The number of Michigan companies using work sharing has spiked during the COVID-19 pandemic but the state program meant to avoid layoffs still represents relatively few participants compared to the number of workers fully unemployed.
Michigan Department of Labor and Economic Opportunity officials report that more than 400 companies have participated in work sharing since March 15. Prior to the outbreak, Michigan had fewer than 60 participants.
“That’s a sizable number who are participating. There are many, many more Michigan employers that are impacted, but it’s not a trivial number,” said Susan Houseman, vice president and director of research at the Kalamazoo-based W.E. Upjohn Institute for Employment Research.
Officials at the state Unemployment Insurance Agency told MiBiz in late March that interest in the program went from “cold to completely hot within a matter of a week.”
The Wall Street Journal reported last week that 26,000 people across the U.S. were receiving unemployment benefits through work sharing in late March, up from 9,000 during the same time period a year earlier.
Work sharing, also known as short-time compensation, avoids layoffs by reducing hours across more employees. Instead of some being fully unemployed while others maintain full employment, more workers qualify for a percentage of unemployment benefits based on their reduction in hours. Experts say work sharing also helps companies retain employees when work scales back up.
Employees in a work-sharing program qualify for $600 in federal unemployment benefits under the CARES Act stimulus package. The CARES Act also fully covers the cost of states’ work-share programs.
“It’s to Michigan’s advantage to have these sorts of plans,” Houseman said.
However, the number of work-sharing participants is dwarfed by those collecting full unemployment benefits, which is near 1.2 million in Michigan and nearly 26 million nationwide.
On Wednesday night, Gov. Gretchen Whitmer extended and expanded a previous executive order involving unemployment benefits.
The latest order also loosens restrictions for employers looking to participate in work sharing by lowering the threshold of worker hour reductions from a maximum of 45 percent to 60 percent. Houseman said the maximum of hour reductions should be 80 percent given the COVID-19 crisis, which would mean allowing work-sharing if an employee’s schedule is cut from five days a week to one day.
“What the governor did with the (latest) order is good,” Houseman said.
By extending her previous order through the end of the state of emergency, a requirement that employers must have a positive reserve in their unemployment insurance account to participate remains waived.
Houseman said the federal and state governments should also clarify that work-sharing is available to companies that slowly bring back workers as economic activity ramps up. For example, it should be clear that they can participate if they have fully laid off workers but want to re-engage more workers as part of a shared work program.
“Suppose 20 employees are furloughed, and now you have enough work to employ 10 of them,” Houseman said. “Instead of just bringing back 10 of them, you could do all 20 at 50 percent hours on a work share plan. That would fully employ everyone right now.”