Measuring the Effects of ShortTime Compensation on Workforce Dynamics

North American employers--particularly those in the U.S.--have often been alleged to prefer layoffs to hours reductions when they respond to output or cost shocks. This research examines theoretical and empirical approaches used to assess the effects of short-time compensation (STC)--which workers may receive prorated unemployment insurance compensation for reduced work hours--on total workforce reductions. It uses data from a recent evaluation of STC programs in the U.S. to present new evidence on the extent to which time on STC affects time on layoff. It also offers general conclusions about the soundness of different methodological approaches to examine the influence of STC-type programs on firms' workforce adjustment patterns.