Saturday, March 15, 2014

JOBS | Trading Growth for Sustainability–"Kurzarbeit"

Kurzarbeit ("Short Work") has been
effective at least since 2009. Ich 
war dabei!="I was there!"
Glenn Hutchins, Vice Chairman of the Brookings Institution, argues today in the New York Times that the United States should follow the German example and trade growth for jobs.

The German Government does this by supporting companies that cut back hours of workers during a recession, rather than laying them off. The employees' salaries are maintained through a system of national subsidies administered by the company.

The companies continue paying workers a reduced salary but do not cut them from the payroll. The reduced salary is subsidized by the government.

This approach builds a reserve of trained workers ready to go to work. When demand picks up, the company asks the workers to come in for more hours. It obviates the need for new hiring and catchup training programs for new workers when the business cycle improves. A reserve of workers remains in place, much like that U.S. Army Reserve and the National Guard in which civilians maintain their military skills to be ready in case of a need for rapid deployment.

Paul Krugman recommended the concept favorably back in 2010, noting that Germany's growth rate in GDP was slower than that of the United States, but its employment rate (i.e., employment relative to population, a more reliable number than unemployment because it doesn't depend on subjective surveys of intent to find a job) did not fall as much.

As they say to the guy on first base in baseball, when there is someone on third and only one out– "Always trade a run for an out."

Trade growth for higher employment, especially when our employment rate is tanking.