Reemployment premium effect of furlough programs: evaluating Spain's scheme during the COVID-19 crisis.

This paper presents an average treatment effect analysis of Spain's furlough program during the onset of the COVID-19 pandemic. Using 2020 labour force quarterly microdata, we construct a counterfactual made of comparable nonfurloughed individuals who lost their jobs and apply propensity score matching based on their pretreatment characteristics. Our findings show that the probability of being re-employed in the next quarter significantly increased for the treated (furlough granted group). These results appear robust across models, after testing a wide range of matching specifications that reveal a reemployment probability premium of near 30 percentage points in the group of workers who had been furloughed for a single quarter. Nevertheless, a different time arrangement affected the magnitude of the effect, suggesting that it may decrease with the furlough duration. Thus, an analogous analysis for a longer (two quarter) scheme estimated a still positive but smaller effect, approximately 12 percentage points. Although this finding might alert against long lasting schemes under persistent recessions, this policy still stands as a useful strategy to face essentially transitory adverse shocks.

Covid-19 Measures in Switzerland—Considerations from a Practice Perspective

This paper offers some observations from a practitioner perspective on Swiss measures to support businesses during the Covid-19 pandemic, as a complement to the paper ‘Governmental measures in Switzerland against mass bankruptcies during the Covid-19 pandemic' by Rodriguez and Ulli in this volume. A brief overview of the main fiscal and non-fiscal measures is followed by analysis of the reasons for non-use of a major non-fiscal measure (a new moratorium), and some suggestions as to the lessons that can be learned from this for the design of analogous relief policies in future crises.

SURE: EU support to national short-term working schemes and its openness to non-standard workers

In response to the labour market effects of the COVID-19 pandemic, the European Union (EU) implemented ‘Temporary Support to mitigate Unemployment Risks in an Emergency' (SURE). This instrument enables loans to be made under favourable conditions from the EU to affected Member States, covering part of their costs for national short-time work (STW) schemes or similar policies. In essence, STW prevents unemployment by helping employers to temporarily reduce the working hours of their personnel, while providing these employees with income support from the state for the hours not worked. During the COVID-19 crisis, non-standard workers in particular experienced job loss or a reduction of working hours, while often having inadequate access to social security. This article assesses the inclusiveness of SURE in terms of providing, via national STW, support to all workers. Firstly, it explores the options provided by the SURE Regulation to finance STW schemes which also cover non-standard workers. Secondly, it gives an EU-wide overview of which schemes and which types of workers have been supported. Thirdly, the paper analyses in detail how three Member States – Belgium, Cyprus and Poland – have used SURE to support non-standard and self-employed workers. The article adds to the currently scarce analyses on how SURE is used by countries with various STW systems. Moreover, it shows whether SURE may fit the growing EU focus on providing access to social security for all types of workers irrespective of their employment relationship, as for instance codified in the EU Pillar of Social Rights. © The Author(s) 2023.

Designing short-time work for mass use

In the course of the Covid-19 pandemic, short-time work as an instrument of income replacement once again proved to be an effective means of stabilising employment. However, the very concept, based on individual entitlement, led to its operational limits in respect of mass use. For example, in Germany, the complete processing of all cases in multiple stages can take years, involving corresponding strains and uncertainties for firms and labour administration. Against this background, we discuss the development of variants of job retention schemes compatible with mass use. An international comparison indicates that the legal instrument of force majeure could facilitate access with simplified criteria and procedures. We elaborate on specific proposals for the well-known German system. Going beyond simplifying existing rules, we outline a collective instrument of a wage subsidy increasing with lost revenue or hours. In this respect, drawing on results from the relevant literature, we argue that the need to limit redundancies and the precision of the instrument must be carefully balanced. Particularly in the case of mass use, qualification is indispensable, which is why the need for a concept with flexibly applicable, modular and online-based training formats, incentives and counselling services is essential. Finally, preconditions for the phasing-out of the mass use scheme are outlined. The exceptional situation would have to be officially ended - or extended - at an appropriate time with sufficient notice. Subsequent schemes may provide for transition to regular arrangements, a gradual reduction of wage subsidies, and liquidity support.

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

PurposeThis 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/approachA dynamic macroeconomic model of job creation and destruction of the search and matching type in a dual labour market. FindingsThe 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/valueThe 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.

The effects of the job retention programme during the Covid pandemic on the Chilean firms and households

During the pandemic, several countries implemented job retention programmeswith the goal of preserving human capital and supporting a quick recovery. This work uses administrative records to show the impact of the job retention programme in Chile across firms of different industries and sizes. Using a calibrated model based on survey data of households and our administrative register of workers-firms, we then show that the Chilean Employment Protection Law increase aggregate consumption by 0.3% and helped to smooth household consumption during the period between March of 2020 and March of 2021.

