- Category: Labor
Unemployment Insurance (UI) and Short-Time Compensation (STC) are two programs designed to support workers who are impacted by job layoffs or work reductions during economic downturns. Through STC, instead of laying off some workers while others remain full time, employers are able to retain employees at reduced hours. Workers whose wages have been reduced are then eligible to collect prorated UI benefits. In the United States, STC is a promising but underutilized alternative to layoffs.
This working paper compares UI and STC by describing the workers who used these programs during the COVID-19 Pandemic and then shows which program provided better short- and medium-term outcomes for workers. Relative to comparable countries, STC usage in the U.S. was low during the COVID-19 Pandemic, but a few states saw considerable and rapid take-up, suggesting that the program can be scaled effectively. In California, STC claimants fared better than claimants who received full UI benefits or partial UI benefits. Two years after the initial pandemic shock, workers using the STC program had experienced only temporary earnings losses, while maintaining high employment rates and job stability.
This working paper was presented by Till von Wachter at the Federal Reserve Bank of Boston 66th Economic Conference. The theme was Labor Markets During and After the Pandemic. The video below shows Professor von Wachter’s presentation.