Municipal Government

Center for American Progress – Strategies to Avoid Layoffs

July 13, 2011

Although Washington DC seems to be currently consumed with tackling debt reduction, the urgency of generating effective job creation strategies is recognized by the general public. Despite the fact that the US economy has gained more than 1.1 million jobs since the labor market hit bottom in September 2010, there are 7 million jobs fewer than the start of the recession in December 2007. With this shortfall in mind the Center for American Progress has begun a series of proposals entitled Job Strategies that Work on ways that policymakers can create jobs and stay within the
fiscal bounds of the federal government.
The first, written by Heather Boushey, examines ideas to create jobs by keeping those already employed in their jobs. Boushey’s recommendations are based on the premise that reducing the number of layoff s could have a major effect on overall employment and may be a preferable strategy than encouraging new hiring. Rather than letting go of workers to alleviate economic strains, Boushey proposes that employers adopt a “work-sharing” approach in which employees are kept on payroll with reduced hours. To realize this, Boushey recommends policymakers provide companies with tax or other incentives.
One such “short-term compensation” program, which has thus far been adopted by 20 states, allows workers to receive partial benefits from the unemployment insurance system if their hours have been reduced, not just if they lost their job or experienced a pay reduction. This idea was a key component of the Keep Americans Working Act S.1646/H.R.4135, which was considered in the previous 111th Congress. A second option proposed by Boushey is to use the tax system to incentivize companies to reduce the number of hours that some or all of their employees work in order to avoid layoff s. Found within the SHARE Credit Act of 2009 HR. 4179, this proposal encourages the use of tax credits to generate job sharing at a firm to shorten the typical workweek while keeping pay constant. These options would allow employers to maintain their workforce even if they need to reduce hours, while keeping general unemployment and unemployment benefits from rising higher. Boushey suggests that both pieces of legislation be taken up in the current congressional session so that work-sharing is encouraged nationally and further layoff s can avoided.
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July 13, 2011

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