Kurzarbeit

Heard of “Kurzarbeit”? It’s a German word that translates to “short work”. German policymakers are rejoicing at present because their strategy of curbing unemployment, or at least minimizing its spread is working well, via “kuzarbeit”.

Firms that face a temporary decrease in demand avoid shedding employees. Instead, they cut down the working hours. If hours and wages are reduced by 10% or more, the government pays workers 60% of their lost salary. This certainly encourages firms to use across-the-board reductions of hours instead of layoffs. The benefit of this program is that workers still have jobs.

Click here for more reading of this program

Laying-off workers should always be the last resort but employers usually do not have much choice when sales and profits are down. But with government intervention, employers are more willing to retain workers. Employers would prefer all else being equal not to lose staff because when recession ends, they need to incur large hiring and training costs. Of course, the other factor is staff morale – when there are lay-offs, it affect not only those that had left but people who are staying too.

So, bravo to Germany!

Kevin Hasset was right to say that US should learn from their friend across the Atlantic. With the recent US unemployment rate rises to 10.2%, surely whatever job-creation programs they had in place are not working effectively. It’s never too late to change and adapt to this work sharing model.

Over this part of the shore, Malaysian policymakers and employers can keep this model in mind too. We may need to adopt it one day.