Europe’s employment aid keeps jobs from vanishing
Support bolsters entire economy
PARIS, April 30, (AP): Christian Etchebest’s Parisian bistro is a shadow of its usual bustling self. Five lunch specials sit in neat paper bags on the bar awaiting takeout customers – a tiny fraction of his normal midday business before the coronavirus.
A skeleton staff rotates in daily at La Cantine du Troquet near the banks of the Seine River, just blocks from the Eiffel Tower. One day they packaged a streamlined version of his Basque menu: sausages with a celery and beetroot remoulade, mashed potatoes and a dessert of strawberries with lemon sauce.
Yet Etchebest isn’t facing bankruptcy – not yet anyway – thanks to a French government program that lets him put staff on reduced hours and makes up most of their lost salary, on the condition they are not fired. That support is giving him a chance to keep his trained team together, awaiting the day when restrictions are lifted and sit-down meals are again allowed at this restaurant and his six others across Paris.
Similar programs are keeping hard-hit businesses across Europe afloat, preventing millions of workers from losing their jobs and income for now, and thousands of bosses from seeing their trained staff scatter. Some 11.3 million workers in France are getting up to 84% of net salary. The government estimates the overall cost at 24 billion euros ($26 billion), with half of all private sector employees expected to take part.
Germany’s economy ministry said 3 million workers are being supported, with the government paying up to 60% of their net salary if they are temporarily put on shorter or zero hours. Those with children get 67%, and many companies such as Volkswagen and Frankfurt airport operator Fraport add more.
Impact
The impact of the coronavirus pandemic and the cushioning provided by such short-work programs will be underlined Thursday when new unemployment figures for the 19-country eurozone are released.
Such programs are different from jobless benefits. They are only for temporary shutdowns that are no fault of the business itself. And they are no panacea. Such programs can’t save jobs that disappear due to long-term slowdowns in customer demand or to technological changes. But it gives workers and bosses breathing space and hope, preventing the unnecessary destruction of otherwise viable businesses.
“I will roll up my sleeves up and I will fight for all my restaurants,” Etchebest said. “For the majority of my staff to remain with me and so on. What else can I say? I can’t contemplate the contrary ... I will fight for it until the end.”
His chef, Thierry Lararralde, was weathering the crisis financially thanks to the support. “I can’t say I’m struggling; my net salary is around 3,000 euros ($3,222 a month), I am making 700 euros ($750) less.” He is making ends meet by spending less on gas and cooking at home: “It’s cheaper, we adapt.”
The takeout crew pushed aside their masks to eat together, Etchebest slicing a rare roast beef on a wooden board for them.
Etchebest realizes the road ahead could be tough after they re-open with fewer tables due to social distancing requirements.
“I am fully aware we will have 40%, 50% less of business,” he said, adding that some employees with health risks may not return. “I think everyone needs to adapt their business model – financially and operationally.”
Options
Economist Holger Schaefer at the German Economic Institute in Cologne said short-work support gives employers more options than the stark choice of keeping people or firing them.
“I can say, ‘You come 70% of the hours, or 50% or 30%.’ One doesn’t have to say either all or nothing,” he said. “When the crisis is past and the demand for labor rises, then the business owner has exactly the right staff available right away and doesn’t have to find new people.”
The support also bolsters a country’s entire economy. “When someone is afraid that their job will be lost in the near future, that person limits their consumption, they don’t buy a new car and spend less money, and that has in turn an effect on the macro-economy,” Schaefer said.
Short-work schemes proved their value during the Great Recession in Germany, where 1.4 million workers took part. Encouraging companies to keep workers meant the unemployment rate barely budged even as the economy plummeted, rising from 7.3% in January 2009 to 7.5% in December that year even as the economy shrank a painful 5% percent. Growth then quickly rebounded.
It’s the flip side of a European labor market, where worker protections are often blamed for deterring hiring in good times. It took seven years for unemployment to drop from a peak of just over 12% in 2013 in euro-currency countries to 7.3% in February, before the economic impact of the coronavirus crisis hit.
Femke Zimmermann, manager of Brasserie Berlage in The Hague in the Netherlands, has her eye on re-opening even as she spends most days at home looking after her 1-year-old and 5-year-old sons while the restaurant’s owners pay her with government help.