Dean Baker: Make Short Work Of Unemployment

Dean Baker, co-director of the Center for Economic and Policy Research and regular economics columnist at MichaelMoore.com, suggests the German solution to the problem of unemployment:

The model here is Germany. It has used a “short work” policy to keep the unemployment rate down – at very low cost to the government. Its unemployment rate today is 0.5 percentage points lower than it was at the start of the downturn, even though the German economy actually has grown less than the US economy over this period.

There are many different packages that fit the short work scheme, but the basic story would be that rather than having a firm lay off 20% its workers, the government encourages the firm to cut their work time by 20%. The government directly replaces 60% of the lost wages (12% of the total wages); it has the company replace 20% (4% of total wages); and leaves the worker taking home 4% less and working 20% fewer hours.

The cost should be about the same as the unemployment insurance benefit that workers would have received if they were laid off, but the short work policy keeps them employed. This has two major benefits. From the standpoint of employers, they have workers available whose hours can be quickly increased if demand picks up. This saves them the need to find and train new workers.

From the standpoint of workers, this keeps them employed and tied to the workforce. They maintain their skills (Germany also offer training subsidies that can be used in many cases), and they don’t run the risk of becoming unemployable as a result of long-term unemployment. …

I realize this is far too sensible for the ideologues running our government at the moment. But perhaps when the unemployed here grow so numerous that they begin to block the entrances to the gated communities of the obscenely wealthy, some consideration may be given to an approach that actually… you know… works.

 

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