10.1 Million people in companies are on short-time work

10.1 million people in companies are on short-time work

The federal employment agency is sitting on a gigantic pile of money: 26 billion euros is the reserve that the agency in nurnberg has accumulated over the past few years.

And even this thick financial cushion will probably not be enough to combat the consequences of the corona crisis on the german labor market. What the chairman of the federal employment agency, detlef scheele, had to announce makes the impact of the crisis on the economy abundantly clear. Unemployment is on the rise, short-time allowances are rising exponentially to "unimaginable levels," and the number of new jobs is plummeting – scheele summarized the negative figures right at the beginning.

751.000 companies had registered short-time work for 10.14 million people by the end of april. Far more than economists had forecast. "That's a number that also left us a bit breathless," said scheele. But behind these 10.14 million names are people whose jobs will be preserved," he says.

This means that not only one in three companies entitled to do so was affected by short-time work, but also almost one in three employees subject to social insurance contributions in germany. In the catering industry – one of the hardest hit sectors – short-time work has been registered for nine out of ten employees.

Federal agency expects that in the end not all people for whom an application is filed will actually claim short-time benefits. There are no valid estimates, since the situation is not comparable with an economic crisis.

It is also unclear how long the short-time work will last and what percentage of it will ultimately be used. The federal government has decided to increase the short-time allowance, so that in future it will no longer only cover 60 percent of the net loss, but up to 80 percent, and for parents up to 87 percent. The increase will cost between 1 and 1.5 billion euros, said scheele.

Despite the enormously high number of short-time work advertisements, the number of unemployed – untypical for an april – fell by 308.000 up on march to 2.644 million. This is down by 415.000 higher than in april 2019. Seasonally adjusted, 373 people were unemployed in april.000 more people without a job – an increase like never before at this time of year. The unemployment rate climbed by 0.7 points to 5.8 percent. Mass layoffs do not take place, however; companies retain employees and bridge the crisis with short-time work.

In the crisis year 2009, 1.44 million people were in short-time work – the record to date. In 2009 as a whole, the figure added up to 3.3 million. This is now being far surpassed. In its negative scenario, the federal agency assumes that there will be up to eight million short-time workers at the peak and that the annual average will be a gigantic 2.8 million. In addition, the number of unemployed could be reduced by 200.000 per year on average.

In this scenario, the 26 billion euro reserve was not enough. "We had a financial requirement of between four and five billion euros from federal funds this year," said scheele.

Steffen kampeter, chief executive of the confederation of german employers' associations and co-chairman of the administrative council of the federal employment agency, criticized what he saw as an overly coarse labor market policy. "Due to political decisions, however, the federal employment agency's backlog is melting faster than snow in the sahara," kampeter emphasized. "Policies that aim to please today and completely lose sight of tomorrow are of little substance and have an even shorter half-life before they become political revelations."

Detlef scheele, who has been used to positive news during his time as chairman of the federal employment agency, is visibly upset when he has to announce the april figures in nurnberg. Never before in post-war history has he or one of his predecessors in office had to go before the press with such figures, said scheele.

"The corona crisis was allowed to lead to the worst recession of the postwar period in germany," he stressed "it has never been worse."This also puts the labor market under severe pressure. Not so much because there were layoffs on a large scale. Rather, because there were hardly any vacancies left and because labor market policy measures such as qualifications had not even been able to start in the first place.

"The labor market has practically collapsed," said scheele. In april 2020, there were only 626.000 unfilled positions were reported to the employment agencies, 169.000 less than a year ago. Adjusted for seasonal effects, the number of job vacancies had fallen by 66.000 down.

Placements were almost non-existent. The mediators were now processing applications for short-time work. In total, not 700 but 9000 people are currently entrusted with this activity – in addition to employees of the employment agencies, volunteers from the federal office for migration and refugees, the german pension insurance and the german postal service.

Federal labor minister hubertus heil – like IG metall boss jorg hofmann – praised the instrument of short-time work available in germany, also in comparison with other nations. "Short-time work secures millions of jobs," said heil. In the USA, more than 26 million people have lost their jobs in the past five weeks. The development shows that "we can't guarantee every job in our country, but we will fight for every job," heil said.

Finance minister olaf scholz (SPD) assured that the government would continue to do everything possible to secure companies and jobs. "I deliberately brought out the bazooka". Our goal is to ensure that companies and jobs come through these times in one piece," said scholz, referring to the provision of taxpayers' money.

It is not certain, however, whether the battle, which is being waged with gigantic sums of money, can actually prevent insolvencies and thus new unemployment. "It depends on how long it takes," said scheele. Success depended on decisions made by virologists and politicians. The key issue is the opening of schools and kindergartens. "The economy can only take off if parents can go to work," he stressed. And the deputy chairwoman of the german federation of trade unions, annelie buntenbach, warns: "the dam is on short time and we have to do everything we can to prevent it from breaking."