A 'Work Sharing' Plan Could Save Your Job -- And CA Is Fixing Its Archaic System
One out of every six workers in Californian has filed for unemployment since the coronavirus pandemic began. With so many businesses closed, mass layoffs may seem inevitable.
But economists say for many companies, there's a better way: Why not keep workers in their jobs, save money by cutting their hours, and use unemployment benefits to partially replace their lost wages?
It's called work sharing. Proponents say it's a great way to avoid painful layoffs during a recession.
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But employers have found the application process for California's Work Sharing Program to be outdated -- and stressful for workers who want to know when they'll see relief.
Now, an update is on the way.
STILL EMPLOYED, BUT LOSING HOURS
Pacoima-based Marketing Innovations International (MII) sources products from Asia and customizes them for their clients.
Want to give your students a special keychain for their graduation party? MII can handle that. Want to thank your customers for buying a high-end designer handbag? They'll customize a compact mirror for you to include as a giveaway.
MII's usual business has taken a big hit from the coronavirus. But the company is now transitioning to sourcing protective gear for organizations that want to outfit their public-facing workers with disposable masks and other sanitary supplies.
MII's workers, including graphic designer Nestor Escobar, are still coming into work, physically distancing themselves from each other in a large office and warehouse while wearing face coverings and using hand sanitizer.
Escobar said one of the upsides of coming in these days is a much shorter commute. Driving to the office used to take him an hour and a half. Now it takes less than 40 minutes.
"It's been pretty sweet, just having the entire 5 freeway to myself," he said.
The downside is that Escobar's hours have been cut by more than half. He's grateful to still have a job. But he has bills to pay, and no savings to fall back on.
"I've been dipping into my own personal vacation hours just to make up for the time," he said. "I don't know how long that's gonna last."
MII has a plan to get Escobar paid for those lost hours. The company is applying for the Work Sharing Program through California's Employment Development Department (EDD), the office that handles unemployment claims.
California is one of the select number of states that offers a work sharing program. The basic concept behind work sharing is to provide an alternative to employers who might otherwise have no choice but to proceed with mass layoffs.
Employers approved for work sharing can cut hours by as much as 60% -- saving a huge amount on payroll costs -- as long as they keep workers employed and maintain their benefits. The work sharing program will then use unemployment benefits to partially replace the workers' lost wages.
AN ALTERNATIVE TO LAYOFFS
Frank Mullens, MII's chief financial officer and chief operating officer, wanted to apply for work sharing based on the company's past experience in 2009 during the Great Recession.
"I have faith in the program, because I've seen it work," Mullens said.
"We had four employees on the program, and all were very happy with the ability to keep their job, keep their benefits, and try to get as close to full pay as possible."
Work sharing won't completely replace lost wages for every employee, especially those who are higher-paid. But these days, it pays a lot more than usual. Like other unemployment recipients, work sharing participants now receive an extra $600 per week, thanks to new federal funding.
GOOD FOR EVERYONE'S BUDGET
Economists say employers and their workers can both come out ahead through work sharing. And so can California's budget.
Laid-off workers who seek traditional unemployment benefits get paid through the state's Unemployment Insurance Trust Fund. When that fund runs out, the state must borrow money from the federal government, which triggers higher payroll taxes for California employers.
In contrast, "The entire cost of work sharing is paid for by the federal government," said UCLA economist Till von Wachter. He argues that California's Work Sharing Program should be scaled up.
"It really saves money for the state and sets us up for a better position in the future," von Wachter said.
WHY ECONOMISTS LIKE WORK SHARING
Work sharing isn't a viable option for every employer affected by the coronavirus.
In order to qualify, companies must continue paying workers at least 40% of their usual wages. Businesses can't participate if they have zero hours to give.
But for companies that remain partially active, von Wachter says the benefits of work sharing are manifold.
Employers get to keep experienced workers on staff. They won't have to waste time and money recruiting new, less skilled workers once the economy returns to normal.
Avoiding layoffs also means fewer applications to process for the state's overburdened unemployment office.
THE PERSONAL COST OF A LAYOFF
But work sharing's most profound benefits may be for the workers who stay in their jobs.
Von Wachter says evidence from previous recessions shows that getting laid off during hard times can lead to long-term earnings losses of up to 20%. It can even shave 1.5 years off a person's life.
"These estimates come from past recessions, not from a temporary shutdown in economic activity," he said. "We all hope that we're in a different environment, but there's certainly a risk here. Keeping these long-term costs of layoffs in mind is a good idea."
Another self-described "fan" of work sharing is California Gov. Gavin Newsom. He signed an executive order earlier this month instructing the EDD to expedite access to the program.
In a press conference on April 15, Newsom said, "I think one of the most significant things we can do in the United States of America is reimagine our unemployment system, and do more of what you're seeing in countries like Germany."
Economists have credited work sharing (or Kurzarbeit as it's known in German) with keeping unemployment rates low in Germany during the Great Recession compared to the United States.
THE HARD PART: WAITING BY THE MAILBOX
MII's Frank Mullens is already sold on the perks of work sharing. But he's been frustrated with the application process, starting with the mail-in forms.
Even though traditional unemployment claims can now be filed online, California's Work Sharing program still operates by snail mail.
Mullens mailed off his company's application on March 31. He then had to trust that EDD would eventually mail him an approval. He said he didn't receive any clear updates for weeks.
"I've had employees come to me and say, 'Okay, what do we do? It's been a couple weeks. You haven't heard anything. What am I supposed to do?'" he said.
One worker even asked to be furloughed so she could seek unemployment benefits on her own.
"It would make sense to me to have an application process online," Mullens said. "You would be able to rely upon something to tell your employees, so that they don't abandon their jobs."
Some MII workers have wondered if they'd have been better off losing their jobs.
"I almost want to say that if I'd have known then what I know now, I may have gone the unemployment route," said accountant Angelica Bright.
Bright lives with her son, who was laid off from his job as a restaurant server in March. Unlike Angelica, he has already started receiving unemployment benefits. She said they may have missed their upcoming rent payment without her son's benefits.
"If it wasn't for the fact that he was able to collect that money, I would really be in a terrible jam," Bright said.
AN EASIER APPLICATION PROCESS COULD BE COMING SOON
Work sharing is lesser-known than traditional unemployment insurance. And experts say California's analog application process may limit uptake among employers.
"The difficulty in applying and the delay in processing will make this program less attractive, even though it could be a very good option for some employers," said von Wachter, the UCLA economist.
Lately, California has been ramping up approvals for work sharing. EDD representatives say 1,321 companies -- employing a total of 15,251 workers -- have been approved so far this year. That's a notable increase from the 1,259 employers approved during all of 2019.
But still, current work sharing enrollment is nowhere near the program's peak during the Great Recession.
Over the course of 2009 and 2010, the EDD enrolled 21,850 employers in work sharing and paid benefits to a total of 356,571 workers. Even those numbers, though, are dwarfed by the millions of Californians now seeking traditional unemployment benefits.
EDD may soon be improving its work sharing application process, including letting employers apply for the program online.
"The EDD had obtained some federal funding and started work on updating the processing for this program before this pandemic began," department officials wrote in an email to LAist.
"We plan to implement some automation features and the first phase of that effort, which will allow employers to file their plan requests online, is set to launch in the first week of May 2020," they wrote.
MII WORKERS BREATHE A SIGH OF RELIEF
Good news came in the mail last Friday for MII's workers. EDD had approved their company's work sharing application.
They still have to fill out more forms and mail those back in before payments can start flowing. But for now, the uncertainty seems to be over.
Mullens said, "They are very happy, but still would like to see their benefit checks."
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