When Short-Time Work Works

Pierre Cahuc, Francis Kramarz, Sandra Nevoux
2018 Social Science Research Network  
Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen
more » ... bedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Short-time work programs were revived by the Great Recession. To understand their operating mechanisms, we first provide a model showing that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. The cost of saving jobs is low because shorttime work targets those at risk of being destroyed. Using extremely detailed data on the administration of the program covering the universe of French establishments, we devise a causal identification strategy based on the geography of the program that demonstrates that short-time work saved jobs in firms faced with large drops in their revenues during the Great Recession, in particular when highly levered, but only in these firms. The measured cost per saved job is shown to be very low relative to that of other employment policies. JEL Classification: E24, J22, J65 Also called short-time compensation, short-time work is a public program intended to preserve jobs at ...rms or establishments experiencing temporarily-low revenues, by providing wage support to the employees the ...rm wishes to keep with reduced work hours. The 2008-2009 Great Recession gave OECD countries the opportunity to expand on such short-time work programs: whereas the OECD average take-up rate was less than 0.2% in the fourth quarter of 2007, just before the Recession, it increased six-fold, to 1.3 %, in the fourth quarter of 2009. The United-States followed this pattern, with the number of participants in short-time work jumping from 48,924 in 2007 to 288,618 in 2009. 2 Promotion of short-time work by U.S. States was further boosted by the Job Creation Act of 2012, resulting in 22 States receiving Federal subsidies for this policy in 2016. 3 However, despite short-time work increasing in popularity, even in recent academic work, 4 very little is known about its causal impact on employment. Our paper contributes to ...ll this gap by taking advantage of the massive expansion of the French short-time work program during the Great Recession. From the end of 2008, the Ministry of Labor not only expanded the policy's budget, but also wrote circulars and directives, in order to promote the use of short-time work as rapidly as possible. As a result, the share of employees on short-time work increased from 0.3%, in 2007 just before the Great Recession, to 4% in 2009, the year of program expansion (Figure 1). Subsidies per non-worked hour and subsidies per employee were respectively multiplied by 1.4 and by 2.5 between these two dates ( Figure 2 ). The cost of the policy trebled, multiplied by a factor of 20. By precisely analyzing the program, both in its principles and in its practical implementation, we show to what extent, and explain why, short-time work works, both from a theoretical and an empirical perspective. We ...rst develop a directed search and matching model with multi-worker ...rms, which shows when and why short-time work saves jobs; then, we develop an empirical strategy that takes full advantage of the details and mechanics of the program administration, as well 1 We thank
doi:10.2139/ssrn.3247486 fatcat:wjgcgv35uncrbd43tbyktehvmy