Short-time working, more commonly known as partial unemployment, enables firms facing temporary and exceptional circumstances to receive subsidies to reduce the number of hours worked by their employees whilst paying them for the hours not worked. Partial activity has both beneficial and adverse effects. During the Great Recession of 2008–2009, partial activity sparked renewed interest as a means of combating unemployment, particularly in France, where it has undergone successive reforms. This paper shows that the reforms to short-time working implemented after the recession have mainly benefited large firms, which use the scheme on a recurring basis to cope with seasonal fluctuations in activity. This expansion of short-time working is ineffective, as it subsidises periods of inactivity, thereby reducing total output.
The ineffectiveness of the repeated use of short-time working
This note shows that, given the ineffectiveness of the use of short-time working, it would be desirable to introduce a bonus-malus system, under which firms would fund short-time working through a levy proportional to their contribution to the cost of the scheme, with payment spread over several years.
Reference IPP Policy Brief No. 33
Presentation
Key Results
- The expansion of the short-time working scheme since 2008 has mainly benefited large firms, which make regular use of it to cope with seasonal fluctuations in activity.
- These subsidies to firms facing significant seasonal fluctuations, at the expense of the rest of the economy, lead to a reduction in total output.
- The introduction of a bonus-malus system, under which firms would provide funding for the short-time working scheme via a levy proportional to their contribution to the cost of the scheme – with payment spread over several years – would make this policy more effective.
Pierre Cahuc
Sandra Nevoux