There are two kinds of adults in this recession: those who are overwhelmed by work, and those who have none. As those who still have a job are taking on more and more responsibilities, productivity rises, leading some to theorize this holds back job creation. While those workers are glad to not be in the ranks of the unemployed, they’re not happy with the work burdens, while other workers who might help out are sitting on the sidelines.

From the perspective of the employer, the situation isn’t that great either. Laying off a full-time employee means losing years of skills, knowledge, and expertise that is difficult to replace even when new hiring resumes.

In today’s LA Times, Dean Baker and Kevin Hassett argue for a better option: work-sharing, which is used in Germany to spread the recessionary pain throughout the workforce by reduced hours (and wages) for everyone:

In Germany, for example, which has used work-sharing aggressively in this downturn, a typical company might reduce the hours of 50 workers by 20% rather than laying off 10 workers. The government would then provide a tax credit to make up for most of the lost pay, with the employer kicking in some as well. In a typical arrangement, a worker might see his weekly hours go down by 20%, and his salary go down by about 4%.

This policy has kept the unemployment rate in Germany from rising even though the country has seen a sharper decline in GDP than the United States. The Netherlands, which also uses work-sharing, has managed to keep its unemployment rate near 4% even though its GDP also has fallen more steeply than in the United States.

Work-sharing should be familiar to Californians because it’s a variation of the furlough policy that state and local governments have used to avoid further layoffs. The big difference is that the furlough policy means workers take pay cuts that are proportional to the length of their furlough — 20% fewer hours, 20% less pay.

By contrast, with a work-sharing arrangement, workers would keep their jobs while effectively dividing up the unemployment benefits that they could receive if they were laid off. For example, if a furlough requires them to take every fourth week off, instead of a 25% cut in pay, their pay would fall only 5% to 10%. The additional money could come from either the state unemployment insurance program or a new federal tax credit.

It’s a very interesting proposal to consider. The current system of unemployment creates a lot of pain for a substantial number of people, but little pain for the rest. That in turn creates a social and political divide between the employed and the unemployed, in addition to the obvious financial divide. As we look at long-term unemployment, it will be tempting for those who still have jobs to simply ignore the long-term unemployed and their needs.

Under the work-sharing model, everyone takes a hit, but also enjoys unemployment benefits that make up some of the difference.

It’s not the only progressive proposal out there for dealing with unemployment. Over at the Realignment Project, Steven Attewell proposes a way to deal with the inflationary aspects of a full employment policy (i.e. spending billions of dollars to put people back to work tends to drive up inflation) is by turning to the Keyensian idea of “forced saving” – investing some of the increased wages in savings accounts that would pay out over time, providing more of a fiscal cushion for households especially when hard times return.

Whether or not you agree with one or both of these proposals – or reject them both – it’s good to see people taking seriously the issue of long-term unemployment, because we’re likely to be facing that issue for some time to come, perhaps the rest of this decade.