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Companies Implement Part-Time Layoffs
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Companies Implement Part-Time Layoffs

Business

RENEE MONTAGNE, host:

Layoffs are an inevitable part of an economic slowdown. And nowadays a growing number of companies are laying people half off; that is, cutting their jobs to part time. Under a little-known program called worksharing, offered in a handful of states, those employees can still collect unemployment for the hours that are cut back. Curt Nickisch has the whole story from member station WBUR in Boston.

CURT NICKISCH: In the small seaside town of Gloucester, Massachusetts, business has been so slow at this sheet metal shop, there's often only one machine running at a time.

Bernard Savo runs this place called Modern Heat. He says the sluggish economy has really cooled sales.

Mr. BERNARD SAVO (Modern Heat): When we didn't have enough money coming in to take care of the payroll, we knew that we had to do something on this end to cut the overhead. You know, the insurance still goes on. The electric still goes on. But the payroll was what was killing us.

Normally, cutting payroll means cutting jobs. But Savo did not want to lose experienced workers only to have to hire and train replacements when orders picked back up again. So he signed up with the state for worksharing. Instead of laying off part of his workforce, Savo's laying everyone off part time.

Mr. SAVO: If I had the work, I'd put them back to work full time. I have no choice but to keep them working for three days a week and then unemployed for two.

NICKISCH: Savo's employees still draw full benefits under worksharing - health care and retirement - but for the two days they're not on the job, they get unemployment from the state.

On the shop floor, Savo's staff is pretty torn about the plan. Longtime employee Alex Monell says the unemployment he gets only makes up about half of what he would have been earning those two days.

Mr. ALEX MONELL (Employee): I don't have a family or a mortgage, so I'm not in too bad shape. And it comes at a time of the year when it's sort of nice to have some extra time off. But in general I'm running on my savings, so it's dropping.

NICKISCH: The drop was too much for another employee with a family. The welder took another job. Still, the rest has stayed on, resigned that a three-day workweek is better than a no-day workweek.

Mr. EDWARD MALMBORG (Massachusetts Unemployment Division): It's good for the economy here because these people do have a job to go back to.

NICKISCH: That's Edward Malmborg. He heads Massachusetts' unemployment system and says the number of people in worksharing here has shot up by more than a third so far this year. Many of the 17 other states that offer part-time layoffs are seeing big increases too. In Florida, the number has tripled. Malmborg says companies want the flexibility to bring employees back to full time as soon as the economy gets better.

Mr. MALMBORG: That's what we really like to see. It doesn't always work out, but in a large number of cases we've seen that it has.

NICKISCH: Malmborg says part-time layoffs don't appear to drain the state's pool of unemployment money any more or less than conventional pink slips. But worksharing is not necessarily a wash for the companies themselves.

Mr. PAUL OSTERMAN (Massachusetts Institute of Technology): The downside is that the costs don't fall proportionately with the hours.

NICKISCH: Paul Osterman is a labor market economist at the Massachusetts Institute of Technology. He says businesses don't save as much money upfront as they would through regular layoffs.

Mr. OSTERMAN: If you have to still maintain benefits and so on, two half-time people are more expensive than one full-time person.

NICKISCH: Osterman says companies have to weigh that against the savings that worksharing brings down the road by not having to rehire. He says the shorter the economic downturn is the more part-time layoffs pay off. The big jump in worksharing recently suggests companies are betting the slowdown will be short-lived.

For NPR News, I'm Curt Nickisch.

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