Ref. Ares(2012)1293126 - 31/10/2012 Final Report Short-time working arrangements during the crisis and lessons to learn This study has been financed by the European Commission DG Employment G. Walz, B.J. Buiskool, M. Collewet, Prof. Dr. J. de Koning Country expert France: O. Calavrezo Projectnumber: BA3889 Zoetermeer, October 31, 2012 The responsibility for the contents of this report lies with Research voor Beleid. Quoting of numbers and/or text as an explanation or support in papers, essays and books is permitted only when the source is clearly mentioned. No part of this publication may be copied and/or published in any form or by any means, or stored in a retrieval system, without the prior written permission of Research voor Beleid. Research voor Beleid does not accept responsibility for printing errors and/or other imperfections. 2 Preface During the most recent economic crisis commencing in the last quarter of the year 2008, several European countries used so-called short-time working arrangements in order to protect jobs that might otherwise be lost. Since a lot resources were in- vested in these programmes, affecting a large number of workers, it is important to understand whether and how these arrangements have contributed to keeping unem- ployment low and supporting economic recovery in the different Member States. The European Commission has therefore commissioned policy research institute Pan- teia from the Netherlands, in cooperation with SEOR, to carry out an analysis of the use and the effectiveness of short-time working arrangements during the crisis. This report presents the result of this research project carried out between June 2011 and June 2012. It presents qualitative information on the design, implementation and perceived effectiveness of short-time working arrangements, as well as quantitative information based on macro- and micro-econometric analysis at European level and at the level of businesses and employees. By combining different research methods, the report presents overarching conclusions on how short-time working arrangements can be used in order to maximise their effectiveness and efficiency. In carrying out the study, the research team interviewed a variety of respondents and collected existing data from national and international sources. We would specifi- cally like to thank Alexander Hijzen from the OECD and the national authorities of Germany, France and Germany for making data for the econometric analyses avail- able to us. Furthermore, we would like to thank our respondents at European level, at national level and at company level for taking the time to share their experiences with us. Finally, we would like to thank the members of the Steering Group of the European Commission, DG Employment, for their constructive cooperation and their feedback on earlier versions of this report. Douwe Grijpstra Project leader 4 Contents Executive summary 7 Zusammenfassung 17 Sommaire exécutif 29 Part A: Design of the study and theoretical background 41 1 Introduction: objectives of the study and evaluation framework 43 1.1 Aims and Goals 43 1.2 Research Questions 44 1.3 Evaluation Framework 45 1.4 Methodology for data collection 47 2 Intervention logic of short-time work 49 2.1 Defining STWA 49 2.2 The intervention logic of STWA 49 2.3 The role of STWA for different stakeholders 52 Part B: Overview of STWA in 12 countries 57 3 Context and design of STWA during the most recent crisis 59 3.1 Context: the 2008-09 economic crisis 59 3.2 Instruments to cope with the unemployment levels 63 3.3 Key features of STWA and description of the instrument 65 3.4 Conclusions 73 4 Implementation of STWA 75 4.1 Authorities responsible for the implementation of STWA 75 4.2 Carrying out STWA and the selection of participants 76 4.3 Participation in STWA 77 4.4 Implementation of training 81 4.5 Influence of contextual factors 83 4.6 Conclusions 84 5 Results, impacts and lessons learned 85 5.1 Results based on the country-level information 85 5.2 Econometric analyses on the effects of STWA 91 5.3 Lessons Learned 108 5 Part C: In-depth analysis of STWA in three countries 111 6 Country case: Germany 115 6.1 The impact of the 2008-2009 crisis in Germany 115 6.2 The German STWA system and its evolution during the crisis 116 6.3 Implementation of the German STWA 119 6.4 The workings of the German STWA at company level 121 6.5 Effectiveness of German Kurzarbeit 125 6.6 Conclusions and lessons learned 134 7 Country case: France 139 7.1 The impact of the 2008-2009 crisis in France 139 7.2 The French STWA system and its evolution during the crisis 140 7.3 Implementation of the French STWA 143 7.4 The workings of the French STWA at company level 145 7.5 Effectiveness of French STWA 148 7.6 Conclusions and lessons learned 156 8 Country case: Austria 159 8.1 