German companies clash over Kurzarbeit leave scheme

FOR THE For the first time in its august history in over 100 years, the Adlon, a glitzy hotel with a view to Berlin’s Brandenburg Gate, used Kurzarbeit, a scheme in which the German government pays the bulk of the wages of people who temporarily stop working or work reduced hours. “Our business had almost completely disappeared,” says Daniela Welter, the hotel’s chief of staff, referring to the strict lockdown imposed last November which prohibited hotel stays for leisure travelers. Thanks to Kurzarbeit, Adlon was able to save the jobs of all of its 347 employees. Today, he is recruiting again.

Kurzarbeit dates back over a century and was emulated around the world during the covid-19 crisis. In Germany, it has been extended to unprecedented lengths. While around 1.5 million German workers in 56,000 companies were put on leave at the height of the global financial crisis in May 2009, around 6 million employees from 610,000 companies took advantage of the program in April 2020, when the closures were the most stringent. Last month, 2.3 million people, or 7% of the German workforce, were still partially or fully on leave, according to the I FO Institute, a think tank. The cost to the Federal Employment Agency is 35 billion euros ($ 42 billion) and continues. In June, the German Minister of Labor announced an extension of the program until the end of September.

Workers and their representatives applaud the extension. A recent study of IMK, the research institute of the Hans-Böckler-Stiftung, a foundation close to the trade unions, found that Kurzarbeit saved 2.2 million jobs at the height of the pandemic, up from 330,000 jobs at the height of the 2007-09 global financial crisis. As for the government, without the regime it might have spent even more on its relatively generous unemployment benefits.

Employers are more circumspect. Most agree that Kurzarbeit has its uses. Sébastien Dullien, director of IMK, says it allows companies to keep their workers and restart seamlessly as the economy reopens, even as their U.S. counterparts struggle to find staff. the BDA, one of the two main employers’ associations in Germany, welcomes the extension.

The pressure group warns, however, against financing holidays through higher unemployment insurance contributions, which would increase the already high labor costs of companies. More surprisingly, the BDA opposes the full payment of social contributions for workers on leave by the government until the end of the year, as demanded by the trade union federation. This would reduce labor costs for businesses but create ‘bad incentives’ to enroll in the program, the BDA warnings.

This in turn could have potentially undesirable consequences for the competitiveness of companies. Although companies pay more than 30% of the labor cost of staff on leave and therefore have no reason to keep entirely zombie employees on the books, the program may discourage companies from adjusting to post-pandemic reality.

A study by Oliver Stettes of the Cologne Institute for Economic Research, another think tank, found that companies that operated Kurzarbeit were 15 percentage points more likely to cut jobs than others. It’s not as if the regime is pushing for layoffs. The most likely explanation is that only the most affected companies, such as Adlon or Lufthansa, the German flag carrier, whose fleet has been more or less immobilized for months, have chosen to participate. This in turn suggests that if they can help it, German companies would rather not.

This article appeared in the Business section of the print edition under the headline “Make it a short job”

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