The coronavirus pandemic has undoubtedly put a heavy strain on Germany’s labour market. But without the government’s short-time working scheme, things could have been a lot worse. According to a new study, Kurzarbeit was instrumental in saving as many as 2,2 million jobs. 

German government supports millions of workers during crisis

At the height of the coronavirus crisis, the German federal government secured 2,2 million jobs via the Kurzarbeit scheme, a new study by the Institute for Macroeconomics (IMK) and the Universities of Kiel and Münster has suggested. The figure was reached by extrapolating from data about the number of hours worked by employees registered with the scheme. 

Accordingly, Kurzarbeit supported six times as many jobs in 2020 as during the 2008 / 2009 financial crisis. Its effectiveness can also be illustrated by the unemployment figures: during many previous economic crises, the number of unemployed workers doubled. In 2020, however, it only rose from 2,3 to 2,7 million. 

“The German model of short-time working is a great thing,” the economist Andreas Peichl, of the Ifo Institute, told Süddeutsche Zeitung. “Several countries have copied it in the meantime.” 

Kurzarbeit puts low-wage workers in precarious position

According to Süddeutsche Zeitung, however the IMK investigation also shows that, despite receiving support from the government, the financial situation for many employees in Germany is still tight. 

While during the 2008 / 2009 financial crisis the majority of Kurzarbeit beneficiaries were industrial workers covered by collective bargaining agreements, this time around it has also been paid out to those working in less well-paid sectors, like retail and hospitality - sectors in which collective agreements are less common, and so fewer companies were obliged to top up their employees’ salaries.

Despite receiving short-time working benefits, the average single person had to forego a fifth of their income at the height of the coronavirus crisis in April 2020, twice as much as during the financial crisis. In the culture and hospitality sectors, the losses averaged 30 percent. 

“Short-time working successfully secures jobs, but can put employees with lower wages in a precarious position,” said Ulrike Stein, who heads the pension, wages and inequality department at IMK. She suggests paying a higher percentage of short-time work benefits to low-wage workers.

This is a view shared by Peichl: “Households with higher incomes put by a lot of money during the crisis. They were well-protected. There's a lot to be said for paying more to low-wage earners.”