Germany: Short-time Work to Prevent Unemployment in Times of Crisis

When in 2007 the financial crisis showed it’s whole seriousness, the German government introduced some measures to fight an increase in unemployment. The most drastical and at the same time highly criticized method was to support companies in Germany to employ their contracted employees as short-time workers with tax advantages, lower ensurance cost and lower wages, resulting from less working hours. This should improve the attractiveness to keep the workers employed, while taking some financial (labour cost) pressure from the companies.
But labour unions and employee representatives criticised that after the planned time of subvention by the state, the companies could easily fire the short-time workers and replace them with new ones instead of employing the old ones as fulltime workers again, resulting from the eased contracts. Additionally, it was reviewed that with a long-lasting crisis these measures would be useless and unaffordable, with the state paying twice: First with subsidies, then with social security payments.
In May 2009, it seemed as if the critics would be right. The government had to extend the subsidies for short-time workers until the end of 2010, because the economial situation did not improve as anticipated. So the costs for the subsidies were further increased and the discontend about the government’s dealing with the crisis got louder.
But suddenly, the economical situation improved in the middle of 2010 with a boom in export sales, followed by a fast growing domestic market. At that time, Germany was the only country in Europe with a recovering economy and many experts saw it as a short-term phenomenon. But especially the exporting companies had to serve the increasing demand and extended production, followed by more working hours and more employees. When the boom showed to be constant growth, the consumption morale improved and lead to a further recovery in the domestic market. This situation still continues and the unemployment rate is as low as it has not been since the German Reunification in 1990.
It is arguable, if this success was mainly due to the measures of the government or if it had a lot to do with the fact that Germany is highly dependent on exports and it benefited from the recovery of the global economies.

The attached graph shows the short-time workers in Germany in thousands. Now, in 2011 the number of short-time workers decreased almost to the level it was before the crisis.



One thought on “Germany: Short-time Work to Prevent Unemployment in Times of Crisis

  1. In my opinion the short-time work implemented by the German government during the crisis was the best policy that could be realized. Through this desicion companies were able to keep their employees which entails not only advantages for the companies and their employees but also for the whole economic sector. If subsidies would not be paid by the government the unemployment rate would be much higher not only during the crisis but also afterwards. Interrelated with this policy is also the hindrance of a time delay. If unemployment is once high, it takes a long time to stabilize it and improve the economic situation. And as the depression in the labour market was not very high, it was much easier to achieve higher employment. I think that this policy was a very clever step to supply the whole German economy with safeness enabling it to recover very fast during and after the crisis.


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