Designing short-time work for mass use
| Published date | 01 March 2023 |
| DOI | http://doi.org/10.1177/13882627231161511 |
| Author | Enzo Weber,Yasemin Yilmaz |
| Date | 01 March 2023 |
| Subject Matter | Articles |
Designing short-time work for
mass use
Enzo Weber
Department Forecasts and Macroeconomic Analyses, Institute for Employment
Research (IAB), Germany; University of Regensburg, Germany
Yasemin Yilmaz
Department Forecasts and Macroeconomic Analyses, Institute for Employment
Research (IAB), Germany
Abstract
In the course of the Covid-19 pandemic, short-time work as an instrument of income
replacement once again proved to be an effective means of stabilising employment.
However, the very concept, based on individual entitlement, led to its operational limits in
respect of mass use. For example, in Germany, thecompleteprocessingofallcasesinmul-
tiple stages can take years, involving corresponding strains and uncertainties for firms and
labour administration. Against this background, we discuss the development of variants of
job retention schemes compatible with mass use. An international comparison indicates
that the legal instrument of force majeure could facilitate access with simplified criteria
and procedures. We elaborate on specific proposals for the well-known German system.
Going beyond simplifying existing rules, we outline a collective instrument of a wage subsidy
increasing with lost revenue or hours. In this respect, drawing on results from the relevant
literature, we argue that the need to limit redundancies and the precision of the instrument
must be carefully balanced. Particularly in the case of mass use, qualification is indispensable,
which is why the need for a concept with flexibly applicable, modular and online-based train-
ing formats, incentives and counselling services is essential. Finally, preconditions for the
phasing-out of the mass use scheme are outlined. The exceptional situation would have to
be officially ended –or extended –at an appropriate time with sufficient notice.
Subsequent schemes may provide for transition to regular arrangements, a gradual reduction
of wage subsidies, and liquidity support.
Corresponding author:
Enzo Weber, Head of Department Forecasts and Macroeconomic Analyses, Institute for Employment Research (IAB),
Germany; Chair of Empirical Economics, University of Regensburg, Germany.
Email: Enzo.Weber@iab.de
Article
European Journal of Social Security
2023, Vol. 25(1) 60–76
© The Author(s) 2023
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/13882627231161511
journals.sagepub.com/home/ejs
Keywords
Short-time work schemes, Kurzarbeit, mass use directive, Covid-19 pandemic, force majeure, wage
subsidy, job retention schemes, international comparison, social security, adapted arrangement
1. Introduction
Whether in the wake of the global financial crisis or more recently, since 2020 in the wake of the
Covid pandemic, the concept of Kurzarbeit, hereafter referred to as short-time work, has aimed at
income replacement in cases exogenous events or general economic development leading to the
reduced working hours. In doing so, it subsidises the hours not worked due to these circumstances.
This makes short-time work a crucial means of social security. In several countries, such as
Germany, short-time allowances are a benefit of the social unemployment insurance.
Short-time work therefore serves to safeguard jobs and to avoid unemployment. Thus, it resem-
bles, in its targeting and effect, the furlough schemes and other temporary unemployment schemes
used in other countries, which focus on forced suspended labour periods (in contrast to temporary
unemployment between contracts for specificfixed time periods, e.g. in platform work (Schoukens,
2020)). However, short-time work does not provide for a compulsory total reduction of hours
worked (Hijzen et al., 2021). Indeed, short-time work schemes can take different forms according
to the permissible range of working time reduction, that is, unrestricted, only partial or only full.
Short-time allowance is an established instrument that has already proven its worth and also
across the different variants in safeguarding employment (e.g. Aiyar and Dao, 2021; Balleer
et al., 2016; Brey and Hertweck, 2016; Giupponi et al., 2022; Hijzen and Martin, 2013). Even
during the Covid crisis, short-time schems were able to significantly limit the rise in unemployment
in the face of the immense force of the economic shock.
However, in times of major crisis, such as the recent Covid-19 pandemic, it has been observed
that the instrument of short-time work has reached the limits of its processability due to exception-
ally high numbers of cases and fluctuating use. This is a problem that threatens to undermine the
effectiveness of the otherwise successful instrument. In many countries such as Germany, short-
time allowance is designed based on complex criteria and processes and on individual entitlement.
While it is initially the companies that must notify the authority about short-time work, later, the
settlements and claims must be checked in each individual case. Processing takes years and an enor-
mous amount of staff. The required operating personnel data may even no longer be available at the
time of review. Additionally, this entails tedious uncertainty for those affected. When the instru-
ment was originally designed, no one even imagined millions of cases. As a result, many companies
across all sectors gained extensive experience with the instrument, so that the use of short-time
work is likely to remain extensive in future crises (cf. Boeri and Brücker, 2011). This is also sup-
ported by the fact that the labour market will be characterised by scarcity in the foreseeable future,
which increases the willingness to retain workers (Klinger and Weber, 2020). In the event of energy
rationing, there would be high demand for a short-time work instrument.
For this reason, our contribution seeks to outline provisions for the design of short-time work
for mass use. We discuss the strengths and weaknesses of short-time work, especially from the
viewpoint of the German scheme, and propose reform options for mass use. For this purpose,
we refer to international examples. While short-time work in general is well-studied, we
focus on extraordinary circumstances. Based on surveying the relevant literature and drawing
Weber and Yilmaz 61
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