{ "title": "Kurzarbeit: Germany’s Short-Time Work Benefit", "publication": "IMF News, June 15, 2020", "sourceUrl": "https://www.imf.org/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit", "canonical": "https://www.imf.org/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit", "overlayPath": "/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit/index.md", "summary": "The COVID-19 pandemic has generated renewed interest in short-time work programs—the state-sponsored work-sharing schemes aimed at saving jobs. Kurzarbeit, Germany’s short-time work program, is widely considered the gold standard of such programs.", "publishDate": "2020-06-15", "sections": [ { "heading": "Overview", "content": "- Kurzarbeit is a social insurance short-time work program whereby employers reduce employees’ working hours instead of laying them off.\n- The COVID-19 pandemic renewed interest in short-time work programs; Kurzarbeit is widely considered the gold standard." }, { "heading": "Main features of Kurzarbeit", "content": "- Government income “replacement rate” normally provides 60 percent (more for workers with children).\n- Mechanics: a worker receives 60 percent of pay for hours not worked, while receiving full pay for hours worked (example: a 30 percent reduction in hours implies a 10 percent salary loss).\n- Usual maximum duration: 6 months consecutively.\n- Kurzarbeit supplements private working-hour flexibility arrangements (working time accounts). Firms may use Kurzarbeit only when working time accounts are exhausted.\n- Employer cost-sharing: employer pays 80 percent of the total social security contributions owed on the reduced working hours." }, { "heading": "Disadvantages and safeguards", "content": "- Potential risk: excessive reliance during normal times could reduce labor market flexibility, keeping workers in jobs that eventually need to disappear and widening protection divides across the labor market.\n- Cost-sharing (employer social security contribution requirement) acts as a deterrent to overuse.\n- Parameters (including employers’ share of social security contributions) can be relaxed during serious crises to discourage mass layoffs; such cyclical adjustments balance relief during deep recessions with avoiding excessive rigidity in normal times." }, { "heading": "Effectiveness during the global financial crisis", "content": "- Germany was the only G7 country that did not experience a fall in employment in 2009, despite a large contraction in GDP (of almost six percentage points).\n- Work-sharing (including Kurzarbeit) was an important factor: estimate that about a third of the reduction in working time per employee was due to Kurzarbeit, with the remainder explained by other margins (e.g., running down working-time accounts and accumulated leave).\n- Other contributing factors included earlier wage moderation and a high degree of specialization of manufacturing workers, making labor hoarding affordable.\n- Stable employment bolstered domestic demand, supported private consumption, reduced precautionary savings, and facilitated a rapid recovery." }, { "heading": "Changes and performance during the COVID-19 pandemic", "content": "- The pandemic affects a broader range of sectors than the global financial crisis (which mainly hit manufacturing); confinement measures caused temporary business closures in many sectors.\n- Temporary changes to Kurzarbeit to make it more attractive:\n - Replacement rate: 60 percent for the first three months; increases to 70 percent during the 4th to 6th months; further increases to 80 percent from the 7th month.\n - Maximum duration extended to 21 months.\n - Coverage expanded to temporary workers (about two percent of total employment).\n - Employers’ social security contributions waived.\n - Requirement to exhaust working-time account balances before claiming Kurzarbeit suspended.\n - Eligibility threshold lowered: firms no longer need to reduce working hours for at least 30 percent of workers; threshold lowered to 10 percent.\n- Usage and labor-market impact (early pandemic period): from the beginning of March to the end of April, the number of workers who applied for Kurzarbeit exceeded 10 million, or about 20 percent of the labor force — a much greater number than peak applications during the global financial crisis — while unemployment increased by less than 0.4 million." }, { "heading": "Assessment and policy recommendations", "content": "- The German government’s approach in deep recessions: make Kurzarbeit more flexible, more attractive to employers, and more generous to employees, while expanding coverage across sectors and job types.\n- Trade-off: increased fiscal cost, but judged well worth paying to preserve jobs and incomes.\n- Limitations: Kurzarbeit cannot fully overcome the profound labor-market impact of the pandemic, which affects far more sectors than the global financial crisis.\n- Vulnerable groups: marginal employees, who disproportionately work in services and often do not make social security contributions, are not covered by Kurzarbeit and are likely to suffer the most.