This rapid evidence review summarizes three strategies governments and businesses can use to retain employees during economic downturns: 1) work share or short-time compensation, 2) furloughs, and 3) employment protection programs.

The COVID-19 pandemic has caused unprecedented disruption to labor markets in the United States and abroad. Unemployment rates have surpassed levels experienced during the Great Recession of 2008−2009. Massive levels of unemployment can have devastating impacts on individuals, businesses, and labor markets.

  1. Workshare or short-term compensation (STC) is a program within the state unemployment insurance system that businesses can use as an alternative to layoffs. Under STC programs, businesses that experience a temporary decrease in demand can reduce employees’ work hours.
  2. Furlough is another strategy that businesses can use to mitigate the impact of fluctuations in demand on labor costs. Employees that are furloughed are placed on unpaid leave, often with benefits and the ability to return to their job once demand resumes.
  3. Employment protection programs are a set of strategies federal and state governments can use to subsidize partial payment of employee wages or benefits for individuals who are unable to work due to the pandemic.

(This report is 27 pages, including appendices.)

Major Findings & Recommendations

The following findings and recommendations are documented in this resource:

1. Work Share or Short-Time Compensation

  • Short-time compensation (STC) programs can benefit businesses and permanent workers.
  • STC programs can help stabilize labor markets during economic downturns.
  • The level of uptake of STC programs influences its impact on macroeconomic conditions.
  • Government policies can influence the uptake of STC programs.

2. Furloughs

  • Furloughs are another strategy business can use to temporarily contain costs without laying off workers.
  • Despite potential benefits of furloughs relative to layoffs, most descriptive studies highlight the downsides of furloughs.

3. Employment Protection Programs

  • Employment protection programs might soften the macroeconomic effects of the pandemic.
  • The U.S. Paycheck Protection Program has provided relief, but it may not stave off a recession.
  • Countries have unique contexts and different methods for administering employment or paycheck protection programs.