Farewell to short-time work. Fewer and fewer companies have to resort to the state instrument for maintaining jobs in times of crisis. The industrial group Thyssenkrupp, for example, is reducing short-time work in its steel division. In April, the listed company sent 900 employees on short-time work, in May around 600, and in June there will “possibly” be no more short-time work there.
Things are looking similarly good in many other companies: the corona pandemic is ebbing away and despite enormous economic risks, the war in Ukraine, supply chain problems and rising inflation, the number of short-time workers fell in almost all sectors of the economy in May, the Munich Ifo Institute just announced. In retail it therefore plays almost no role anymore, in the hospitality industry the numbers are declining significantly. A total of 277,000 people in Germany are still on short-time work. That is 0.8 percent of the workforce.
If things are going badly in a company due to the economy, there is a temporary loss of orders or an unforeseeable event, the short-time work regulation provides that employees only work part of the usual working hours for a while or stay at home completely. The company pays wages for the work done, and the state pays a subsidy. Employees usually receive 60 percent of the lost net wages as short-time work benefits, and 67 percent for employees with at least one child. According to the Corona special rules, it can be up to 80 or 87 percent of the lost net salary from the seventh reference month.
The labor market policy instrument is generally regarded as a successful model that saved many jobs during the pandemic, many employees feared existential fears and companies saved redundancies. Similar to the financial crisis of 2008 and 2009. “It is not intended to stabilize the labor market in almost all sectors in crises that have lasted for years,” says Daniel Terzenbach, board member of the Federal Employment Agency (BA). For his authority, short-time work in the corona crisis was and is a tour de force. He estimates that it will take another year and a half before the 1.1 million outstanding short-time work invoices are processed.
Short-time work peaked in the first lockdown, in April 2020, when restaurants, shops and hotels were closed, planes were grounded and production was stopped in many factories. This month, employers received short-time work benefits for six million employees, which was 17.9 percent of the employees – almost four times as many as at the peak of short-time work during the financial crisis in May 2009.
700 employees at the BA were responsible for applications for short-time work until the lockdown. In April 2020, every employee who could and wanted to help, regardless of their original area, was deployed, says Terzenbach. At peak times, almost 12,000 employees would have ensured that those affected had their money in their accounts within a week of receiving the application. Most employment agencies, even labor market researchers and office assistants were trained to do this in a very short time.
The costs are immense. The BA spent 22 billion euros in 2020 plus 20.2 billion euros in the second year of Corona for short-time work benefits. Added to this are the 2.6 billion euros so far for this year. The money is actually paid from unemployment insurance, but the reserves have long since been used up. The federal government has added 24 billion euros. “According to the current status, the year-end deficit will be granted to us as a loan that we will have to repay in 2023,” says Terzenbach. It would be almost impossible to build up a reserve in the next few years.
Something like a new normal has returned to the BA. Most employees go back to their actual jobs. Additional staff was hired. There are now around 4,000 employees who mainly process the applications. The provisional approval was the first step. “Now the final accounts are pending, it will be checked whether the money has been paid out properly,” explains Terzenbach.
Obviously there was fraud. Hotels in Hamburg and Schleswig-Holstein and companies in Brandenburg are said to have illegally obtained funds. Sometimes it was about several million euros. Exceptional cases, says Terzenbach. He expects that the abuse in the corona crisis will be comparable to that in the financial crisis. At that time there were 1.4 percent unlawful claims. So far, the BA employees have come across 8,000 suspected cases, and around 1,000 have been handed over to the main customs office or the public prosecutor’s office.
“Short-time work is a very individual instrument,” says the BA board member. For future, longer-term crises, more general regulations should be developed so that the BA and companies do not have to bill each employee individually. “The bureaucratic effort for this is simply too high.”