REAGANOMICS HAS demonstrated once again that the economists' only proven cure for rampant inflation is disastrous unemployment. Perhaps the reason that this strong medicine is regularly prescribed and reasonably well tolerated, is that the side effects are confined to a relatively small portion of the patient population. Of course, everyone who has a job deplores the plight of the unemployed. But the pain is a good deal more remote than if, rather than disemploying 10 percent of the work force, everyone -- both high- and low-income -- were called upon to forgo 10 percent of his income instead.
Three states -- California, Arizona and Oregon -- have adopted state programs, patterned to a considerable degree on West Germany's decades-old work- sharing program, that encourage employers and workers to share the burden of unemployment more equitably. The short-time compensation programs, as they are called, allow companies facing sizable but temporary production cutbacks to reduce hours of work for all employees instead of laying off some of them entirely. Workers are then allowed to draw state unemployment benefits for the part of the week that they are unemployed.
Short-time compensation is not without potential pitfalls. Without controls, it may end up permanently boosting unemployment insurance and other employer costs in order to subsidize inefficiently managed or seasonal industries or to boost the incomes of people who would choose to work part- time anyway. California, however, which has avidly promoted its program since 1978, claims that both companies and workers benefit greatly. Workers as a group gain because none of them suffers a major loss in income or in valuable health insurance and other fringes. Employers gain because they avoid the cost and disruption of laying off experienced workers and then having to rehire and retrain when recovery comes.
The union movement was initially skeptical about the idea because it means that cutbacks affect more senior workers and because work-sharing seems a poor substitute for full employment or a fully compensated shorter work week. Many union contracts, however, include work-sharing provisions, and local unions have reacted favorably to the California program. Last year, the AFL-CIO worked with Rep. Patricia Schroeder in developing federal legislation encouraging state short-time compensation programs.
The new federal law -- passed as part of last summer's tax bill--provides useful guidelines for states wanting to adopt programs. It also requires the Labor Department to do a thorough, independent study of how these programs affect workers, productivity, and unemployment insurance costs. If the department does the careful study that is needed, it would provide the bais for deciding whether work- sharing is a good way to make sure that when unemployment is prescribed for the country, more than a few people have to swallow the medicine.