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SHORT-TIME WORK AND RELATED MEASURES TO MITIGATE
THE CONSEQUENCES OF A (PARTIAL) ECONOMIC SHUTDOWN IDEA 2020
Cahuc (2011) Table 1 provides take-up rates in 2009, which ranged from 0% to 7.4% of all employees. Countries with existing short-time work schemes saw large increases in take-up during the recession. For example, Belgium, Turkey, Italy, Germany, Luxembourg and Japan had existing short-time work schemes and saw enrollment rise above 2% of all employees. Cahuc and Carcillo (2011, p. 139-145) provide a detailed comparison and analyze the correlates of take-up. Unsurprisingly, they find that take-up rates are predicted by the size of the downturn. They also find a positive correlation with recovery, but the direction of causality is not clear. They also analyze which design features and requirements are correlated with higher take-up rates.
C. Key Lessons About Short-time Work
The current popularity of short-time work as a (proposed or actual) policy tool likely stems from its success during the last economic crisis. It is widely believed that short-time work policies helped countries like Germany, France, and Belgium to reduce hours worked in manufacturing more quickly and with a much smaller reduction of the workforce than in the US, where no such scheme was in place initially.
The majority of previous papers highlight the importance of short-time work programs in decreasing unemployment and working hours (e.g., Cahuc and Carcillo, 2011; Cahuc, Kramarz, and Nevoux, 2018). However, Gehrke, Lechthaler, and Merkl (2019) argue that the successful navigation of the recession in Germany may be more attributable to the positive labor market performance shocks than to short-time work programs. Despite their finding on the limited effects of short-time work, they argue that the stabilizing effect of this policy increases if firms expect that the rules for short-time work are dependent upon business cycles. However, there are concerns that a short-time work policy may not be equally effective in the context of other labor markets, since the stabilizing effects of short-time work depend on certain labor market features, e.g., rigid labor market flows, collective wage bargaining and high costs of firing employees.
The positive effects of short-time work are supported not only by evidence from cross- country analyses, but also by micro-level analyses. For example, Giupponi and Landais (2018) find significant reductions in hours worked, but large and positive immediate effects on worker counts in Italy. However, they find no evidence that short-time work has medium or long term effects on employment probability and earnings of workers.
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