Friday, July 17, 2009
Reed Offers Plan to Preserve Jobs and Keep Rhode Islanders Working
CUMBERLAND, RI - With rising joblessness hampering Rhode Island's economic recovery, U.S. Senator Jack Reed (D-RI) today outlined a plan to help preserve jobs and reduce future lay-offs. Reed joined with employees at Hope Global, a Cumberland-based manufacturer of textile products, to discuss legislation he plans to offer that will help states like Rhode Island strengthen existing work share programs and encourage more states to follow suit.
Under work share programs, employers reduce their workers' weekly hours and pay, and states make up some of the lost wages from their unemployment funds. Companies are able to remain competitive by lowering costs and keeping a skilled work force, employees keep their jobs and health benefits, and states only pay a fraction of the price it would cost if the workers went on unemployment.
"Work share programs provide businesses with the flexibility to reduce hours instead of cutting jobs," said Reed. "This plan will help prevent layoffs, make businesses more productive, and save taxpayers money by keeping people on payrolls and off unemployment benefits. My goal is to expand this program to allow more companies to take advantage of it and help more employees keep their jobs and their benefits as we work our way through these tough economic times."
Hope Global took advantage of work share by implementing a four-day week last winter which helped the company reduce lay-offs. The company has since restored employees to regular work schedules.
The New York Times recently noted: "States have different unemployment insurance formulas, but generally, a worker being paid $600 a week, if laid off, might receive $300 in jobless benefits. With work-sharing, if that worker's hours drop 20 percent, wages would fall to $480 and work-sharing would make up at least half of the lost wages ($60), for a total of $540 a week. With savings from reduced income taxes and from commuting fewer days, some workers nearly break even."
Nationally, 17 states -- including Rhode Island -- have work share programs to help people keep their jobs and help companies avoid expensive re-hiring and re-training costs. However, too few businesses are aware of the program in states that have these programs and 33 states nationwide do not have a program.
Reed's planned legislation will establish a temporary program to provide partial federal-funding of short-time compensation benefits for up to 26 weeks to states like Rhode Island that operate work share programs. States that encourage employers to maintain health and retirement benefits would receive a larger share of federal funds. Reed's bill would also provide $3 million for competitive start-up grants to states that do not currently have work-share programs to get them off the ground.
Economist Mark Zandi estimates that Senator Reed's work share proposal offers a very high "bang for the buck" of $1.69. That is, every $1 in federal money devoted to finance work share program results in $1.69 in real GDP one year later.
In Rhode Island, Reed's bill will help alleviate some pressure on the state's unemployment trust fund because a share of short-time compensation benefits would be temporarily paid for by the federal government instead of solely by the state, which just took out a $40 million line-of-credit on top of the $70 million already loaned from the federal government.
According to the Rhode Island Department of Labor & Training, the number of employees participating in the program has skyrocketed over the last few months, from 3,781 in March; to 7,500 in May; to 17,856 employees in June.
The 17 states that currently have work share programs are: Arizona, Arkansas, California, Connecticut, Florida, Iowa, Kansas, Maryland, Massachusetts, Minnesota, Missouri, New York, Oregon, Rhode Island, Texas, Vermont, and Washington.