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

Abstract

Using firm-level data from a large-scale European survey among 20 countries, we analyse the determinants of firms using short-time work (STW). We show that firms are more likely to use STW in case of negative demand shocks. We show that STW schemes are more likely to be used by firms with high degrees of firm-specific human capital, high firing costs, and operating in countries with stringent employment protection legislation and a high degree of downward nominal wage rigidity. STW use is higher in countries with formalised schemes and in countries where these schemes were extended in response to the recent crisis. On the wider economic impact of STW, we show that firms using the schemes are significantly less likely to lay off permanent workers in response to a negative shock, with no impact for temporary workers. Relating our STW take-up measure in the micro data to aggregate data on employment and output trends, we show that sectors with a high STW take-up exhibit significantly less cyclical variation in employment.

Short-Time Work and Unemployment in and after the Great Recession

“…The Swiss STW scheme is similar to those in other countries in many respects (Cahuc, 2018;Hijzen and Venn, 2011;Lydon et al, 2019, provide overviews and comparisons of such schemes). However, it stands out in three ways.…”

Surviving Covid-19 and Beyond: A Conceptual Framework for Smes in Crisis

“…As demonstrated by Lydon et al (2019), by using firm-level data from 20 European countries, firms are more likely to choose short time work (STW) as an option during the crises and it is an important mechanism for smoothing employment through shocks.…”

“…Some governments offer wage and income support for employees that are temporarily laid off, or for companies to secure employment (OECD, 2020). STW is an important mechanism for easing employment through shocks (Lydon et al, 2019). Other suggestions for remedial approach are reducing or suspending premiums, bonuses, compensation packages, work hours (daily or weekly) (Tambunan, 2019), and staff remuneration respectively, as well as making use of unpaid leave (Buley et al, 2016), or late salary payment (Gherman et al, 2015).…”

Who is Most Vulnerable? Exploring Job Vulnerability, Social Distancing and Demand During COVID-19

“…This may limit unemployment. However, this type of strategy is thought to best suit occupations which have high recruitment and firing costs, are reliant upon specialised human capital and are in countries with strong employment legislation (Lydon et al 2019).…”