The inefficiency of regular reliance on short-time work

Pierre Cahuc and Sandra Nevoux
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Sandra Nevoux: Centre de recherche de la Banque de France - Banque de France

Institut des Politiques Publiques from HAL

Abstract: Short-time work makes it possible for companies faced with temporary and exceptional circumstances to receive subsidies to reduce the number of hours worked by their employees by remunerating the time off. Short-time work has both beneficial and detrimental effects. During the Great Recession of 2008-2009, there was renewed interest in short-time work as part of the fight against unemployment, particularly in France, where it underwent successive reforms. This policy brief shows that the short-time work reforms carried out after the recession have mainly benefited large firms using them on a regular basis to cope with seasonal fluctuations in business activity. This expansion of short-time work is inefficient because it subsidizes periods of inactivity, thus reducing total output. In this context, it would be desirable to introduce a bonus-malus system by which companies would fund short-time work via a tax paid over several years and that is proportional to their contribution to the cost of the scheme.

Date: 2018-06
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Published in 2018

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Working Paper: The inefficiency of regular reliance on short-time work (2018)
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