Work-sharing saves jobs

In Denmark work-sharing was introduced as a short-term measure that could be used to mitigate the effects of the global financial crisis. It proved popular, with many companies preferring it to redundancy schemes when there was not enough work to keep staff fully employed, because they were able to retain staff in readiness for an economic upturn. The Danish Employment Regions and the union 3F believe that work-sharing has played a key role in maintaining employment levels.

When the impact of the financial and economic crisis hit Denmark in autumn 2008 many Danish companies in manufacturing and construction had already started restructuring, either through internal reorganisation or by moving production offshore to low-wage countries. The crisis was unexpected by most companies and when it began to intensify over the winter of 2008–2009, many had no option but to use work-sharing as means of dealing with the crisis, since they had already dismissed those members of staff who were not required. Rather than either closing down production or laying off staff, work-sharing was seen as preferable because retaining staff in this way would make it easier for companies to return to growth after the crisis (DK0903021I).

Work-sharing as preferred short-time arrangement

In August 2008, a month before the crisis started, just 229 Danish employees were engaged in a work-sharing scheme. Shortly after that the levels of work-sharing began to increase dramatically and peaked in April/May 2009 with around 18,000 people sharing a full-time job. Since then the incidence of work-sharing has gradually decreased to pre-crisis levels (see figure).

Employees participating in a work-sharing arrangement (thousands)

Employees participating in a work-sharing arrangement (thousands)

Source: Ledighedsindikatorer, Jobindsats.dk - Arbejdsmarkedsstyrelsen

Companies may introduce work-sharing for up to 13 weeks. If necessary, they can extend this period by a further 13 weeks, but only after consulting the Regional Employment Council. The circumstances in which work-sharing can be used are set out in collective agreements.

For the periods when work-sharers agree not to work, they receive a supplementary unemployment benefit financed by the government. This caused some political turmoil because companies claimed that the maximum possible period of work-sharing was too short, while the government refused to finance longer periods of work-sharing, saying that it would cost too much.

Companies argued that they needed longer periods, along the lines of the German model, to keep their human capital intact ready for an economic upswing, and the unions agreed, particularly Denmark’s largest, the United Federation of Danish Workers (3F).

The unions were keen, however, to argue that periods of receiving supplementary benefit while work-sharing should not be counted as unemployment. The maximum period for receiving supplementary unemployment benefit is 30 weeks, and unions have pointed out that employees work-sharing for the maximum permitted 26 weeks would have only four weeks of supplementary benefit entitlement left if they were then made redundant. 3F has asked that the non-working periods of work-sharing schemes be used for training instead

The conclusion of two independent assessments was that work-sharing was effective in mitigating the effects of the financial crisis on employment levels. One was a spot check conducted by the Employment Region Copenhagen and Zealand in spring 2010 and the other a study by 3F published in September 2010.

The spot check made by the Employment Region Copenhagen and Zealand (Agenda, arbejdsmarkedspolitisk analyse, No. 3, 25 February 2010) showed that 94% of the employees who took part in a work-sharing arrangement remained in work when it ended. Although the other three employment regions have not conducted similar research, they confirm that a considerable number of employees remained in employment after their short-work periods. The data do not show whether these employees stayed with the company where they work-shared, but the high percentage of job preservation suggests that this is a relatively unimportant detail.

3F survey suggests work-sharing saves jobs

Large numbers of 3F members have been affected by layoffs and work-sharing schemes. The union, the largest in Denmark, has many members in the sectors most affected by the crisis, manufacturing and construction.

In September 2010, 3F published the results of a survey (in Danish, 104Kb PDF) assessing the success or failure of work-sharing for its members. The survey showed that only one in six 3F members who had gone into a work-sharing scheme during 2009 did not continue in full-time employment afterwards.

Every insured 3F member who took part in work-sharing in 2009 is included in the study and data are taken from 3F’s unemployment fund. The focus of the analysis was on the way in which workers were affected by the end of work-sharing arrangements, establishing whether they continued to work for the same company under normal conditions or whether they were pushed out of the company and onto unemployment benefits.

In order to give a reliable picture of the transition from work-sharing to unemployment, the study examined the period of three months after the end of a work-sharing arrangement. If a person received unemployment benefits for at least three weeks in a row, he or she was classified as unemployed. The survey concluded that although a growing number of work-sharing schemes were terminated in 2009, this was not matched by a comparable number of redundancies as had been feared. The study concludes: ‘It is therefore gratifying that only 14% of the 3F-members ending work-sharing in 2009 went into a subsequent period of unemployment.’

Overall, the level of unemployment among 3F members was 11.3% during 2009. The study’s authors therefore comment that an average of 14% of those on work-sharing schemes becoming unemployed ‘must be characterised as a success’. In other words, work-sharing saves jobs, and based on these conclusions 3F proposed three initiatives that could improve conditions for employees taking part in work-sharing.

  • They should be regarded as employed by the system and not as unemployed, as is currently the case.
  • Work-sharers should be offered further training, financed by early warning funds, for instance, during the period of work-sharing.
  • Periods of work-sharing should not count as periods of receiving supplementary unemployment benefits.

Commentary

In Denmark, work-sharing was the primary short-time arrangement used to mitigate the effects of the financial crisis. There was, for instance, no significant increase in part-time working. Even if the economic situation has not yet improved for some companies, the usage of work-sharing has returned to normal levels. Work-sharing had never before been used so widely as it was used at the peak of this current crisis, and although it sparked heated debate and was met with scepticism from many employees, evidence suggests that work-sharing has been a success. Even though this conclusion is based on the relatively narrow focus of the studies mentioned above, there is little reason to suspect that a broader assessment would bring radically different conclusions.

Carsten Jørgensen, FAOS, University of Copenhagen

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