Heterogeneous Layoff Effects of the US Short‐Time Compensation Program

Marlon R. Tracey and Solomon Polachek

LABOUR, 2020, vol. 34, issue 4, 399-426

Abstract: The Short‐Time Compensation (STC) program enables US firms to reduce work hours via pro‐rated Unemployment Insurance (UI) benefits, rather than relying on layoffs as a cost‐cutting tool. Despite the program's potential to preclude skill loss and rehiring/retraining costs, firms' participation rates are still very low in response to economic downturns. Using firm‐level UI administrative data and semi‐parametric methods, we show why by illustrating which type of firms benefit from the program and which do not. A key finding is that cyclically sensitive firms have about 14% lower layoff rates when they use STC, but we find no difference for more cyclically stable firms.

Date: 2020
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https://doi.org/10.1111/labr.12184

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Working Paper: Heterogeneous Layoff Effects of the US Short-Time Compensation Program (2018)
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