Chart 1 shows the number of employees taking part in STWA as a percentage of total employment in a selected group of Member States in 2009. In all Member States with the exception of Belgium the share is below 3 percent. Germany has the second largest share. Behind these averages are some noticeable developments. In Germany the number of recipients increased from 39 000 people in May 2008 to more than 1 500 000 people in May 2009, while in Belgium the number of recipients increased from about 87 000 people in July 2008 to a peak of 313 000 people in March 2009 after which it started to decline gradually. In Austria the total number of recipients rose from zero in August 2008 to more than 36 000 in June 2009, falling thereafter. A more modest increase is to be observed in the other Member States(15).
3.1.1. Scope and limitationsA short-time work arrangement (STWA) can be seen as a temporary reduction in working time intended to maintain an existing employer/employee relationship. It can involve either a partial reduction in the normal working week for a limited period of time (a partial suspension of the employment contract) or a temporary lay-off (zero hours’ a week), in other words, a full suspension of the employment contract.In both cases, however, the employment contract remains in force, and is not broken. See Box 3 for a summary of the main institutional characteristics of STWAs.
The objective of STWAs in times of economic crisis is twofold.
Firstly, it enables companies to reduce labour costs in the short-term and to quickly adjust labour inputs to cyclical fluctuations in labour demand by reducing working time for the existing workforce, rather than resorting to layoffs and related costly and lengthy dismissal procedures, especially in highly-regulated labour markets. Moreover, it enables companies to retain skilled workers, thus avoiding the costs of recruiting and training new workers when demand recovers, and enhances employee morale.
Secondly, to the extent that they prevent lay-offs, such measures spread the adjustment burden over all of the workers rather than concentrating the impact on a few, possibly more vulnerable workers, who might otherwise risk becoming inactive in the long-term.
Two main kinds of risks are associated with STWA schemes.
Firstly, they could lead to deadweight costs as they may encourage employers to enrol in such schemes, even if no lay-offs are planned (windfall profits being sought by companies). This may lead to excessive take-up and become an undue financial burden on national unemployment insurance schemes, which are the usual financing instrument in the EU. In the long run, taxes or contribution rates would have to be increased - inducing higher wage costs and loss of competitiveness. This is in contrast with the USA, where the financing of STWA is generally privately arranged and insurance-based.
Secondly, STWA could prove ineffective in saving jobs permanently. The jobs kept alive for some time could eventually prove to be unviable and ultimately end in lay-offs. In the meantime, more viable jobs held by non-beneficiaries of such schemes – who would typically be new entrants to the labour market or small and medium-sized enterprises (SME)’s – might be exposed to effective ‘displacement’.
There is considerable variety in the institutional arrangements concerning short-time work programmes across Europe.
In France, Belgium and Luxembourg, public short-time work (STW) and temporary lay-off schemes are usually known as ‘partial’ or ‘temporary unemployment’, sometimes with reference to the specific application or circumstances (e.g. economic, seasonal, and technical). These schemes should be distinguished from voluntary working time reduction on an individual or collective basis (through time accounts, time credit, sabbatical leave, etc.(1) or from ‘part-time unemployment’, which indicates a situation where (partially) unemployed jobseekers would prefer to work longer hours or full time, but can only find part-time work and receive various forms of direct financial support for the incurred loss of earnings.
In Denmark, STW is designated as ‘work sharing’. This indicates a reduction in working time intended to spread a reduced volume of work over the same number of workers to avoid lay-offs. As such, it is to be distinguished from ‘job sharing’, which refers to a voluntary arrangement whereby two persons take joint responsibility for one full-time job.
In the Netherlands, short-time work support was temporarily offered up until the end of March 2009 in order to respond to the economic crisis.
Since then, companies experiencing temporary financial difficulties may apply for partial unemployment for their workforce.
Austria and Germany simply refer to such schemes as ‘short-time work’, while Italy stresses the aspect of income support in its STW scheme, which is called the Wage Supplementation Fund (CIG(2)).
In countries such as Estonia, companies and employees may agree on STW arrangements, however, without public financial support.
Table 1 summarises the maximum duration and level of STW compensation and unemployment benefit before the crisis measures.
In most of the other Member States (Estonia, Greece, Cyprus, Malta and Sweden) which do not have government subsidised STW arrangements to respond to drops in labour demand caused by an economic downturn, insured workers can get support through the regular unemployment scheme, or receive training grants for people working reduced hours.
(1) | IAB (2009) observes that in ( Germany STW accounted for only 25% of the total reduction in average hours from 2008 to 2009, while reductions in the volume of paid over-time work and debiting working-time accounts were both responsible for a 20% reduction in hours (other leave covered by sick leave et al.). |
(2) | La cassa integrazione guadagni. |
(14) | This section is based on Arpaia et al. (2010) |
(15) | Charts 11 to 18 in Annex 1 show the number (or stock) of recipients of shorttime working allowance for nine Member States, while charts 19 to 25 show the new recipients of short-time working allowance for another six Member States. See also section 2.2.4 of Chapter 1 of this report. |