Study of the ramifications of the German short-time work (STW) scheme using novel administrative data on STW and drawing on evidence from establishment surveys that are linked to the administrative data. I show that, besides financial reasons, firms value and use STW because it allows them to hoard labor in a tight labor market.
During the pandemic, I document a strong negative selection into STW based on measures of firm quality and productivity, a pattern not observed during the financial crisis. This selection pattern is explained by the differing types of crises and their impact on establishments. Adjusting for selection, I then investigate the employment effects of STW in the pandemic and find 3-4 percent higher employment levels for firms utilizing STW. This relationship, however, vanishes quickly after firms exit STW, a result driven by outflows among STW firms being initially lower, but being higher after the end of STW.
IAB-Discussion Paper 14/2024: The Employment and Windfall Effects of Short-Time Work: Evidence from Germany