This seems not to have been the case during the global financial crisis of 2008, when Kurzarbeit was largely credited with softening the blow to Germany’s labour market. In contrast, the confinement Overall, the German government is doing precisely what should be done consecutively. From August employers have had to start contributing towards its cost, first with pension and national insurance contributions, and with 10% and then 20% of wages in the next two months. (more for workers with children). security contributions—can be relaxed during a serious crisis to discourage However, not all companies that applied for the scheme used it, meaning the actual number of recipients is considerably lower. All rights reserved. Germany are typically allowed to work overtime and accumulate credit on © 2020 Guardian News & Media Limited or its affiliated companies. employment in 2009. The Frankfurter Allgemeine Zeitung warned in 2019 that the German auto industry, which was already struggling with a bad export market prior to the pandemic, should not be propped up with Kurzarbeit indefinitely. The total cost to date is nearly £35bn. And companies retain firm-specific human Under Kurzarbeit, the government normally provides an income “replacement rate” of 60 percent (more for workers with children). Currently, there are just 900 cases under investigation, while 880,000 companies have claimed Kurzarbeit during the pandemic. It’s not hard to see why. They are among those likely to suffer the most from the sharp recession. Moreover, the coverage will be mass layoffs. the global financial crisis was partly the result of earlier wage moderation, and a high We estimate Companies that invest heavily in their employees are more heavily motivated to invest in their retention. As serious as these issues might be, they pale in comparison to the kind of mass unemployment the US is currently experiencing, and investing in the retention of highly qualified workers now may prop up some failing industries, but it will also help others to stay competitive through an unprecedented global crisis. employer has to pay 80 percent of the total social security contributions Kurzarbeit is, in many ways, an excellent crisis management tool. This opened the way to a rapid The Kurzarbeit programme, in which the government provides workers whose hours have been reduced with a minimum of 60% of their lost pay, has been credited by many with softening the economic blow of the pandemic. collapse of external demand. costs. million, or about 20 percent of the labor force—a much greater number than owed on the reduced working hours. Are there any disadvantages to the program? during the current pandemic. market. threshold has been lowered to 10 percent. scheme temporarily more attractive to employers and employees alike. Kurzarbeit, Germany’s short-time work program, is widely considered the gold standard of such programs. It is also worth mentioning that Kurzarbeit is an addition to private working-hour flexibility arrangements. alternative ways to provide income support for this vulnerable segment of For all of these problems, the decision to extend coronavirus Kurzarbeit protections has been widely praised in Germany. expanded to temporary workers (about two percent of total employment). save on a precautionary basis. Kurzarbeit is a social insurance program whereby employers reduce their The scheme wasn’t built in a day. the 4th to 6th months, and further to 80 percent from Under Kurzarbeit, the Germany was the only G7 country that did not experience a fall in divide between workers in more and less protected segments of the labor The UK scheme paid 80% of wages, up to £2,500 a month, for about 9.5 million employees at its peak. All rights reserved. There are also substantial concerns that the system is rife for abuse – companies can easily claim that their workers are spending fewer hours on the job, while business goes on as usual. April, the number of workers who applied for Kurzarbeit exceeded 10 In the US, by comparison, unemployment temporarily rose to a record 14.7% in April. These cyclical adjustments to the program help strike a delicate
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