Abstract
There has been a strong interest in short-time work (STW) schemes during the global financial crisis. Using data for 23 OECD countries for the period 2004 Q1 to 2010 Q4, this paper analyses the quantitative effects of STW programmes on labour market outcomes. Special attention is given to the dynamic aspects of the relationship between output shocks and labour market outcomes.The results indicate the STW raises hours flexibility by increasing the output elasticity of working time and helps to preserve jobs in the context of a recession by making employment and unemployment less elastic with respect to output. A key finding is that the timing of STW is crucial. While STW helped preserving a significant number of jobs during the crisis, its continued use during the recovery may have slowed the job-content of the recovery. By the end of 2010, the net effect of STW on employment was negligible or may even have become negative. However, the gross impact of STW on the number of jobs saved per quarter remains large and positive in the majority of countries.
Highlights
Short-time work (STW) programmes are public schemes that are intended to preserve jobs at firms experiencing temporarily low demand by encouraging work-sharing, while providing income-support to workers whose hours are reduced due to a shortened workweek or temporary lay-offs
The same estimates suggest that the continued use of short-time work (STW) during the recovery exerted a negative influence over the job-content of the recovery
There has been a strong interest in short-time work (STW) schemes during the global financial crisis
Summary
Short-time work (STW) programmes are public schemes that are intended to preserve jobs at firms experiencing temporarily low demand by encouraging work-sharing, while providing income-support to workers whose hours are reduced due to a shortened workweek or temporary lay-offs. The results suggest that, as expected, STW increases the flexibility of average hours worked, but do not provide evidence that the reduction in working time associated with the use of STW in recessions mitigates the employment response to negative output shocks These results do not change much when controlling for selection effects by including measures for the level of employment protection and the generosity of unemployment benefits or by instrumenting STW using the age of the programme. The results are qualitatively similar when: countries without STW schemes are excluded from the sample; additional variables are included to control for the role of employment protection and the generosity of unemployment insurance and their impact on the responsiveness of labour inputs to output shocks; the potential endogeneity of STW is addressed by instrumenting the STW take-up rate by the number of years since the introduction of STW as suggested by Boeri and Brucker (2011).
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