Publicly sponsored short-time schemes have been intensively used during the recession, to prevent otherwise profitable enterprises from going bankrupt, and to avoid unnecessary labour shedding and the consequent losses in human capital with potentially adverse effects on output growth through hysteresis effects. In a number of Member States, these schemes are an integral part of the unemployment insurance system. They provide firms with a buffer to avoid mass lay-offs during temporary downturns, while sharing the burden of the adjustment among workers and between workers, government and employers. From the workers' perspective, short-time schemes are used to spread the unemployment risks across workers with different characteristics, protecting the jobs irrespective of the characteristics of the job holders (employability, seniority etc.). For firms, they represent a convenient tool to deal with transitory shocks without incurring dismissal costs, preserving the human capital specific to the firm and reducing costs of turnover. In practice, firms make regular contributions to a pool of funds (generally with the unemployment insurance) and then draw money from these funds to compensate workers for the reduction in the hours worked during downturns. Given that those contributing can differ from those benefitting from the schemes - the so-called crosssubsidisation – this can lead to excessive reliance on these programmes, a problem usually dealt with by requiring programmes to be of short-duration. Through the regulation of short-time work and the state contribution, public authorities are able to influence the adjustment of the labour input between changes in employment levels and changes in the average hours worked. The primary role of STW is to allow firms to reduce the labour input without shedding workers during downturns. However, even aggregate shocks intensify reallocation needs, as the foregone output when restructuring is lower during recessions than expansions. Yet, it is difficult to identify a pure transient shock from the need for structural changes delayed during expansions, and STWA should be redesigned to stabilise employment without distorting production efficiency. In practice, this may require reforms which introduce job search obligations for workers in short-time (including the reduction of individual entitlement to unemployment benefits) combined with incentives to support job mobility and stricter control of firms long-term demand prospects. Bron: rapport; bewerking RWI
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