German worksharing might not work in America
I doubt any post-crisis policy has gotten as much favorable press as Germany’s work-sharing program. I’m a fan, too. The basic idea is that unemployment is bad, and so the government pays employers not to fire workers. It worked well in Germany. But would it work well in the United States?
Perhaps not. It turns out to be really, really difficult to fire a German worker. It can take the better part of a year. You have to pay their salary for all of that time. You have to waste administrative dollars and effort prosecuting your case to the workers’ council. And so you can see why, if you don’t really want to fire your workers in the first place and you’re just expecting a bad couple of months, a work-sharing program would keep you from laying workers off. The alternative is that you spend six months trying to lay workers off and, in month eight, you have to begin searching for and training their replacements. It’s almost more trouble than it’s worth even before the work-sharing dollars kick in.
But in the United States, where you can fire workers easily and quickly, a work-sharing program is worth less to you. You can fire your workers and save money on their salaries. If you have to hire new workers in eight months or a year, well, you’ve saved eight months or a year’s worth of salary and benefit costs. And if the recession lasts longer than that -- as this one did -- you saved much more than that.
So just on its face, a work-sharing program in the United States would probably be worth less money to U.S. employers than to German employers. And then there are the cultural differences. It’s hard to fire people in Germany because firing people in Germany is frowned upon. It’s easier to fire people in the United States because firing people in here is less frowned upon. That’s not to say that CEOs or managers like letting go of their employees, but both anecdotally and legislatively, it’s viewed as a much more dramatic and reprehensible act in Germany than it is in the United States.
That’s not to say we shouldn’t give work-sharing programs a shot. A number of U.S. states have work-sharing programs and they’re not used. California, for instance. Experts tell me that these programs are poorly publicized and horribly administered, and I believe them. The German program, by contrast, was aggressively publicized and competently administered. So we should give that a try. But the policy is unlikely to work as well for us as it has for Germany.
That said, if the government wants to preserve existing jobs, it can start by not firing people. The public sector has lost more than 500,000 jobs since 2008, and it continues to lose more every month.