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The wage aid that has saved millions of jobs during the pandemic in the 3 largest economies in Europe

The coronavirus caused an unprecedented double health and economic crisis.

In addition to the more than three million deaths worldwide, there are tens of millions of jobs lost due to the fall in economic activity.

The International Labor Organization (ILO) estimates that in Latin America and the Caribbean, for example, at least 26 million jobs in 2020, although the actual impact could be greater given the abundant informal work that is in the region.

Governments around the world have launched ambitious stimulus programs to avoid layoffs and promote a faster recovery once normality returns.

However, in a recent interview with BBC Mundo, the Brazilian economist Mónica de Bolle stated that although in Latin America there have been some positive actions, in general governments “have failed the people during the pandemic”, especially the most vulnerable.

By comparison, in rich countries billions of dollars have been spent saving the worst-hit employees, in many cases allowing them to keep much of their salaries and jobs.

We review how these ambitious programs work in Germany, the United Kingdom and France, all three major economies of Europe.

Alemania – ‘Short-time work’

The German program is called short-time work (temporary work) and in 2020 more than 10 million people benefited from it.

Under the short-time work the government provides 60% of the total salary (67% for workers with children) in the first three months, increasing to 70% between the fourth and sixth month, and up to 80% after exceeding seven months.

In the current crisis, Germany allows companies to keep their employees part-time, in which case it offers 60% of the salary for the number of hours not worked.

Most of the funds went to the tourism, hospitality, manufacturing and trade sectors, according to data from the International Monetary Fund (IMF).

Around three million people continue to be enrolled in this program, which It will work until the end of 2021 at least.

Economists have in the past highlighted the effectiveness of short-time work, attributing that Germany was the only G7 country that did not lose employment during the 2009 financial crisis.

United Kingdom – ‘Furlough’

Through the Job Retention Scheme –job retention program The conservative government of Boris Johnson has rescued companies and workers with multimillion-dollar aid in the United Kingdom. The sterling equivalent has been earmarked for US$70.000 millones.

It was introduced at the beginning of the lockdown in March 2020 and will be in effect until at least September 30, 2021.

Since then, the scheme, popularly known as furlough (license in Spanish) has supported 11.2 million workers, paying them 80% of the salary of the total hours not worked.

According to the latest official data, about 4.7 million of workers they continued to be assigned at the end of January.

The United Kingdom has one of the highest vaccination rates in the world and is scheduled to lift all restrictions on June 21. However, it extended the program until September to continue protecting the most affected sectors.

As of July, however, the government decrease the salary contribution to 70% and 60% in August and September.

The objective of furlough is to allow companies to keep their workers even if the lockdowns mean they can’t work at all.

It was also conceived for employees who had to take care of their children while schools were closed or for those most vulnerable to the virus who could not work safely.

Francia – ‘Partial unemployment’

France, the second-largest economy in the European Union after Germany, has also not skimped on employment support during the pandemic.

According to the IMF, France’s response to the crisis has been “punctual, flexible and proportional to the dimensions of the impact “.

The government drew up extensive fiscal plans for 2020-2022, reaching a total of 26% of GDP in emergency and recovery measures.

His program is called Partial unemployment, partial unemployment in Spanish, and is intended for all workers who suffer a reduction in wages for working fewer hours or because their companies have temporarily closed.

Currently, according to the French Ministry of Labor, there are three million people under the program.

But during the most restrictive moments of the pandemic, there were almost 13 million.

The program already existed in France before the pandemic and offers between 60% and 70% of salary depending on how affected the worker’s economic sector is.

Those who earn the minimum wage receive 100% of the total wage.

As with the German scheme, companies can claim only part of a worker’s salary, which in that case relieves the burden on the treasury.

critics

These systems have also received criticism.

Some economists argue that many of these hard-to-maintain jobs for governments will never return.

If remote work becomes widespread after the pandemic, for example, many of the businesses that live off the flow of workers in financial centers could lose income and be forced to close.

Instead, they say the money could be better used to further support those who have lost their jobs.

Other critics argue that these programs generally do not include freelancers or they leave out workers who have not been with the company long enough.

The United Kingdom, Germany and France offer bonuses and other aid for these workers, but not in all cases it seems to have been enough.

In fact, in Germany, the popular short-time work has been criticized by airline workers, since his pay did not include his overtime and night shifts that make up a large part of his salary.

It remains to be seen how governments will address the historic public deficits that these aid have generated when the pandemic ends, but to date the efforts appear to have saved the income of millions of workers.

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