A note on labour market effects of supply chain bottlenecks

During the COVID-19 pandemic there were supply chain bottlenecks all over the world with regard to raw materials and intermediate products. In this article, we examine how these constraints affected labour market development. For an empirical panel analysis, we combine survey data and administrative labour market data for economic sectors in Germany. We find effects on unemployment that are noticeable but still relatively limited. The effect on short-time work, on the other hand, is revealed to be considerable. Whilst short-time work is traditionally imposed where there are slumps in demand, our results show that it is also used in the case of adverse supply shocks. While inflation is rising, this explains why the Phillips curve does not shift outward. © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.

Subsidizing Labour Hoarding in Recessions: The Employment and Welfare Effects of Short-time Work

Short-time work (STW) policies provide subsidies for hour reductions to workers in firms experiencing temporary shocks. They are the main policy tool used to support labour hoarding during downturns and were aggressively used during the coronavirus disease 2019 (COVID-19) pandemic. Yet, very little is known about their employment and welfare consequences. This article leverages unique administrative social security data from Italy and quasi-experimental variation in STW policy rules to offer evidence on the effects of STW on firms' and workers' outcomes during the Great Recession. Our results show large and significant negative effects of STW treatment on hours, but large and positive effects on headcount employment. We then analyse whether these positive employment effects are welfare enhancing, distinguishing between temporary and more persistent shocks. We first provide evidence that liquidity constraints and rigidities in wages and hours may make labour hoarding inefficiently low without STW. Then, we show that adverse selection of low productivity firms into STW reduces the long-run insurance value of the program and creates significant negative reallocation effects when the shock is persistent.

COVID-19, normative attitudes and pluralistic ignorance in employer-employee relationships.

Employment relationships are embedded in a network of social norms that provide an implicit framework for desired behaviour, especially if contractual solutions are weak. The COVID-19 pandemic has brought about major changes that have led to situations, such as the scope of short-time work or home-based work in a firm. Against this backdrop, our study addresses three questions: first, are there social norms dealing with these changes; second, are there differences in attitudes between employees and supervisors (misalignment); and third, are there differences between respondents' average attitudes and the attitudes expected to exist in the population (pluralistic ignorance). We find that for the assignment of short-time work and of work at home, there are shared normative attitudes with only small differences between supervisors and nonsupervisors. Moreover, there is evidence for pluralistic ignorance; asked for the perceived opinion of others, respondents over- or underestimated the consensus in the (survey) population. Such pluralistic ignorance can contribute to the upholding of a norm even if individuals do not support the norm, with potentially far-reaching consequences for the quality of the employment relationship and the functioning of the organization. Our results show that, especially in times of change, social norms should be considered for the analysis of labour markets.

The impact of COVID-19 on Japanese firms: mobility and resilience via remote work.

Drawing on the original survey of Japanese firms during the COVID-19 pandemic, we estimate the impact of the crisis on firms' sales, employment and hours worked per employee and roles of work-from-home (WfH) arrangements in mitigating negative effects. We find that the lowered mobility, induced by the state of emergency declared by the government and fear of infection, significantly contracted firms' activities. On average, a 10% reduction in mobility reduced sales by 2.8% and hours worked by 2.1%, but did not affect employment. This muted employment response is consistent with limited changes in aggregate employment at the extensive margin during COVID-19 in Japan. We find that the adoption of WfH before COVID-19 mitigated the negative impact by 55% in terms of sales and by 35% in terms of hours worked. Adapting to the pandemic by increasing the number of remote work employees also helped firms moderately mitigate the negative impact on sales and work hours and reduce the probability of filing for the short-time work subsidy. Supplementary Information: The online version contains supplementary material available at 10.1007/s10797-022-09749-7.

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

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.

Later one knows better: the over-reporting of short-time work in firm surveys.

Short-time work (STW) in Germany allows for a lot of flexibility in actual usage. Ex ante, firms notify the Employment Agency about the total number of employees eligible, and, up to the total granted, firms can flexibly choose how many employees actually use STW. In firm-level surveys, which provide timely information on STW in Germany, over-reporting of the number of employees on STW is prevalent. This study explores reasons for STW over-reporting based on a high-frequency and low-cost survey initiated during the Covid-19-pandemic (BeCovid) and a low-frequency and high-cost long-running survey (BP). Merging administrative records on actual use of STW, firms that use STW prove more likely to participate in the BeCovid survey. Multi-establishment firms over-report STW because they tend to report STW for all subfirms. The BP uses more interview time and confirms the over-reporting of STW use in the survey month, while-crucially-the over-reporting drops sharply with a few months of retrospection.

Establishments in the Covid-19-Crisis (BeCovid): A High-Frequency Establishment Survey to Monitor the Impact of the Covid-19 Pandemic

The high-frequency establishment survey “Establishments in the Covid-19-Crisis” (BeCovid) started in 2020 and continued until June 2022 to collect monthly data on how businesses in Germany adjusted to the challenges of the pandemic. This article describes the survey design and provides an overview over the topics covered. We further outline the survey’s research potentials, particularly when linked to administrative records.

