Inefficient Short-Time Work

Abstract

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Counteracting Unemployment in Crises: Non‐Linear Effects of Short‐Time Work Policy*

“…Second, we relate to the literature on the effects of STW. Theoretical contributions that concentrate on welfare are Burdett and Wright (1989), Audenrode (1994), Braun and Brügemann (2017), and Cahuc and Nevoux (2019), among others. These studies stress potential inefficiencies resulting from reductions in the hours of STW.…”

Temporary layoffs, short-time work and COVID-19: the case of a dual labour market

“…Cooper et al (2017) suggest that STW can reduce this source of inefficiencies, but at the cost of distorting hours worked per employee. Cahuc and Nevoux (2017) claim that experience-rated STW schemes could to some extent reduce these distorsions on working hours because employers would prefer to get rid of their employees during unproductive periods to avoid paying the cost associated with STW.…”

Short-time work in the Great Recession: firm-level evidence from 20 EU countries

“…Displacement effects give rise to longer-term inefficiencies when STW schemes preserve jobs that are not viable without a subsidy, hindering labour mobility and efficiency enhancements (such as re-training). On the potential inefficiencies in STW schemes, Cahuc and Nevoux (2017) argue that the expansion of STW schemes in France during the recession primarily benefitted large firms that were recurrent STW users. They find it to be an inefficient way to insure workers, as it involves those firms less affected by demand fluctuations subsidising those firms more affected by demand fluctuations.…”