Why too much short-time working would be harmful for the recovery

The sudden shutdown of the economy following the decision to lockdown has a disastrous effect on employment. To cope with this unprecedented crisis, the government opened wide the floodgates of short-time working, a tool used in small doses since the 1970s and activated during the 2009 crisis. Concretely, the State is taking charge of the largest part of wages by reimbursing employers up to 84% of net wages (100% at minimum wage) up to 4.5 minimum wage, which covers more than 95% of employees.

To make life easier for companies hit hard by the suddenness of the containment measures, the services of the Ministry of Labor have 48 hours (14 days in normal times) to process the files. If the administration does not respond within this period, the request is considered accepted. A sign that the period is exceptional, the scheme also concerns temporary workers, home employees, seasonal workers in ski resorts, childminders, etc. The executive has learned the lessons of the 2009 crisis: a decade ago, despite Nicolas Sarkozy’s efforts to reform partial unemployment, France remained a small player against Germany which had spent some 10 billion euros between 2007 and 2010, ten times more than France.

About 12 million people are in partial activity, ie half of the employees.

About 12 million people are in partial activity, ie half of the employees.

Encourage resumption of activity

The advantages of this device are multiple. First, it avoids putting millions of people out of work while preserving their purchasing power. Then, it prevents business failures, which can adapt the weekly working hours or close a site during the crisis. Finally, partial activity is effective in preparing for the recovery because it prevents the loss of skills within companies that do not need to rehire and train employees.

Success is at the rendezvous since, according to the latest accounts of the Ministry of Labor, nearly 12 million people are in partial activity, or about half of the employees. This is much more than Germany (24%). But France’s generosity, even if it were to be reduced in June, could slow the exit from the recession. The reason is simple: by maintaining too broad coverage for too long, the State does not encourage a resumption of activity. However, the epidemic is here for several more months and it is not conceivable that half of the employees will remain on short-time work during the entire period. It is therefore time to downsize by encouraging the continuation of teleworking and targeting aid to sectors and people in difficulty. The more so as the enormous cost, some 24 billion euros, amputates the capacity of the State to manage this crisis in the long term.