Employment Support and COVID-19: Is Working Time Reduction the Right Tool?

Luigi Aldieri, Bruna Bruno and Concetto Paolo Vinci

Economies, 2022, vol. 10, issue 6, 1-14

Abstract: The main objectives of this study are to take into account the effects of COVID-19 on labor market functioning, and to evaluate the effects of policies regarding working time reduction, in terms of both containing the spread of infection and economic activity. Accordingly, we describe a macroeconomic model wherein we test the effects of reducing working hours in the Keynesian unemployment framework, which comprises a fixed prices and wages regime, and a consumption demand that is dependent on salaries and autonomous demand components. Moreover, we also describe a neoclassical unemployment framework, wherein the labor market is only governed by dynamic demand forces. Theoretical results show that, according to the epidemiological phase, a reduction in working hours may be a good policy for containing the virus and improving employment in the Keynesian framework when established conditions are maintained. In the neoclassical framework, a work sharing policy will fail if some conditions do not occur, and it could cause an increase in the spread of the virus when a reduction of epidemic containment measures occurs. Employment will increase when the pandemic ends. A numerical simulation confirms that a reduction in working hours could reduce virus diffusion, but only under established, constrained parameters in both frameworks.

Keywords: COVID-19; working time policy; simulation (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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