentives for short-time compensation (STC).
Short-time compensation programs allow employers to reduce all employees’ hours by a percentage, rather than laying off a portion of their workforce. Workers would then be compensated for lost wages through existing unemployment insurance programs. For business leaders—faced with the prospect of having to let go some percentage of their highly-skilled workforce because of a rough patch—short-time compensation allows them to keep workers on the job with reduced hours until they can bring them back on full-time when business rebounds.
STC programs, which are voluntary, can help prevent business disruption and skill erosion by allowing businesses to keep employees on the job. With fewer workers unemployed, there is then less of a burden on the UI system. And typically, workers would continue to receive critical job-related benefits—like health insurance—that they might otherwise lose if they were laid off.
This common-sense approach has wide-ranging support. Kevin Hassett—a former advisor to John McCain and director of economic policy at the American Enterprise Institute—supports this approach, noting that STC programs help workers and employers. By keeping their jobs, workers can remain in their homes, save for their children’s college, and plan for their economic future. Businesses benefit by retaining their most valuable asset: a motivated and skilled workforce.
Currently, 23 states across the country—with Democratic and Republican governors alike—operate short-time compensation programs. Ohio does not currently have an STC program in place.
Under the Layoff Prevention Act, even if a state does not pass a law establishing a program, the state can submit a plan to be approved by the U.S. Department of Labor, to be considered eligible for support.
According to the Labor Department, short-time compensation programs saved approximately 165,000 jobs in 2009. One analysis found that in addition to saving jobs, short-time compensation also helps speed economic recovery, as every dollar devoted to finance state STC programs results in an estimated $1.69 in gross domestic product (GDP).
Short-time compensation means employees can depend on a paycheck instead of living solely on unemployment insurance. And businesses are able to retain workers and avoid retraining and rehiring efforts.
With a challenging jobs picture, we need to examine every tool at our disposal. To be sure, a full economic revitalization must be multi-faceted. That means easing the credit market for small businesses so they can expand and add jobs through vigorous enforcement of trade laws, and expanded opportunities for businesses to compete in a global marketplace.
Short-time compensation is an innovative way to help protect jobs and improve worker morale. So while short-time compensation alone won’t fully solve our jobs deficit, it is an important investment in workers and businesses that our economy needs.