What is... | November 24, 2009

What is Kurzarbeit?

It might be a hard word for non-Germans to get their tongues around. But Kurzarbeit is a concept that is likely to be of interest around the globe. It is a form of government work subsidy in Germany in which employees get about 80% of their salary for working half-time.

The German government announced in November 2009 it was likely to extend its Kurzarbeit scheme for another 18 months. Other countries in Europe have similar schemes – such as arbeidstijdverkorting, or ATV, in the Netherlands.

The facts and figures
A paper out of John Hopkins University in the United States detailed (in English) the background of Kurzarbeit and gives a concise definition. It said Kurzarbeit permitted employers to cut working time by up to 50 percent – with employees placed on the short-time work scheme receiving between 60 and 67 percent of their net foregone wage from the German Federal Employment Agency. Employers also receive tax advantages through the scheme. Before the financial crisis, companies in Germany could access subsidised short time working for 6 months. But in June it was temporarily extended to up to 24 months for the rest of this year. Last week, Minister for Labour and Social Affairs Dr Franz Josef Jung announced companies were set to be able to access the 24-month-long subsidy until June 2011 – opening the possibility for employees to work on a subsidised short time arrangement until June 2013.

Kurzarbeit has become widespread in Germany
The short-term work instrument has been touted as one of the most efficient measures during the crisis. It has been popular, with about 1.5 million workers now involved. Data showed since 2000 the numbers had been much lower.

How Kurzarbeit has protected employment in Germany
Data released this month by Eurostat, the Statistical Office of the European Communities, showed Germany was not as badly hit with job losses than many other countries in Europe. The figures indicated employment in the 27 member countries of the European Union dropped 1.9% in the year to the end of the June quarter. The drop took the number of employed people in the area to 222.7 million. Luxembourg was the only country to have employment growth in the year to June – up 1%. Germany was also particularly resilient with employment down just 0.1% in the period.

The future for Kurzarbeit
The extension of the subsidy scheme could save more jobs and it is likely to add more certainty immediately for German families. It could even increase spending over the Christmas holiday period – which would be important for the country’s economic recovery. But the longer term outlook is still uncertain. If the recovery in Europe is V-shaped – that is, characterised by a steep fall and an equally vigorous bounce – the subsidy for short-time employment will prove valuable. The costs incurred by the government could be paid back later. If the recovery is U or L shaped, paying the costs could prove more difficult. What is … is an occasional feature from eZonomics that explains important terms and people.


eZonomics team
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