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SHORT-TIME WORK AND RELATED MEASURES TO MITIGATE
THE CONSEQUENCES OF A (PARTIAL) ECONOMIC SHUTDOWN IDEA 2020
Short-Time Work and Related Measures to Mitigate the Consequences of a (Partial) Economic Shutdown2
March 29, 2020
The objective of this document is to provide a basic foundation to think about the merits, alternatives and policy design choices of short-time work policies. The first section characterizes the motivation for short-term work and the types of costs that it can help to reduce or cause. The second section briefly overviews key policy alternatives and their merits, to lay out where short-time work has the potential to be useful, and what alternative tools can amend or replace it. This is followed by an overview of short-time work policies from the last recession and key lessons learned from that experience. The document closes with an overview of short-time work policies already enacted in response to the current economic situation. The main aim of this document is to draw general policy conclusions for the current situation in the Czech Republic based on the reviews and considerations in the first two sections. Section 3 will attempt to do so. Readers who are primarily interested in specific policies or those familiar with the literature on short-time work may want to go straight to Section 3.
1. Main Objective and Problems of Economic Policy in the Current Corona Virus Crisis
In light of massive current short-run economic disruptions, a desirable goal would be to temporarily “suspend” the economy, i.e. to create conditions that would allow individuals and companies to take a break until the containment measures are lifted, at which point the economy should return to the pre-crisis state as seamlessly as possible. Suspending and later “waking up” the economy will obviously come at a cost, which depends on the measures taken as well as the details of implementation. To compare policies, it seems useful to distinguish the four different sources of costs:
2 The current text is by and large based on common sense and a partial understanding of the literature. When it is based on the literature, the current draft rarely gives appropriate credit. We will add the references it is based on and weed out parts where my common sense contradicts prior evidence. Davit Adunts, Sona Badalyan, Bohdana Kurylo and Ella Sargsyan made excellent contributions at short notice. All remaining mistakes, which we suspect are many due to speedy implementation, are our responsibility. Any comments or corrections are appreciated.
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