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Why is Short-Time Compensation Use Rare in the U.S.? Open Access

Why is Short-Time Compensation Use Rare in the U.S.?This dissertation explores the reasons for low utilization of short-time compensation (STC) in the U.S. I find that a great majority of workers on reduced time schedules due to slack demand are eligible for STC in states with a plan, but firms nonetheless do not participate in the program. This type of short-time work without the costs associated with a compensation scheme for the lost hours is apparently a major alternative to STC in the U.S. STC's uniform treatment of workers regardless of seniority is another reason for low program use because seniority rules provide better job protection than STC for senior workers and union members. Similarly, all participating workers benefit from STC regardless of their skill level and productivity as STC programs require benefits to be provided to all affected workers in a business. Firms increase average productivity by dropping the less productive workers through layoffs. Under STC, they keep all workers, the highly productive and the less so. One of the reasons for low STC use nationwide is that not all states have the program. A strong taste for greater government involvement in the economy appears to affect state STC adoption decisions. As expected, the probability of adoption increases during high unemployment rate years. The percent of the population that is female also increases the likelihood of STC. The share of minority population is found to be not a significant, suggesting STC is not perceived to be a powerful affirmative action tool as originally thought. Interestingly, manufacturing employment does not affect a state's STC adoption probability even though the manufacturing sector is the major user of the program. The similarity of utilization in Canada and the U.S. provides some evidence that utilization in the U.S. is not driven by experience rating of STC and UI charges in the U.S., nor by state-paid health plan and maintenance of fringe benefits in Canada.

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