The effectiveness of job retention schemes during economic crises

Alexander Hijzen, Egbert Jongen and Mateo Montenegro
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Alexander Hijzen: OCDE / OECD - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development
Egbert Jongen: Universiteit Leiden = Leiden University
Mateo Montenegro: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Job retention schemes played a key role in preserving job-matches during the global financial crisis and, to a larger degree, during the COVID-19 crisis, covering at some point 20% of all employees in the OECD during the latter. The generosity of the support seems to have played a key role in this. Empirical studies on the global financial crisis suggest that the schemes were quite effective in preserving matches, especially in the first year, but may have reduced productivity growth when used for a long time in some countries. Firm-level studies for the COVID-19 crisis suggest that short-time work schemes were more cost-effective in saving jobs than wage subsidy schemes, possibly because they tended to be better targeted in practice. However, it is important to note that firm level studies do not capture potentially important macro-effects of these schemes, e.g. via consumption. To be better prepared for future crises, this chapter suggests that countries prioritize an administrative system for job retention schemes that can be scaled up quickly and consider a system of experience rating for the co-financing by firms.

Keywords: COVID-19 crisis; Financial crisis; Job retention schemes (search for similar items in EconPapers)
Date: 2024-12
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Published in Handbook on Labour Markets in Transition, ‎ Edward Elgar Publishing, pp.262-278, 2024, Economics 2024, 9781839106941. ⟨10.4337/9781839106958.00021⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05457715

DOI: 10.4337/9781839106958.00021

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