Premium
Heterogeneous Layoff Effects of the US Short‐Time Compensation Program
Author(s) -
Tracey Marlon R.,
Polachek Solomon W.
Publication year - 2020
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/labr.12184
Subject(s) - layoff , compensation (psychology) , unemployment , retraining , labour economics , business , work (physics) , demographic economics , economics , engineering , economic growth , mechanical engineering , psychology , international trade , psychoanalysis
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.