When times are tough in Germany, Berlin staves off unemployment by paying for private jobs with government subsidies.
Should the US look to comparable foreign economies for examples of how to create and keep jobs. Berlin’s model for dealing with job retention during downturns is one the US might explore.
Instead of an unemployment system, they have a wage subsidy system so you don’t let people go in the first place. Germany’s “Kurzarbeit,” or short-work, policy, one that Germans are enthusiastically proud of. It allows companies to reduce workers’ hours with the government picking up the tab for the lost time.
U.S. officials have run into trouble in the past by suggesting European solutions to America’s problems.
Germany’s policies would be difficult to replicate in the United States, said American Enterprise Institute scholar Desmond Lachman. The German workforce is highly unionized, he said, making it easier for workers to get concessions from the central government when times are tough.
Lachman also said the German policy does little to create new jobs, and widens the gap between top earners and those at the bottom who don’t get salary increases when Berlin steps in with subsidies. But this is not job creation. It keeps unemployment down, perhaps increasing the number of people at the bottom.
During the Great Recession, the German labor market proved especially resilient. In 2010, when the United States and the rest of the world were losing jobs, Germany actually added them because companies there took advantage of the government program.
According to a survey for the Munich-based research group Ifo Institute, in the first quarter of 2010 — the depths of the European sovereign debt crisis — 39 percent of German manufacturers were using Kurzarbeit, allowing them to hold onto skilled labor at a time when many firms around the globe were shedding jobs.
Many on the right and left, including President Barack Obama and former President Bill Clinton, have mentioned the Kurzarbeit concept as something the United States should consider. And evidence from Germany, Europe’s strongest economy, shows that it stops companies from cutting jobs.
