The economy is calling for short-time working to be extended

“An extension of the short-time work allowance is not a panacea and should not become the norm,” said the chief executive of the mechanical engineering association VDMA, Thilo Brodtmann, the Handelsblatt. From the point of view of the export-oriented industry, however, an extension would make sense because the European and non-European sales markets would need well into next year to recover from the pandemic.

IG Metall boss Jörg Hofmann is also calling on politicians to readjust the short-time work: “If this bridge is to continue, the crisis regulations must be extended beyond the end of the year,” he told Handelsblatt. The subscription period should be increased from twelve to 24 months. Thanks to the gradual economic recovery, the number of short-time workers is already falling sharply. The Federal Employment Agency (BA) estimates it could have been 4.5 million in June – after almost seven million in May. The average absence from work also fell from 49 percent to 44 percent from April to May.

However, in order to ensure the survival of the companies that continue to suffer from a lack of orders, the VDMA hopes that employers will continue to be reimbursed the social contributions for short-time work. The special corona rule should also continue to apply that short-time work benefits can be applied for if only ten percent of a company’s employees are affected by a loss of work.

Finances could be the limiting factor for a generous extension. From January to July, the BA spent a good eleven billion euros on short-time working allowances alone, of which around five billion euros were reimbursed for social security contributions. The authority currently calculates that its reserve of almost 26 billion will be used up by the end of the year and that it will need a state injection of just under five billion euros.

That is why the Federal Ministry of Labor is still keeping a low profile when it comes to extending the short-time work regulation. A spokeswoman said the coalition will decide on this in the fall. However, the department headed by Hubertus Heil (SPD) refers to the resolution of the coalition committee to stabilize social security contributions at a maximum of 40 percent at least until the end of 2021 and to cover any additional financial needs from the federal budget.

In January – before Corona – the Union and SPD had reduced the unemployment insurance contribution to 2.4 percent, limited to the end of 2022. If the coalition does not want to risk a contribution debate in the election year, the federal government would have to inject money in the longer term – especially if the facilitated short-time work continued should have. According to a rule of thumb, 100,000 short-time workers with a 50 percent loss of work cost almost 80 million euros a month.

Labor market experts such as the Freiburg economist Alexander Spermann are skeptical about an extension anyway: “The strength of short-time work is its short-term nature,” he says. At some point the companies would have to decide whether there would be work for the employees again or whether they would be parted with. Industrial production and exports slowly recovered, emphasizes Spermann: “Allowing short-time working as a structural instrument to continue at such a time increases the risk of abuse.”

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The retail trade association HDE is nevertheless in favor of an extension of the temporary special rules and the standard duration of short-time work allowance to 24 months. “This would help the companies to better master the difficult situation together with their employees”, announced the association. In particular, many non-grocers suffered severely from the effects of the pandemic and would have to continue fighting for their economic existence.

More: The economic data point to a strong upswing in the short term. But the recovery could be stalled again in autumn – and a winter of bankruptcies may threaten.

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