DP8449 Short-Time Work: The German Answer to the Great Recession

Author(s): Karl Brenke, Ulf Rinne, Klaus F Zimmermann
Publication Date: June 2011
Keyword(s): economic crisis, labour market policy, partially unemployed workers, short-time work compensation
JEL(s): J65, J68
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8449

Short-time work was the 'German answer' to the economic crisis. The number of short-time workers strongly increased in the recession and peaked at more than 1.5 million. Without the extensive use of short-time work, unemployment would have risen by approximately twice as much as it actually did. Short-time work has certainly contributed to the mild response of the German labor market to the crisis, but this is likely due to the country-specific context. Although the crisis has been overcome and employment is strongly expanding, modified regulations governing shorttime work are still in place. This leads to undesired side effects.