海角大神

Germany鈥檚 recipe for lockdown: Reduced hours, not layoffs

Annette Brinkman was only 4 when she took her first trip out of Germany.

That trip to the sun-soaked island of Mallorca, Spain, with her parents inspired a love for travel, and by her teens she was collecting destination brochures 50 at a time. By high school, she knew she wanted a career in tourism.

Today, the coronavirus pandemic has decimated revenues at the company that鈥檚 employed her for four decades as a travel booking agent and office manager.

Yet, even as the travel industry has been gutted, Ms. Brinkman collects more than half of her original salary as she cooks, gardens, takes a breather, and waits for the signal to return to work at her company鈥檚 local office in Dortmund, a medium-sized city in western Germany. Thanks to a German government program known as Kurzarbeit, which taps government coffers to help employers pay worker salaries, the company hasn鈥檛 let go a single employee.

Editor鈥檚 note: As a public service,聽all our coronavirus coverage聽is free.聽No paywall.

鈥淭his is the first time I鈥檝e not been working in 40 years,鈥� says Ms. Brinkman. 鈥淚t鈥檚 a shock. But without Kurzarbeit, we would all be unemployed right now. That would be 100 times worse.鈥�

As the global pandemic prompts an uncertain economic future, employers in Germany have tapped an important patch in the country鈥檚 social safety net to help avoid mass layoffs and stay afloat. Translated as 鈥渟hort work,鈥� Kurzarbeit allows companies to whittle down employees鈥� working hours to as little as zero if needed, and have the government chip in to restore salaries to a certain level.

Deployed during the 2008-09 global recession, the program聽took about 3.5 million applications in 2009 and assisted nearly 1.5 million workers at its peak. During the current crisis, applications for more than 11 million workers are winding their way through the Federal Employment Agency.

鈥淲e鈥檙e proud in Germany we have a good social security system,鈥� says Johannes Jakob, head of labor market policy at DGB, Germany鈥檚 leading trade union. 鈥淚t may be a little more expensive, but during the 2008-09 crisis skilled workers could stay in place, and when the economy improved they were able to start again the next day. It helps us get out of the crisis as quickly as possible.鈥�

Keeping people working

Under Kurzarbeit, employers can reduce workers鈥� hours to any fraction of a normal workweek and pay accordingly. Germany鈥檚 Federal Employment Agency, flush from 10 years of building up reserves, then plugs the remaining salary gap up to a certain percentage of an individual鈥檚 usual salary.

Two years from retirement, Ms. Brinkman volunteered to work zero hours, with the thought that younger colleagues might need hours that would have been allocated to her. Without working, she鈥檚 still able to collect 60% of her pay, but she鈥檚 cut out frills including once-weekly dinners and thermal baths.

Kurzarbeit does keep most people working, according to Mr. Jakob. During the 2009 financial crisis, about 3 of 4 employees continued to work even in Kurzarbeit. And, 鈥渟hort work鈥� costs governments roughly the same as putting people on unemployment, Mr. Jakob notes, yet it reaps much greater rewards. Employers can get help to keep workers on payrolls, while those workers can feel more secure in their financial and career outlooks.

The U.S. situation, where nearly 40 million filed for unemployment during the coronavirus shutdown, would be a catastrophe in Germany, says Mr. Jakob. 鈥淭he equivalent in Germany would be roughly 14 million unemployed without Kurzarbeit. [With the program] we actually only have 500,000 unemployed.鈥�

Enzo Weber, a macroeconomist with the University of Regensburg, points out that retaining workers is much more important in a market like Germany鈥檚. In short, companies are slow to hire. 鈥淚n Germany if we had 30 million additional unemployed, it would take us 20 years or so to get back to the pre-crisis level,鈥� says Mr. Weber. 鈥淭he U.S. market sheds quickly, but also brings back workers much more quickly. We are slower than the U.S. in both directions.鈥�

A drag on reform?

Kurzarbeit isn鈥檛 a perfect system. It鈥檚 relatively expensive and doesn鈥檛 fully benefit certain workers such as hospitality employees since overtime and tips make up a large proportion of take-home pay. Such line items aren鈥檛 typically calculated into Kurzarbeit.

The program also requires the right combination of factors to prompt employers to apply, such as an 鈥渆xogenous鈥� market shock that appears temporary, and a skilled-worker shortage that makes it difficult to fill positions.

So far, those factors have neatly lined up. A coronavirus is an external shock, and Germany suffers from a shortage of qualified labor. 鈥淭his makes firms ready to keep people on board, because they might never get them back,鈥� says Mr. Weber. 鈥�Kurzarbeit saves them the 鈥榤atch capital鈥� so they can restart quickly when they need.鈥�

Yet, Kurzarbeit can also slow progress should industries need restructuring, 鈥渂ecause it keeps everything and everyone where it is,鈥� says Mr. Weber.

Indeed, the pandemic has prompted changes in supply chains and industries such as mobile, transportation, and digitization. 鈥淛obs after the recession aren鈥檛 necessarily going to be the same as before the recession,鈥� says Mr. Weber. That means retraining and investment in skills is important to keep the workforce agile and adaptable, he says.

Uncertainty in the future

Ms. Brinkman is aware that the travel industry could be radically changed once the economy gets back to normal. 鈥淟ongtime clients will always be with us,鈥� says Ms. Brinkman, 鈥渂ut will others book online? Or will they say the travel agencies really helped us through this time?鈥�

In short, she wonders if all the 24 colleagues in her local office will be needed in the future.

For Robert Helbig, four weeks on Kurzarbeit was a blessing, as he鈥檇 just welcomed a newborn son. A worker at a car factory, he stayed home as the plant was shuttered, and the Federal Employment Agency covered 60% of his salary while his employer topped up the rest. 鈥淓njoying that time with the family is amazing,鈥� he says.

Mr. Helbig is back at work now as Germany has reopened for business. He鈥檚 thankful that he鈥檚 survived the crisis financially intact.

鈥淚 think a lot of people don鈥檛 really know how good Kurzarbeit is,鈥� says Mr. Helbig. 鈥淔or some people it鈥檚 hard to survive on 60% pay. But we shouldn鈥檛 be complaining in Germany. Especially if you look at what鈥檚 happening in America.鈥�

Editor鈥檚 note: As a public service,聽all our coronavirus coverage聽is free.聽No paywall.