Clarence Page: Germany’s enviable shock absorber
As the usual suspects in Congress argue over whether to extend unemployment benefits, which ran out at the end of last year for more than a million jobless workers, I am feeling Germany envy.
Jobs in Germany fell more softly in the 2008 global economic crisis than they did here or in the rest of the European Union —and bounced back more quickly.
While the U.S. and Europe still struggled at the end of 2013 to return unemployment to pre-recession 2007 levels, Germany already had pushed their unemployment 30 percent below that level.
How did Deutschland do it? Recoveries are complicated, but a major factor appears to be Germany’s policy of “Kurzarbeit” and that we Americans call “work sharing.” Instead of firing workers or laying them off in times of economic crisis, it encourages hard-pressed companies to reduce all of their employees’ hours and pay — and the government pays a portion of the workers’ unemployment benefits to help make up the difference.
For example, if hours and wages are reduced by 10 percent or more, the government makes up 60 percent of workers’ lost salary, explains Kevin Hassett, economic policy director at the conservative American Enterprise Institute, who has been studying Germany’s work sharing for several years.
The benefits of this arrangement are enormous. Workers stay on their jobs, although with reduced hours, and they keep most of their salaries, which is better than getting laid off. Some workers even pick up part-time work with their work-sharing schedule, which further means some even come out financially ahead.
For government, it’s cheaper to pay partial unemployment benefits to a reduced-time worker than to pay full benefits to an unemployed worker.
And for employers, it’s less costly in many ways to keep a reliable worker on the job and, when business improves, expand everyone’s hours again without having to find, hire and train replacements.
What’s not to like? Remarkably in polarized Washington, work sharing has enthusiastic fans on both political sides — which may account for why the idea has received so little attention.
Although Hassett has advised three Republican presidential nominees, his support for work sharing has put him on the same side as such liberal allies as, well, President Barack Obama.
Conservatives outside of think tanks are wary about any idea that Obama likes, and liberals feel the same about the tea party right.
Yet Obama’s Middle Class Tax Relief and Job Creation Act of 2012 passed with bipartisan support for the federal incentives it offers to states to set up work-sharing programs. But many of those incentives expire in the next year or two.
Michael Strain, another AEI scholar, suggests “it would be wise to extend them” and expand other incentives in the law.
About half of the states have launched work-sharing programs of their own, including some that had them before Washington stepped in.
So far, 27 states are participating, but further growth has come slowly, partly because too few people know about it.
Another reason was raised by Illinois State Rep. Renee Kosel, a New Lenox Republican whose work-sharing bill failed to survive a state House committee last year. “I think there aren’t yet enough employers who feel the need to do it,” she said, “except those with workers whose special skills make them harder to replace.”
Economic skeptics also question whether it would not be better to encourage workers to pack up and move as workers traditionally do to where jobs are more plentiful. That’s worth debating. In fact, Strain has suggested that government should offer to help those workers with relocation assistance.
Indeed, such a move could be cheaper for taxpayers than unemployment insurance and more helpful in the long run for the workers. In the midst of our third “jobless recovery” since the early 1990s, Americans should be less concerned about what’s left or right than with what works.
Email Clarence Page at firstname.lastname@example.org.