Kurzarbeit/Short Time Working: Experiences and Lessons from the Covid-Induced Downturn
Following the Covid-induced lockdowns, many commented on the part the German model of Kurzarbeit could play in reducing unemployment. This paper analyses the strengths and weaknesses of STW schemes, asking whether STW has been well designed to have optimal short and longer run impact. It concludes it is quite an effective short-term palliative measure but, in longer downturn, its weaknesses come to the fore.
Pub. Date
20 November, 2023
Pub. Type
Main Points
- Germany has a long-established STW scheme. Under Covid, it was extended and made yet more generous. The UK, which effectively had no such thing, invented one – the "furlough” at very short notice. It was not persisted with.
- Sweden has a long -term reluctance to using STW as a labour market policy measure, but it did make some use of the measure during the covid downturn. However, the government resisted calls for further extensions.
- The USA, by contrast, relied upon “temporary layoffs” whereby employees were releases but with some expectation they would be rehired once an upturn occurred. Under covid, provision was made to extend the length of time unemployment insurance could be claimed and its level was also increased.
- One difference between European and American schemes was health coverage. Employees on STW in each of the European countries maintain their health coverage. American employees were in a different situation. Because they were no longer “employed”, some of them lost their health insurance.
- Some argued that STW be combined with opportunities for those affected to take advantage of retraining. This was largely resisted, especially in Sweden, where it was seen as potentially subsidising activities employers would have carried out themselves.
- Both STW and temporary layoffs serve as a means of supporting income and so act as “automatic stabilisers”. They did not cover all workers – especially the self-employed and gig workers. In some countries, supplementary, often temporary, measures were made for such people.
- In Germany in particular, STW has been justified as enabling employers to maintain the skills of their workforces. In that country, great stress is placed on high degrees of internal flexibility based upon competencies for which the employer has paid. The UK, by contrast, has prided itself on the external flexibility of its labour markets. This, alone, rather undermines the arguments in favour of a more permanent STW scheme. Temporary income support measures also played a part in that country.