Flexible Adjustment through Short-time work: A Comparison of France, Germany, Italy and Spain

Short-time work is a principal form of flexible workforce adjustment in which declines in labour demand are compensated by temporary reductions in working time as an alternative to dismissals. Although enterprises may elect such a strategy even in the absence of a programme, public short-time work schemes provide a strong additional incentive. Most European countries have explicit schemes to promote this form of work sharing.

This paper compares short-time work programs and patterns and trends in short time working in France, Germany and Italy. The goals of the short-time work schemes in the three countries examined are broadly similar: to stabilize employment and to avoid or minimize dismissals during temporary economic downturns through reductions in working time and to assist firms in economic
difficulty. Although France, Germany and Italy all have short-time work
schemes, both the level and pattern of use of short-time working differ, in some
cases markedly.

This paper examines incentives for work sharing, patterns of uptake of short-time work, and the use of short-time work for structural intervention in France, Germany, Italy, and Spain. Chapter 1 discusses various factors influencing the use of short-time work in labour force adjustment. The following chapters compare the characteristics of short-time work schemes (2); analyze similarities and differences in the level and structure of short-time work (3); and examine recent experience with short-time work as an instrument of structural adjustment,(4). The principal conclusions are summarized in Chapter 5.

Analysis of estimated full-time equivalents shows the highest incidence of short-time work in Italy and Spain, followed by Germany and France. This pattern is the product not only of the relative generosity of short-time schemes but of a variety of other institutional factors such as employment protection, flexibility options, and labour representation. Short-time work is highly concentrated in industry and disproportionately in larger enterprises in all four countries. This pattern of uptake is not a consequence of restrictions on eligibility in short-time programme regulations but is rooted in differences between industry and the service sector and between large and small firms in markets and adjustment style.

Originally introduced with the goal of maintaining employment in
enterprises experiencing temporary difficulties, short-time work is increasingly used as an accompanying measure in enterprises undergoing structural change. This use of the instrument is strongest in Italy and Spain but has also been widely practiced in Germany since the mid-1970s. While temporary or cyclical use represents an efficient co-ordination mechanism of labour market policy, prolonged use of short-time work in structural adjustment is problematical. The same goals could be better achieved through other labour
market measures.