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The state-funded German safety net known as Kurzarbeit, which keeps salaries flowing to workers even when their work has dried up, is getting renewed attention as governments around the world grapple with the economic fallout of the coronavirus pandemic. In boom times, Europe’s employee-friendly labor codes draw criticism for acting as a brake on economic growth, because they prevent companies from hiring and firing at will. Times like these shine a light on the virtues of programs such as Germany’s.
1. How does Kurzarbeit work?
Businesses facing a temporary and unavoidable shortfall of orders due to a crisis -- as is the case for many due to the coronavirus -- can apply for the government to subsidize workers’ salaries while activity is reduced or put on hold. Kurzarbeit -- pronounced KUHRTS-ahr-bite, and loosely translated as “short-time working” -- typically covers 60% of lost net wages, which rises to 67% for people with children. That’s far more generous than what’s on offer to furloughed workers in the U.S. and elsewhere. Companies are still responsible for paying workers and must apply to get reimbursed by the state. The German government recently expanded the program to include contract workers and cover social insurance contributions, among other tweaks to make it easier to access.
2. Is the program popular?
Though smaller companies say it isn’t perfect -- as it assumes they have the liquidity to cover personnel costs upfront -- Germany’s program has received frequent praise. It kept about half a million people employed during the global financial crisis, the Organisation for Economic Co-operation and Development reported in 2009. Germany’s labor minister has said it will save millions this time around.
3. How often is it used?
German companies, particularly manufacturers, make routine use of Kurzarbeit even when there’s not a global economic crisis going on. Companies can use it to offset seasonal production swings, such as bad weather affecting construction. Under special circumstances, it can even be used by companies undergoing restructuring to prevent sudden layoffs.
4. How much is it being used now?
A record 470,000 companies applied for Kurzarbeit in March, suggesting that around 9 million employees, or 20% of the German workforce, are affected by the program so far. Compare that to 2019, when an average of 1,300 companies applied for support each month. Big names including Volkswagen, BMW, Daimler, sports-apparel maker Puma and airline Lufthansa have said they plan to make use of the program.
5. Do other countries offer something similar?
France, Italy, Belgium, and the Netherlands are among other European countries that allow distressed companies to tap government funds to pay salaries in periods when they have little or no income. Many have recently pledged to bolster those programs with additional funds, and the European Commission has announced it wants to help governments pay for such policies. Canada also provides income support to people on a reduced work week, with a well-established program that has helped during previous economic hardships. With the pandemic causing extraordinary economic pain, other countries are moving to join the club.
6. Who else has signed on?
Sweden and Denmark introduced support measures specifically in response to the coronavirus. Denmark’s three-month aid program, for instance, is expected to pay partial wages to an estimated 70,000 people by June. (Nordic populations, those in Denmark, Finland, Iceland, Norway and Sweden, rely on generous welfare states that ensure those dropping off payrolls still get monthly support.) In the U.K. the government has made an unprecedented move to cover as much as 80% of salaries of workers whose jobs are at risk.
7. Does the U.S. have anything like this?
Not really. Furloughed employees in the U.S. typically go without pay but retain access to benefits like health insurance. Under the stimulus package signed into law by President Donald Trump, people receiving unemployment benefits through their state get an additional $600 per week from the federal government through the end of July. The stimulus law also makes more workers eligible for unemployment benefits, including those furloughed rather than laid off.
8. Could a Kurzarbeit program work in the U.S.?
Nobody has proposed it on any official level. But one of Trump’s favorite Fox News hosts, Tucker Carlson, on March 16 endorsed Kurzarbeit as “a model in progress for how we can save work.” One of Trump’s top economic advisers, Kevin Hassett, wrote approvingly of Kurzarbeit in 2009 during the global financial crisis. And a March 25 policy paper by the conservative Tax Foundation praised the German program, noting that it helped limit job losses after 2008, has been widely emulated since, and is likely to prove effective in the current slump too.
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