Saturday, March 15, 2014

The Long and Short of Kurzarbeit

An op-ed in this morning’s New York Times extolls the virtues of Kurzarbeit, the German system for promoting shared work rather than unemployment.  This isn’t the first time we’ve heard of this program; it’s a common theme among labor-oriented economists and pundits, who want for the US what Germany has achieved, a low unemployment rate despite the downdraft from 2008.

First, what’s Kurzarbeit?  It means “short work”, and it’s a public program to subsidize shorter work hours at the discretion of employers.  Rather than lay off workers altogether, a firm can offer them part-time work, and the government will subsidize a portion of the cost.  The exact amount of the subsidy varies depending on how long the part-time work continues, whether retraining is provided and other details, but a common figure for the average contribution is two-thirds.

The fact that the cost of keeping workers on the payroll is split between the employer and the government is important, and it explains why Kurzarbeit works better in Germany than it would in the US.  The bottom line is that businesses have to want to retain their workers and be willing to  pay a price to keep them in order for the system to be taken up.  This is true in Germany because of the entire economic model: the skill and involvement of the workforce is seen as the central asset on which business depends, and workers are key to the identity of firms—they are part of what the firm is, not outsiders who happen to do business with it.

The list of elements that make up this model is long.  It includes the apprenticeship system, which is paid for jointly by the government and business associations.  It includes works councils and co-determination, the representation of workers on the supervisory boards of firms.  It includes the public provision of credit to small and medium-size enterprises, which reduces labor market segmentation and promotes a “social” perspective on economic development.  And it also rests on longstanding cultural assumptions about work and livelihood that go back to the guild system of centuries past.  (Kurzarbeit itself is almost a hundred years old.)  German firms support Kurzarbeit because they want to keep their workforce through thick and thin—and the “they” includes worker representatives themselves.

I’m all for trying to introduce some replica of Kurzarbeit in the US, but how effective would it be?  How much of the extra cost of keeping redundant workers on the books would have to be paid by the government in order to convince firms to play along?  The increasing trend in this country is for firms to regard workers as interchangeable, offered minimal job security, training or career ladders.  It’s telling that the calls for an American Kurzarbeit come primarily from the left, not from the business community, which is not at all the case in Germany.

Don’t take this post as a criticism of work-sharing; that’s not my point at all.  Rather, to make the pieces of a better employment policy program work we need to address the whole anti-labor framework.

2 comments: said...

The Kuzarbeit system has worked quite well in Germany, certainly during the recent years, although its longer term prospects in Germany are questionable.

However, for all its virtues, I fear that it will not be possible to adopt in the US in a serious way, although perhaps in might exist in some remote corners of the economy, just as we have some sectors such as plywood where we have coops that job share and look like kurzabeit formations.

tstreet said...

The first thing that needs to be done is to make employers more desperate to retain workers. A guaranteed annual income would make it less likely that employers would welcome high rates of unemployment. As it is, high unemployment is considered a good thing because it lowers the cost of labor.