The effects of the job retention programme during the Covid pandemic on the Chilean firms and households

During the pandemic, several countries implemented job retention programmeswith the goal of preserving human capital and supporting a quick recovery. This work uses administrative records to show the impact of the job retention programme in Chile across firms of different industries and sizes. Using a calibrated model based on survey data of households and our administrative register of workers-firms, we then show that the Chilean Employment Protection Law increase aggregate consumption by 0.3% and helped to smooth household consumption during the period between March of 2020 and March of 2021.

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

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. © 2021, Victoria Osuna and José Ignacio García Pérez.

The heterogeneous effects of COVID-19 on labor markets: People's movement and non-pharmaceutical interventions.

The paper investigates the heterogeneous effect of a policy-induced decline in people's mobility on the Japanese labor market outcome during the early COVID-19 period. Regressing individual-level labor market outcomes on prefecture-level mobility changes using policy stringency index as an instrument, our two-stage least squares estimator presents the following findings. First, the number of people absent from work increased for all groups of individuals, but the magnitude was greater for workers with non-regular employment status, low-educated people, females especially with children, and those aged 31 to 45 years. Second, while work hours decreased for most groups, the magnitude was especially greater for business owners without employees and those aged 31 to 45. Third, the negative effect on unemployment was statistically significant for older males who worked as regular workers in the previous year. The impact was particularly considerable for those aged 60 and 65, thus suggesting that they lost their re-employment opportunity due to COVID-19. Fourth, all these adverse effects were greater for people working in service and sales occupations. Fifth, a counterfactual experiment of more stringent policies indicates that while an average worker would lose JPY 3857 in weekly earnings by shortening their work hours, the weekly loss for those aged 31 to 45 years and working in service and sales occupations would be about JPY 13,842.

Distributional effects of macroeconomic shocks in real-time: A novel method applied to the COVID-19 crisis in Germany.

The highly dynamic nature of the COVID-19 crisis poses an unprecedented challenge to policy makers around the world to take appropriate income-stabilizing countermeasures. To properly design such policy measures, it is important to quantify their effects in real-time. However, data on the relevant outcomes at the micro level is usually only available with considerable time lags. In this paper, we propose a novel method to assess the distributional consequences of macroeconomic shocks and policy responses in real-time and provide the first application to Germany in the context of the COVID-19 pandemic. Specifically, our approach combines different economic models estimated on firm- and household-level data: a VAR-model for output expectations, a structural labor demand model, and a tax-benefit microsimulation model. Our findings show that as of September 2020 the COVID-19 shock translates into a noticeable reduction in gross labor income across the entire income distribution. However, the tax benefit system and discretionary policy responses to the crisis act as important income stabilizers, since the effect on the distribution of disposable household incomes turns progressive: the bottom two deciles actually gain income, the middle deciles are hardly affected, and only the upper deciles lose income. Supplementary Information: The online version contains supplementary material available at 10.1007/s10888-021-09489-4.

Furloughing.

Over nine million jobs were furloughed in the United Kingdom during the coronavirus pandemic. Using real-time survey evidence from the UK in April and May 2020, we document which workers were most likely to be furloughed and we analyse variation in the terms on which they furloughed. We find that women were significantly more likely to be furloughed. Inequality in care responsibilities seems to have played a key role: mothers were 10 percentage points more likely than fathers to initiate the decision to be furloughed (as opposed to it being fully or mostly the employer's decision) but we find no such gender gap amongst childless workers. The prohibition of working whilst furloughed was routinely ignored, especially by men who can do a large percentage of their work tasks from home. Women were less likely to have their salary topped up beyond the 80 per cent subsidy paid for by the government. Considering the future, furloughed workers without employer-provided sick pay have a lower willingness to pay to return to work, as do those in sales and food preparation occupations. Compared with non-furloughed employees, furloughed workers are more pessimistic about keeping their job in the short to medium run and are more likely to be actively searching for a new job, even when controlling for detailed job characteristics. These results have important implications for the design of short-time work schemes and the strategy for effectively reopening the economy.

A lockdown index to assess the economic impact of the coronavirus.

Like most countries, the Swiss government adopted drastic measures to stop the spread of the coronavirus. These measures were aimed at avoiding close physical proximity between people. The adverse economic consequences of this lockdown policy became immediately apparent, with almost two million workers, or more than every third worker in Switzerland, being put on short-time work within only 6 weeks after the policy's implementation. In an attempt to promptly assess the heterogeneous consequences of this lockdown policy, we computed a lockdown index. This index is based on an occupation's dependence on physical proximity to other people and corrected for certain essential sectors being exempt from this policy. We find that on average, 31% of jobs in Switzerland have been potentially restricted by the lockdown policy. This average masks considerable heterogeneity along many dimensions, with the strongest effects for the large industries hospitality, construction, and arts and entertainment. With respect to the regional variation, we find the strongest effects for the cantons of Obwalden, Uri, Appenzell Innerrhoden, and Valais. Moreover, low- and middle-income individuals are considerably more restricted than high-income ones. We do not find meaningful differences between men and women or urban and rural areas. Finally, we test the explanatory power of the lockdown index for short-time work and unemployment increases by canton and industry until the end of April 2020 and find that it can explain up to 58% of these short-term employment outcomes.