The impact of the 2008-2009 crisis in Austria 159 8.2 The Austrian STWA system and its evolution during the crisis 160 8.3 Implementation of the Austrian STWA 162 8.4 The workings of the Austrian STWA at company level 164 8.5 Effectiveness of Austrian STWA 167 8.6 Discussion and lessons learned 170 Part D: Conclusions 173 9 Answering the research questions 175 References 189 Annex 1 Annex to the macro-econometric analysis 199 Annex 2 Interview respondents 205 6 Executive summary The European Commission acknowledges that, in response to the current economic crisis, European governments have invested heavily in short-time working arrangements (STWA). The objective of STWA is to protect jobs that are under threat due to a temporary drop in output. Governments aim to help businesses keep their employees during the crisis so that they do not need to re-hire people when the economy picks up again. Given this prominent position of STWA, the Commission wishes to be provided with an analysis of whether these STWA have indeed protected jobs in the EU labour market and how this protection com- pares to earlier experiences with similar measures in previous crisis situations. Such an analysis is relevant because in future crisis situations governments need to be able to make more informed and better decisions on introducing, modifying or terminating STWA. In order to do so, a European approach where countries with different arrangements can be compared will provide clarity on the best ways to effectively protect jobs during an economic downturn. This report presents the results of a comparative research project that was carried out by Dutch research institute Panteia, in cooperation with SEOR, between June 2011 and June 2012. In the course of the project, an overview of STWA use in all European Member States was attained, followed by a quick scan of twelve European STWA and in-depth study of STWA use in three countries, namely Germany, France and Austria. For the overview, the available literature at European level and at national level was reviewed and some national stakeholders were interviewed. Furthermore, we conducted macro-econometric analyses of data provided by the OECD in order to measure the effectiveness of STWA at macro level. On the basis of the overview, the three countries Germany, France and Austria were se- lected as cases for the in-depth study. In the three case studies, an extended interview programme was carried out, as the re- search team interviewed representatives of government, business representatives and trade unions in the countries concerned. Furthermore, company cases studies were carried out in order to understand how companies dealt with the crisis and which role STWA use played in their approach. Finally, we used micro level data provided by national govern- ments and employment agencies to analyse the effectiveness of the measures at company level and at the level of the individual. The results of all these research activities are pre- sented in this report. Defining short-time working arrangements Short-time work (STW) can be defined as a temporary reduction in working time intended to maintain an existing employer/employee relationship. It can involve either a partial re- duction in the normal working week for a limited period of time (a partial suspension of the employment contract) or a temporary lay-off (a full suspension of the employment contract with zero hours' week). In both cases, the employment contract continues and is not bro- ken. STWA are designed in order to allow employers to temporarily adjust the working hours (and thus maintain internal flexibility) without discontinuing the employer-employee relationship. 7 The focus of our study is on STWA that are subsidised by the government. Hereby, the government supports individual employees or companies on short-time work with subsidies in order to compensate for income loss. STWA that were created on the basis of for exam- ple a sectoral agreement without government support have not be taken into consideration in this study. During the economic crisis in 2008-09, STWA were applied by the majority of EU countries. Though STWA differed considerably between the different countries, the literature shows that there are several main features that are common to most of the STWA. Firstly, STWA are associated with the reduction of working hours for (all) workers in a company or a specific work unit and it forms an alternative to layoffs. Secondly, this reduction in working hours is accompanied by a corresponding (pro-rata) reduction in wages/salaries. Thirdly, provision of wage supplements (usually public subsidies) is administered to af- fected workers. Fourthly, specific time limits on the period of STWA are usually established in order to ensure that STWA is a temporary measure.