Page 24 - IDEA Kurzarbeit zahranicni zkusenost Covid19 duben2020 13

SHORT-TIME WORK AND RELATED MEASURES TO MITIGATE
THE CONSEQUENCES OF A (PARTIAL) ECONOMIC SHUTDOWN IDEA 2020
A key downside of short-time work is that it deters adjustment to long term changes and thus may lead to larger long-term adjustment costs. To minimize these costs, short-time work can be complemented by unemployment insurance. Employees in jobs that were not viable even before the crisis started and employees in jobs that will not be viable after the crisis, or who will have low continuation value of the job should be incentivized to transit to unemployment insurance or other programs. This incentivizes labor re-allocation and will thereby help to smooth the recovery. Since there is a great deal of uncertainty about long-term adjustments, transitions between short-time work and unemployment insurance should be easy (and likely reversible). Flexible transitions have the advantage that they can adapt to both changing situations (e.g. temporary closures in between short- time work spells driven by demand abroad or policy here) and changing expectations (the cost of repeatedly adjusting to changes in expectations should not be too high, but should deter bank-run type swings).
To keep the policy costs manageable and implementation simple, the short-time work policy should deter employees and employers who would be able to continue through the crisis without the subsidy from taking it up. It is likely that many cases can be better served with loans or simpler wage subsidies, such as postponing or partly waiving social security contributions. Offering such schemes in addition to short-time work may take some companies and workers off the short-time payroll. But subsidies are always attractive and screening for “neediness” is extremely difficult. It seems preferable to build some form of a tax or other form of ex post targeting into the short-time work program to incentivize companies and workers to only take up the subsidy if necessary. Such provisions could include the simple threat of some screening after the crisis is over that could lead to a fine (or a conversion of the subsidy to a loan) in cases of fraud. Another useful tool may be to tax the benefits in proportion to the loss of income/revenue compared to last year, along the lines of Mankiw’s proposal (March 23). Any such incentives will naturally deter some employers and employees in need. This trade-off can be softened by offering other forms of help for those who are “missed” by the policy and clearly suffer hardship.
Mild hardship and lighter problems in small businesses can probably be addressed by offering cheap and simple access to small loans. What is ‘small’ could be checked against prior balance sheets or tax records. The government may offer to waive these loans after the crisis if there is evidence of true hardship or the company transits to short-time work
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