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Is Short-Time Work a Good Method to Keep Unemployment Down?

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  • Cahuc, Pierre

    ()
    (Ecole Polytechnique, Paris)

  • Carcillo, Stéphane

    ()
    (OECD)

Abstract

Short-time work compensation aims at reducing lay-offs by allowing employers to temporarily reduce hours worked while compensating workers for the induced loss of income. These programs are now widespread in the OECD countries, notably following the 2008-2009 crisis. This paper discusses the efficiency of this type of policy and investigates its impact on unemployment and employment. There is some evidence that short-time compensation programs stabilize permanent employment and reduce unemployment during downturns. All in all, it seems that short-time work programs used in the recent downturn had significant beneficial effects. This suggests that countries which do not have short-time compensation programs could benefit from their introduction. But short-time compensation programs can also induce inefficient reductions in working hours and reduce the prospects of outsiders if used too intensively. Thus, the design of short-time compensation programs should include an experience-rating component.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5430.

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Length: 34 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5430

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Keywords: unemployment; short-time work; employment;

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  1. Cahuc, Pierre & Zylberberg, Andre, 2005. "Optimum Income Taxation and Layoff Taxes," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5170, C.E.P.R. Discussion Papers.
  2. Quentin Max David & Alexandre Janiak & Etienne Wasmer, 2012. "Local social capital and geographical mobility," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/133081, ULB -- Universite Libre de Bruxelles.
  3. repec:dlw:wpaper:09-10. is not listed on IDEAS
  4. Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Chapters, National Bureau of Economic Research, Inc, in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 59-94 National Bureau of Economic Research, Inc.
  5. Alexander Hijzen & Danielle Venn, 2011. "The Role of Short-Time Work Schemes during the 2008-09 Recession," OECD Social, Employment and Migration Working Papers, OECD Publishing 115, OECD Publishing.
  6. Alberto F. Alesina & Yann Algan & Pierre Cahuc & Paola Giuliano, 2010. "Family Values and the Regulation of Labor," NBER Working Papers 15747, National Bureau of Economic Research, Inc.
  7. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 20(3), pages 357-386, 07.
  8. Calavrezo, Oana & Duhautois, Richard & Walkowiak, Emmanuelle, 2010. "Short-Time Compensation and Establishment Exit: An Empirical Analysis with French Data," IZA Discussion Papers 4989, Institute for the Study of Labor (IZA).
  9. repec:hal:journl:halshs-00255794 is not listed on IDEAS
  10. Van Audenrode, Marc A, 1994. "Short-Time Compensation: Job Security, and Employment Contracts: Evidence from Selected OECD Countries," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(1), pages 76-102, February.
  11. Burdett, Kenneth & Wright, Randall, 1989. "Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1479-96, December.
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