The Heterogeneous Impact of Short-Time Work: From Saved Jobs to Windfall Effects

Cahuc, Pierre; Kramarz, Françis; Nevoux, Sandra

doi:10.2139/ssrn.3855945

Cited by 27 publications

(21 citation statements)

References 17 publications

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“…For instance, Balleer et al (2016), claim that changes in the discretionary component of STW mainly subsidize workers that would not have been fired anyway. Cahuc et al (2021) find that STW may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours of work are reduced, without saving jobs. They also find windfall effects, which increase the cost of the policy per job saved.…”

Section: Literature Reviewmentioning

confidence: 82%

“…The closest models to ours are Balleer et al (2016) and Cahuc et al (2021). They study the effectiveness of publicly subsidized STW policies in the context of the Great Recession using a structural macroeconomic search and matching model with endogenous separation.…”

Section: Literature Reviewmentioning

confidence: 99%

“…By contrast, Giuponni and Landais (2020) find that the Italian scheme is more prone to displacements by postponing dismissals rather than preventing them. Cahuc et al (2021) complement this literature by focusing on the heterogeneous effects of STW and document large windfall effects.…”

Section: Literature Reviewmentioning

confidence: 99%

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Temporary layoffs, short-time work and COVID-19: the case of a dual labour market

Osuna

Pérez

2021

AEA

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Purpose This paper aims to study the type of short-time work (STW) schemes implemented in Spain to preserve jobs and workers’ incomes during the COVID-19 crisis and the corresponding labour market outcomes. Design/methodology/approach A dynamic macroeconomic model of job creation and destruction of the search and matching type in a dual labour market. Findings The model shows that the availability of STW schemes does not necessarily prevent a large increase in unemployment and job destruction. The quantitative effects depend on the degree of subsidization of payroll taxes and on the design of the policy. A scenario with a moderate degree of subsidization and where the subsidy is independent of the reduction in hours worked is the least harmful for both welfare and fiscal deficit. The cost of such a strategy is a higher unemployment rate. Concerning heterogeneous effects, the unemployed are the ones who experience the strongest distributional changes. Originality/value The effectiveness of STW schemes in dual labour markets using a search and matching model in the context of the COVID-19 crisis has not been analysed elsewhere. The literature has emphasized the importance of dynamics, labour market institutions and workers’ heterogeneity to understand workforce adjustment decisions in the face of temporary shocks to de- mand especially when firms’ human capital is relevant. These elements are present in the model. In addition, this paper computes welfare and distributional effects and the cost of these policies.

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Section: Literature Reviewmentioning

confidence: 82%

Section: Literature Reviewmentioning

confidence: 99%

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Temporary layoffs, short-time work and COVID-19: the case of a dual labour market

Osuna

Pérez

2021

AEA

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“…Additionally, regardless of the labour market measure chosen, STW as well as the unemployment insurance carry the risk of moral hazard for labour market actors and are associated with social costs. Regarding STW, Cahuc et al (2021) document moral hazard problems on the firm side by showing that firms with relatively low revenue shocks tend to reduce their employees' working hours without actually safeguarding their jobs. In contrast, too generous unemployment benefits may induce moral hazard issues if they reduce search effort for new jobs (Schmieder et al 2016).…”

Section: Comparison Of the Strategiesmentioning

confidence: 99%

Germany and the United States in coronavirus distress: internal versus external labour market flexibility

Herzog-Stein

Nüß

Peede

et al. 2022

J Labour Market Res

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Germany and the United States pursued different economic strategies to minimise the impact of the Coronavirus Crisis on the labour market. Germany focused on safeguarding existing jobs through the use of internal flexibility measures, especially short-time work (STW). The United States relied on a mix of external flexibility and income protection. On this basis, we use macroeconomic time series to examine the German strategy of securing employment through internal flexibility by contrasting it with the chosen strategy in the United States. In Germany, temporary cyclical reductions in working hours are mainly driven via STW. US unemployment rose at an unprecedented rate, but unlike in previous recessions, it was mostly driven by temporary layoffs. However, a closer look at the blind spots of the chosen strategies in both countries showed that despite the different approaches, people in weaker labour market positions were less well protected by the chosen strategies.

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“…Insofar as it is more profitable for firms to reduce the hours worked of temporarily lowproductive workers, STW induces firms to retain low-productivity jobs much more precisely than wage or hiring subsidies. Hence, STW can help sustain employment in recessions at a small cost, relative to other policies providing financial support to firms (Cahuc et al 2021, Giupponi et al, 2022 It has also been argued that STW is more equitable because it is a "work-sharing" scheme distributing the adjustment burden over a large number of workers, who reduce their hours of work, compared to a situation where some workers are dismissed outright (Abraham and Houseman, 1994, Walsh et al, 1997, Vroman and Brusentev, 2009. This is particularly true when STW is implemented in the context of "solidarity agreements" aimed at preventing layoffs.…”

Section: Reducing Layoffsmentioning

confidence: 99%

Labor Market Insurance Policies in the XXI Century

Boeri

Cahuc

2022

SSRN Journal

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The Heterogeneous Impact of Short-Time Work: From Saved Jobs to Windfall Effects

Cited by 27 publications

References 17 publications

Temporary layoffs, short-time work and COVID-19: the case of a dual labour market

Temporary layoffs, short-time work and COVID-19: the case of a dual labour market

Germany and the United States in coronavirus distress: internal versus external labour market flexibility

Labor Market Insurance Policies in the XXI Century

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