\n- Recommendation: consider alternative ways to provide income support for this vulnerable segment of the population to avoid potentially large social costs.\n\nSource: IMF News, June 15, 2020.\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- Germany and the IMF\n- Emerging from the lockdown\n- IMF Europe Office\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit" } ], "bullets": [ "[Markdown version](/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit/index.md)", "[Structured JSON version](/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit/index.json)", "[Bundle manifest](/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit/bundle-manifest.json)", "Published: June 15, 2020", "Kurzarbeit is a social insurance short-time work program whereby employers reduce employees’ working hours instead of laying them off.", "The COVID-19 pandemic renewed interest in short-time work programs; Kurzarbeit is widely considered the gold standard.", "Government income “replacement rate” normally provides 60 percent (more for workers with children).", "Mechanics: a worker receives 60 percent of pay for hours not worked, while receiving full pay for hours worked (example: a 30 percent reduction in hours implies a 10 percent salary loss).", "Usual maximum duration: 6 months consecutively.", "Kurzarbeit supplements private working-hour flexibility arrangements (working time accounts). Firms may use Kurzarbeit only when working time accounts are exhausted.", "Employer cost-sharing: employer pays 80 percent of the total social security contributions owed on the reduced working hours.", "Potential risk: excessive reliance during normal times could reduce labor market flexibility, keeping workers in jobs that eventually need to disappear and widening protection divides across the labor market.", "Cost-sharing (employer social security contribution requirement) acts as a deterrent to overuse.", "Parameters (including employers’ share of social security contributions) can be relaxed during serious crises to discourage mass layoffs; such cyclical adjustments balance relief during deep recessions with avoiding excessive rigidity in normal times.", "Germany was the only G7 country that did not experience a fall in employment in 2009, despite a large contraction in GDP (of almost six percentage points).", "Work-sharing (including Kurzarbeit) was an important factor: estimate that about a third of the reduction in working time per employee was due to Kurzarbeit, with the remainder explained by other margins (e.g., running down working-time accounts and accumulated leave).", "Other contributing factors included earlier wage moderation and a high degree of specialization of manufacturing workers, making labor hoarding affordable.", "Stable employment bolstered domestic demand, supported private consumption, reduced precautionary savings, and facilitated a rapid recovery.", "The pandemic affects a broader range of sectors than the global financial crisis (which mainly hit manufacturing); confinement measures caused temporary business closures in many sectors.", "Temporary changes to Kurzarbeit to make it more attractive:", "Usage and labor-market impact (early pandemic period): from the beginning of March to the end of April, the number of workers who applied for Kurzarbeit exceeded 10 million, or about 20 percent of the labor force — a much greater number than peak applications during the global financial crisis — while unemployment increased by less than 0.4 million.", "The German government’s approach in deep recessions: make Kurzarbeit more flexible, more attractive to employers, and more generous to employees, while expanding coverage across sectors and job types.", "Trade-off: increased fiscal cost, but judged well worth paying to preserve jobs and incomes.", "Limitations: Kurzarbeit cannot fully overcome the profound labor-market impact of the pandemic, which affects far more sectors than the global financial crisis.", "Vulnerable groups: marginal employees, who disproportionately work in services and often do not make social security contributions, are not covered by Kurzarbeit and are likely to suffer the most.", "Recommendation: consider alternative ways to provide income support for this vulnerable segment of the population to avoid potentially large social costs.", "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)", "[PRESS CENTER](http://presscenter.imf.org/)", "[Germany and the IMF](https://www.imf.org/en/Countries/DEU)", "[Emerging from the lockdown](https://blogs.imf.org/2020/05/12/emerging-from-the-great-lockdown-in-asia-and-europe/)", "[IMF Europe Office](https://www.imf.org/en/Countries/ResRep/EUR)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit/index.md", "json": "/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit/index.json", "bundleManifest": "/en/news/articles/2020/06/11/na061120-kurzarbeit-germanys-short-time-work-benefit/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T23:44:22.149Z" }