Uk chancellor rishi sunak has vowed to get creative. to protect jobs we need to try things no government has ever done, he said this month. oddly, the pay top-up scheme to minimise mass unemployment he is reportedly considering sounds like a german scheme that is over 100-years-old.
The kurzarbeit is the gold standard of short-time work schemes, according to the imf. under it, the state normally provides workers with 60 per cent of pay for hours not worked. it is one reason german employment unlike other g7 countries did not fall in 2009.
This scheme maintains the link between employers and the employed. like other european schemes, such as frances chmage partiel, the kurzarbeit contrasts with the us approach. this focuses on supporting individuals rather than jobs when political wrangling permits.
Critics of the european model argue that excessive state support prevents the process of creative destruction. one is deutsche bank boss christian sewing, who fears europes recovery will lag behind that of the us. that argument holds good where covid-19 has accelerated structural trends. a lasting shift to remote working and more ecommerce will permanently erase some jobs.
The uk has provided far less generous pandemic support, roughly half the business loans and direct support as germany, measured as a share of gdp. in addition, support for the unemployed is much lower than in france or germany. mr sunak could strengthen the uk safety net by extending a 1,000 a year rise in universal credit due to expire in april next year.
The chancellor would do well to ape elements of the kurzarbeit but should ensure it is targeted at viable jobs. wage subsidies should only apply when businesses are prepared to pay a sizeable proportion of normal wages. such a scheme would increase the number of people able to do at least some work in the hardest hit sectors. it would improve the chance of a return to normality, when the pandemic is eventually brought under control.
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