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Over the past few weeks, nearly ten million Americans have applied for unemployment. This is easily the worst two weeks of work in US history. And it might not be over yet. According to estimates from economists at the Federal Reserve of St. Louis, 47 million Americans can be dismissed during a pandemic.
German not yet released the number of recent jobless claims is enough for us to compare them to the U.S. large spike, but they are likely to be much lower. That’s because Germany handled the same crisis differently. They have a system that aims to prevent mass layoffs. This is called Kurzarbeit, which translates to “short work”. Under this program, when companies say they are in financial trouble, the government helps them pay their workers. Workers reduce their workweek, and the government usually pays them about ⅔ of their lost wages. In this way, everyone shares the pain of the decline and the work protection system.
By using a short-term work program, which has been around for more than a century, Germany has overcome everything from the world war to the financial crisis. “Unemployment did not rise in Germany after the 2008 financial crisis as it did in other developed countries,” said Anke Hassel, an economist at the Hertie School in Berlin. “That must have been largely due to Kurzarbeit because companies don’t have to fire their workers. “
That Kurzarbeit the system makes special sense in Germany, which is dominated by intensive manufacturing skills. Many German workers spend years in apprenticeship programs, developing special skills. Preserving a match between employers and employees is very valuable with this much investment in training. During the depths of the Great Recession, four fifths from all German workers get Kurzarbeit subsidies exist in the manufacturing sector.
Rüdiger Bachmann, a German-American economist at Notre Dame, believes that the German system, in maintaining relations between employers and employees, allows the economy to recover more quickly once the crisis ends. In the U.S. system, companies must invest more time and earn money and train more workers.
Anke Hassel stressed that Kurzarbeit not necessarily more expensive than the U.S. mass layoff system That’s because, in the U.S. system, the government still provides unemployment benefits. Germany also has a parallel system of unemployment insurance for those who are laid off. German companies can also fire their workers, American-style, and let them receive government assistance through other means. Of course, this is cheaper than keeping people working part time. But many German companies maintain the routes employed by their workers. In the past few weeks, half a million of them have submitted Kurzarbeit accompaniment.
Historically, German companies outside of specialized manufacturing are less likely to be used Kurzarbeit. It makes sense because a lot of work, especially in the service sector, does not require much training. For example, cashiers in grocery stores or servers in restaurants. Companies in these sectors have an easier time to recruit and train workers once the economy recovers. But Bachmann believes the rescue match is even important in this sector. “There is a burger joint, but there are also Asian fusion restaurants that find something very specific that provides welfare for customers,” he said. “We want this to be reopened as soon as possible after the crisis.”
France, Denmark, the United Kingdom, and other countries have adopted similar programs. One economist even called Kurzarbeit one of “Germany’s most successful exports”. Anke Hassel is based in Berlin, and when he read about the huge surge in unemployment in the United States, he was somewhat confused we did it this way. “Well, from a European perspective, that doesn’t look good,” he said. Even though unemployed Americans receive checks from the government, he said, they are still dealing with the great insecurity, anxiety, and vulnerability that comes from unemployment. The mass of unemployed people will eventually burden the taxpayers in various ways.
US. maybe not too far from developing a Kurzarbeit system. The $ 2 trillion coronavirus aid package multiplies with traditional unemployment insurance, but also includes a measure that might be considered Kurzarbeit-light. Actions are created a $ 349 billion “Salary Protection Program.” Under this program, small businesses can apply for loans at private banks, and these loans can be forgiven if companies keep their employees on the payroll.
Bachmann believes this is a step in the right direction, but he questions why it is managed through private banks, not directly from the government, and why it is limited to small businesses. According to him this will only slow down and reduce the benefits of the system. But this may be the beginning of a different way of thinking about how to deal with economic shocks.
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