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COVID and Wage Subsidy – The true nature of it in Germany and France

In Germany, for instance, 650,000 employers had notified employment agencies by last week of their intention to make use of the country’s short-time work program. Under the system, employees have their hours scaled back, and the government pays them up to two-thirds of their normal salary, while the employer pays little or nothing. Once the employer is ready to pay full wages again, everything returns to normal — there are no layoffs.

Many economists credit the system for having enabled Germany to come roaring back after the 2008 global financial crisis since its companies did not lose the expertise of their workers and were ready to zoom to full capacity once the recovery started. This time, many European countries have imitated their neighbor.
Isn’t that expensive?

A man wearing a protective face mask walks past a cinema with the words “Stay at Home” on display in Berlin’s Kreuzberg district on April 11, 2020. (David Gannon/AFP/Getty Images)
It certainly is. But so is a major economic contraction. Ordinary unemployment benefits in Europe also tend to be more generous than those offered in the United States, so the difference between subsidizing employment and cushioning the blow of layoffs is more limited.

Germany’s employment agencies have already asked for an extra $11 billion to help address the demand.

The French system, meanwhile, is already covering 8 million people — a third of the country’s private sector workers. The French government will cover up to 84 percent of a worker’s salary, and the Labor Ministry estimates the costs will be $21 billion over the next three months.

Chosen excerpts by Job Market Monitor. Read the whole story @ How Europe manages to keep a lid on coronavirus unemployment while it spikes in the U.S. – The Washington Post

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