Does Short-Time Work Save Jobs? A Business Cycle Analysis

Balleer, Almut; Gehrke, Britta; Lechthaler, Wolfgang; Merkl, Christian

doi:10.2139/ssrn.2290473

Cited by 15 publications

(35 citation statements)

References 33 publications

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“…High and medium-income developed and developing countries have put in place counter-cyclical monetary and fiscal policies, and while such policies have been beyond most low-income developing countries with limited public finances the spotlight has been shown on the labour theory. Earlier studies on the employment effects of SARS and MERS find that short-time work could be an effective measure to prevent job losses in severe recessions (Balleer et al , 2016), this may though not hold in the current situation. This is because the magnitude of the employment losses from the COVID pandemic differ substantially across different types of jobs and different types of workers.…”

Section: Review Of Literaturementioning

confidence: 99%

The labour market impact of COVID-19: early evidence for a sample of enterprises from Southern Europe

Webster

Khorana

2021

IJM

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PurposeThe choice of Southern Europe is partly based on the observation that the sample includes a number of countries whose economies faced more severe difficulties than elsewhere in Europe. Economically they were less able to absorb the economic shock posed by COVID-19. It is also partly based on the characteristics of the pandemic. A number of countries in the sample were amongst the earliest in Europe to be hit by the pandemic and a several were harder hit in terms of both morbidity and mortality.Design/methodology/approachThis study uses evidence from World Bank enterprise surveys of a sample of firms from six countries in Southern Europe. It examines the early evidence of the effects of COVID-19 on labour markets. The economic consequences potentially cover a wide range of issues. The focus of this study is on firm level evidence of the effect on labour. The evidence and the analysis are provided at a time when the pandemic is still in progress. The authors use both traditional regression analysis and IPWRA to assess the joint effect of loans versus government support on, firstly, the change in sales revenues and, secondly, the number of weeks that the firm would expect to survive with no sales revenues.FindingsThe study suggests that, despite efforts to support firms and hoard labour, there is a prospect of a significant number of firm closures with a consequent loss of employment. Temporary firm closures also represent a substantial loss of labour weeks. These are partly related to a significant number of workers subject to furloughs. The empirical findings suggest that COVID-19 cases and deaths have directly affected firm sales but government containment measures, particularly closures, have more strongly affected firms. Losses of sales were unsurprisingly related to losses of employment. Remote working has contributed to sustaining employment but online business has not affected most sectors.Research limitations/implicationsThe future progress of COVID-19 and government containment measures is uncertain, and the full economic consequences will probably continue to emerge after the end of the pandemic. The full extent of the impact on labour will probably not be the first of these. There are obvious advantages in seeking to learn lessons from the early stages of the pandemic but there are also obvious constraints. The full economic consequences will take longer to emerge than the pandemic itself and the full consequences for employment will take longer to be evident than many other economic effects.Practical implicationsBoth temporary closures and furloughs impose costs that will be borne by firms, workers and government. The effects of COVID-19 on firms differ across sectors. Adverse effects tend to be higher in hospitality, non-essential retail and travel. That many firms lack the capacity to survive further temporary closures of a similar duration to those in the earlier stages emphasises that the support provided in the near future is of critical importance to control employment losses through permanent firm closures. A long-term perspective suggests neither permanent closure nor laying off workers may be the best response to a temporary crisis in demand. A stakeholder model of the firm would often suggest that it is not an optimal for the point of view of workers or the wider economy either. Both imply a preference for labour hoarding.Social implicationsThe most affected are sectors with a high proportion of female workers and, in consequence, most of the countries in the sample exhibit an early decline of the already lower than average share of women in employment.Originality/valueThe data used have been recently released and this is the first analysis using the data to look at the consequence on firms employment decisions during the Pandemic. The case of Southern Europe is much understudied, though one of the most dramatic as to the consequences of the pandemic. From a methodological point of view, the authors use not only traditional regression analysis, but also the matching approach to identify the effect of different policy options on labour demand by firms.

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Section: Review Of Literaturementioning

confidence: 99%

The labour market impact of COVID-19: early evidence for a sample of enterprises from Southern Europe

Webster

Khorana

2021

IJM

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“…We construct a New Keynesian DSGE model with search and matching frictions, endogenous separations and rigidities in prices and real wages. To this model, we add a STW decision as in Balleer et al (2016) and incomplete asset markets as in Ravn and Sterk (2017). Worker-firm matches are subject to idiosyncratic profitability shocks.…”

Section: Introductionmentioning

confidence: 99%

Short-Time Work and Precautionary Savings

Dengler

Gehrke²

2022

SSRN Journal

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“…Whilst some predate the 'great recession' of 2008-2009, many more were conducted in relation to the contributions STW made at that time. 10 Reviews of the literature are given in, inter alia, Balleer et al (2014), Boeri and Brücker (2011), Cahuc et al (2018) and Hijzen and Martin (2012). Most find that STW schemes can have a positive impact on employment during downturns, even if their longer-term impact is more or less neutral-partly because they might have impeded recovery.…”

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confidence: 99%

“…One study concludes that the impacts of 'regular' and 'extended' STW can differ (Balleer et al, 2014). Following the use of such schemes over a business cycle, it concluded that, when regular STW was used, it had a positive impact.…”

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confidence: 99%

KURZARBEIT/SHORT TIME WORKING: EXPERIENCES AND LESSONS FROM THE COVID-INDUCED DOWNTURN

Casey¹,

Mayhew

2022

NIER

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Following the covid-induced lockdowns, many commented on the role the German model of Kurzarbeit could play in reducing unemployment. Other countries emulated the model. Looking at the experiences of Germany, the UK, Sweden and the USA, the article analyses the strengths and weaknesses of short-time working (STW) schemes. It asks whether STW has been well designed to have optimal short and longer run impact. It is quite effective as a short-term palliative, but in longer downturns, its weaknesses come to the fore. It is by no means clear that the UK needs a permanent replacement for the furlough.

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Does Short-Time Work Save Jobs? A Business Cycle Analysis

Cited by 15 publications

References 33 publications

The labour market impact of COVID-19: early evidence for a sample of enterprises from Southern Europe

The labour market impact of COVID-19: early evidence for a sample of enterprises from Southern Europe

Short-Time Work and Precautionary Savings

KURZARBEIT/SHORT TIME WORKING: EXPERIENCES AND LESSONS FROM THE COVID-INDUCED DOWNTURN

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