Is Short-Time Work a Good Method to Keep Unemployment Down?

Pierre Cahuc and Stéphane Carcillo ()

No 5430, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Short-time work compensation aims at reducing lay-offs by allowing employers to temporarily reduce hours worked while compensating workers for the induced loss of income. These programs are now widespread in the OECD countries, notably following the 2008-2009 crisis. This paper discusses the efficiency of this type of policy and investigates its impact on unemployment and employment. There is some evidence that short-time compensation programs stabilize permanent employment and reduce unemployment during downturns. All in all, it seems that short-time work programs used in the recent downturn had significant beneficial effects. This suggests that countries which do not have short-time compensation programs could benefit from their introduction. But short-time compensation programs can also induce inefficient reductions in working hours and reduce the prospects of outsiders if used too intensively. Thus, the design of short-time compensation programs should include an experience-rating component.

Keywords: short-time work; unemployment; employment (search for similar items in EconPapers)
JEL-codes: E24 J22 J65 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2011-01
New Economics Papers: this item is included in nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (149)

Published - published in: Nordic Economic Policy Review, 2011, 1(1),133-165.

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Working Paper: Is Short-time Work a Good Method to Keep Unemployment Down? (2011)
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