Short-time Compensation: Factors Leading to its Adoption and its Success in Connecticut

The recent financial crisis has reawakened the U.S to the possible effects of a rapid economic downturn. Poor economic conditions have forced both households and government to tighten their budgets. Still, unemployment persists and the growth rate of the U.S has not been as robust as past recoveries. Worksharing, or short-time compensation (STC), is an unemployment insurance program where a pool of workers shares a reduction in their hours to avoid layoffs. The program offers both benefits and possible issues for firms, employees and state governments alike. This paper attempts to determine why certain states have elected to adopt STC where others have passed on it. Besides the obvious cause of higher unemployment, geography and political institutions prove to have substantial impacts on the chances of a state enacting legislation for STC. This model is followed by an analysis of STC’s small but positive impact on unemployment rates in the state of Connecticut