“What would you do with an extra few hundred dollars each week, and a couple of extra days to go out and spend it? Perhaps you would use the cash to support local businesses and purchase big items—activities which help to boost economic recovery.“
Faced with massive budget gaps caused by the COVID-19 pandemic, state and local governments in Rhode Island are turning to a relatively obscure program that can save them money, prevent layoffs, boost worker pay and support economic recovery. What is this miracle-worker of a program? It’s called workshare.
Here’s how the Rhode Island Department of Labor and Training describes the program:
Employers may be able to avoid layoffs by choosing the WorkShare alternative … The WorkShare program allows employers to retain their skilled workers during times of slowdown by simply reducing the work hours of a larger group of employees. Employees whose hours and wages are reduced would be eligible to receive a portion of their regular unemployment insurance benefits to compensate for the lost wages. In addition to sparing employers the potential loss of its existing workforce, WorkShare also spares a company’s employees the financial and emotional hardship associated with a layoff situation.
The federal CARES Act, passed in March, made two key changes to incentivize take-up. First, it provided that the federal government will cover 100 percent of the cost of workshare programs. Previously, workshare benefits were paid by states through their unemployment insurance systems. Now, benefits paid to state and local government employees are essentially free money to those government entities, courtesy of the United States Treasury. Second, the CARES Act created the Federal Pandemic Unemployment Compensation program, which provides $600 per week through the end of July to every eligible worker who is unemployed or had her hours reduced, including workers enrolled in a workshare program.
State and local governments in Rhode Island got the memo. On Wednesday, state Director of Administration Brett Smiley announced that employees in the state executive branch could begin volunteering to participate in worksharing through September. Those who opt in will agree to reduce their time on the job by two days per week, helping the state reduce payroll costs. “If as few as 1,000 union and nonunion employees in the executive branch volunteer to [enroll in workshare] … Smiley estimates $4.7 million in state savings,” the Providence Journal reports.
Providence is enrolling 500 of its employees in workshare on a mandatory, rather than voluntary, basis, according to WPRI. Those employees will see their work week reduced by one or two days through September. The city estimates that this move will save it about $2 million. The General Assembly is also implementing mandatory workshare for 120 of its staff members, per the Providence Journal.
Here’s how it will work for employees who reduce their time on the job per week by two days. Once one of these workers enrolls in workshare, her hours—and the state’s or municipality’s contribution to her paycheck—drop by 40 percent. Through workshare, the federal government automatically fills about 45 percent of the gap (18 percent of the worker’s original pay), bringing her paycheck up to 78 percent replacement. On top of this, the federal government adds $600 per week.
The extra $600 pushes the vast majority of workers over 100 percent replacement—meaning they effectively receive a pay raise for the duration of their furlough.
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How much a worker receives after enrolling in workshare depends on how high her wage is and whether the federal government extends the $600 weekly supplement which is set to expire on July 31. On the second item, extension of the supplement is being actively considered in Congress; House Democrats have pushed for it to be continued in full through the end of the year. If they are not victorious and it is abruptly ended on July 31, workshare participants will have had access to it for 7 of their 12 weeks of furlough (June 14 to September 5), resulting in a sum of $4,200 which can be rationed over the remaining 5 weeks.
Either way, the result is a big pay raise for a lot of workers. Even if the $600 top-up is not extended, a full-time worker earning the state median wage of $20.21 per hour who enrolls in workshare will see her weekly pay increase by $174 throughout the duration of her furlough—assuming the 5 weeks of $600 are smoothed over the full 12 weeks at $350 per week. This amounts to a 122 percent wage replacement rate, or a 22 percent pay raise. If the federal government extends the $600 weekly top-up, a median-wage worker would experience a $424 raise in weekly pay and a 152 percent wage replacement rate. In other words, in the first scenario, a median wage worker receives a net pay increase of 22 percent despite working 40 percent fewer hours. In the second scenario, pay increases by 52 percent while work hours fall by 40 percent.
Workshare gives lower-wage workers the biggest boost. Someone earning the Rhode Island minimum wage of $10.50 per hour, for instance, will receive a 62 percent raise under a scenario where the $600 supplement is not extended, lifting her weekly paycheck from $420 to $678. If the supplement is extended, a minimum wage worker will see her weekly pay more than double to $928, a 121 percent increase.
Some higher-income workers will receive a small reduction in pay if they enroll in workshare. But, overall, nearly everyone benefits: All workers with income below $76,000 see a net increase in weekly pay if the $600 supplement is ended July 31. If the top-off is extended, this threshold rises to $109,000.
What would you do with an extra few hundred dollars each week, and a couple of extra days to go out and spend it? Perhaps you would use the cash to support local businesses and purchase big items—activities which help to boost economic recovery. In the end, workshare is a win for the state budget, a win for workers and a win for the local economy. Curious how much workshare would benefit you? Check using this spreadsheet.