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Short-Time Work schemes and labour market flows in Europe during COVID

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  • Cristina Lafuente and Astrid Ruland

Abstract

In this paper we investigate the impact that Short-Time Work schemes (STWs) had on employment and labour market flows during the COVID emergency of 2020 in four of the five largest economies of the EU. Most European countries used STWs at this time to alleviate the negative impact of sanitary measures like lockdowns. Looking at labour market stocks and flows, we document that these schemes were widely adopted and likely prevented substantial job losses. However, they failed to protect temporary workers. Moreover, in all countries, transitions from employment to non-participation reached unprecedented levels. These flows are reverted in subsequent quarters, which implies that many workers postponed job search during the lockdown. We do not observe permanent increases in non-participation, but we document a large fall in flows between temporary and permanent jobs. We interpret this as a drop in labour market mobility. We find that vacancy posting and firm dynamics may be able to explain part of the observed differences between countries.

Suggested Citation

  • Cristina Lafuente and Astrid Ruland, 2022. "Short-Time Work schemes and labour market flows in Europe during COVID," Economics Working Papers EUI ECO 2022/02, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2022/02
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    Cited by:

    1. Natalia Bermudez & Muriel Dejemeppe & Giulia Tarullo, 2023. "Theory and Empirics of Short-Time Work: A Review," LIDAM Discussion Papers IRES 2023018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Diaz, Antonia & Dolado, Juan J. & Jáñez, Álvaro & Wellschmied, Felix, 2025. "Labor reallocation effects of furlough schemes: Evidence from two recessions in Spain," European Economic Review, Elsevier, vol. 171(C).
    3. Basso, Gaetano & Depalo, Domenico & Lattanzio, Salvatore, 2023. "Worker flows and reallocation during the recovery," Labour Economics, Elsevier, vol. 83(C).
    4. Gómez, Ángel Luis & Lattanzio, Salvatore, 2024. "Worker reallocation in Italy and Spain after the COVID-19 pandemic," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(1).

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    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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