European countries seeking to protect workers from Covid-19 are overwhelmingly looking to Germany.
Across the continent, countries are rolling out their own version of Kurzarbeit, a German program that translates literally to “short-time work.” Under the program, financially distressed employers can drastically reduce worker hours, and the government will pay most of their lost wages. The goal is to help companies preserve jobs, making it easier for them and the broader economy to recover later.
Kurzarbeit has existed for more than a century, but it gained international attention during the 2008 financial crisis, when the number of workers enrolled in it climbed from around 50,000 to more than 1.5 million in a year (pdf, p. 35). The program is widely credited with helping Germany weather the crisis and recover relatively quickly; economists believe unemployment would have risen by twice as much (pdf) without it. Kurzarbeit’s long history and acceptance by both firms and workers is one reason why it works so well in Germany. And because layoffs must clear a higher bar under German law than in a market like the US, making them more onerous and costly, companies are eager to avoid them.