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Short-Time Work Extensions

Author

Listed:
  • Christina Brinkmann
  • Simon Jäger
  • Moritz Kuhn
  • Farzad Saidi
  • Stefanie Wolter

Abstract

Governments use short-time work (STW) schemes to subsidize job retention. A key policy lever during crises is the extension of potential benefit duration (PBD)—how long firms can receive STW subsidies. Using unique German administrative data from 2009 to 2021, we show that separations rise and employment falls when firms exhaust benefits. Yet the uptick in separations at exhaustion almost entirely reflects job-to-job moves rather than transitions into unemployment, even in slack labor markets, consistent with STW delaying reallocation rather than preventing unemployment. We develop a model to analyze exogenous shifts in PBD and show that wage flexibility can substitute for longer benefit duration. Exploiting a 2012 reform that doubled the PBD from six to twelve months, we find no evidence that the extension prevented unemployment and, if anything, reduced reallocation to other firms. In line with the model, firms without extensions reduced wages relative to those with extended support, and across labor market cells, larger wage adjustments coincide with smaller employment losses. Our findings imply that STW extensions operated mainly as wage subsidies rather than job-saving measures.

Suggested Citation

  • Christina Brinkmann & Simon Jäger & Moritz Kuhn & Farzad Saidi & Stefanie Wolter, 2024. "Short-Time Work Extensions," NBER Working Papers 33112, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33112
    Note: AG CF EFG LS PE
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    Cited by:

    1. Gert Bijnens & Natalia Bermudez & Bart Cockx, 2025. "The impact of short-time work during the great recession," Working Paper Research 481, National Bank of Belgium.
    2. Martins, Ana & Pereira dos Santos, João & Pozzobon, Fernando, 2025. "Sailing Through Troubled Waters: Evidence from Support Discontinuities to Firms in Times of Crisis," IZA Discussion Papers 18136, Institute of Labor Economics (IZA).
    3. Ana Martins & João Pereira dos Santos & Fernando Pozzobon, 2025. "Sailing through Troubled Waters: Evidence from the APOIAR Program," GEE Papers 190, Gabinete de Estratégia e Estudos, Ministério da Economia, revised May 2025.
    4. Dengler, Thomas & Gehrke, Britta & Zessner-Spitzenberg, Leopold, 2024. "Short-Time Work and Precautionary Savings," ECON WPS - Working Papers in Economic Theory and Policy 02/2024, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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