What is the general orientation and targeting of the measures adopted to tackle the labor market impact of COVID-19 in your country? Is the summary in the OECD inventory appropriate? Have there been recent changes or new initiatives? How do you assess the overall policy set adopted so far? Have certain aspects or target groups been neglected in the policy packages adopted?
Crisis Response Monitoring Country comparison
To soften the impact on the labor market, the government introduced several initiatives targeted at businesses. The main components can be summarized as follows: (i) a “Corona support fund” of €15 billion, targeted at all firms, (ii) a “hardship fund” of €2 billion, targeted at self-employed, freelancers, and small enterprises, (iii) guarantees and the postponement of tax liabilities for businesses, and (iv) the “COVID-19 short-time work scheme” with an initial budget of about €12 billion. Measures (i)-(iii) are targeted at businesses which have little or no revenues due to the crisis. All measures were announced as methods for keeping business operational and able to provide employment. Several measures received additional funds since May 2020, for example, state guarantees for exporting firms were extended from €2 billion to €3 billion.
COVID-19 short-time work is an adaptation (effective from March 1st) of the existing short-time work arrangement and intended to keep employees employed even if there is little or no work. It is limited to a maximum of 6 months (divided in two periods of three months each); employees’ wages are paid by the PES with a replacement rate that varies between 80% and 95% (depending on the wage level); and firms’ social security contributions for their employees are refunded in full. The average working time over the period must be between 10% and 90% of the regular working time, which allows for shorter periods of 0% working time. It is more generous than the existing short-time work program. Firms have, however, to pay their workers in advance and are refunded later, which could lead to liquidity problems for some firms.
A survey of businesses carried out in April indicates that these measures were seen as “helpful” (48%) or “very helpful” (25%) (Hölzl, 2020). Only about 10% of businesses said that the measures did not help. About 16% of businesses stated that they do not need government support during the crisis. We observe significant variation across firm size, however, and small firms were twice as likely as large firms to report that support measures are not helpful (Figure 4).
Measures were targeted at “standard” businesses and were initially not available for NGOs, artists, and certain groups of self-employed. The government extended and adapted the program in several steps, with the aim to close gaps and to increase their coverage of vulnerable categories. By mid-May, steps have been taken to improve the situation of artists and persons working in the cultural and entertainment sector, who are in a particularly difficult situation because cultural activities and mass events are still largely banned or subject to very restrictive rules.
Although labor market indicators such as employment and unemployment currently show similar developments, in several respects the crisis affected women harder than men, as more women than men work in the health sector, in education, or in retail. In addition, both men and women have been working more in the home, but evidence indicates that the additional burden due to care and household work has not been shared equally. Berghammer (2020) states that 16% of women and 9% of men report that they spend much more time on housework (47% of women and 43% of men spend more or slightly more time on housework). The increase is most marked among families with children, but couples without children and people living alone also report increased time spent on domestic work. Gender-specific responsibilities for childcare increased and it is mainly mothers who look after their children and learn with them: 47% of women and 29% of men spend much more time on school-related activities. Survey data collected by the University of Vienna (Austrian Corona Panel Data, 2020) indicate a marked drop in life satisfaction during the pandemic crisis for the Austrian population as a whole. The decline was however steeper for women than for men (Haindorfer, 2020).
A survey among businesses in August 2020 suggests that about two thirds of these businesses used short-time work (Hölzl et al., 2020). There was little change over time, in March some 64% of businesses used short-time work and in August it was about 66%. Financial support to ensure financial liquidity was used by 18% of businesses in August.
- Self-employed persons in Austria are not automatically insured against unemployment. Self-employed who started their self-employment after 2008 keep an entitlement to unemployment benefits for a maximum of five years if they worked less than five years before their self-employment spell. They keep their entitlement for an unlimited period if they worked for five years or more as a dependent worker before their self-employment spell. Self-employed who started before 2009 also keep their entitlement indefinitely. The self-employed may voluntarily insure themselves with the social security within 6 months of their self-employment start. The opt-in is binding for 8 years. However, to be able to claim benefits, the business has to be (temporarily) closed. Only a minority of self-employed choose to opt-in, between January 2009 and August 2018 there were a total of 2,342 applications (Hartinger-Klein, 2018). In 2019, there were on average 529,600 self-employed persons in Austria (Statistik Austria, 2020).
For individuals, the most important, broadly based program introduced by the Federal Government was the Canada Emergency Response Benefit (CERB), which operated from March 15 to September 26, 2020. CERB was a temporary direct transfer program that operated two parallel streams: one for those (expected to be) EI eligible (CERB-EI), and another for those not EI eligible (CERB-CRA; Canada Revenue Agency). Especially in the early days of CERB there was some confusion about who should apply to which stream and some people applied to both and needed (or will need) to make repayments. The EI stream of CERB simplified and effectively temporarily replaced the existing EI program’s regular and sickness benefits. The combined CERB streams had less stringent entrance requirements than pre-COVID EI and was accessible for workers with minimal labour force attachment who would not normally qualify for EI. CERB was also more generous for those with low EI benefit rates and receiving it did not directly affect subsequent EI eligibility (although the latter was not entirely clear at the outset). Processing time to the payment of the first cheque was also supposed to be (on average) faster and there was less administrative burden for workers and employers. On the funding side, the CERB-CRA stream was paid out of the federal government’s general revenues whereas CERB-EI stream was entirely premium funded by employers and workers. CERB provided a taxable benefit of $2,000 every four weeks for eligible workers — that is, those who stopped working or whose work hours were reduced due to COVID-19 (with retroactive applications accepted until December 2, 2020). The program was initially only intended to last 16 weeks but was extended to 28 weeks in total. As of October 4, 2020, about 27.5 million total applications had come from 8.9 million unique applicants, representing 48.1% of the labour force; 51.4% of applicants were male, and 48.5% were female. Payments totalled $81.6 billion. The contrast between so many processed claims relative to job losses peaking at just over three million is stark, especially since other programs were also operating.
The federal government made a deliberate decision to move quickly, recognizing that some errors would occur. Support for those who needed to self-isolate or who had lost income because of temporary layoffs or COVID-19 related issues was a government priority. Some confusion ensued and continued into the fall of 2020. A non-trivial number of individuals erroneously claimed both CERB-EI and the CERB-CRA, and some claimed CERB (for which the initial administration was minimal) who were ineligible. Recently, the tax authority reported that 213,000 Canadians may have to repay benefits. Many had voluntarily repaid benefits prior to this announcement. Also, although CERB was taxable, no taxes were deducted from the transfer, which many anticipate will be problematic when income taxes become payable.
CERB also interacted with other elements of the tax and transfer system in a manner that was not always initially obvious to claimants and potential claimants. As a result, beneficial tax and application strategies were not always clear to claimants at the outset. Of particular policy interest are the impacts on very low-income individuals. They experienced heterogeneous treatments on several dimensions — especially as a function of province of residence. Since for some individuals CERB paid more than disability and other social assistance programs, and certain recipients met the eligibility criteria, some applied (either switching or claiming both). In Canada social assistance (including some disability programs; also called income assistance or welfare) is operated by provincial and territorial governments; CERB claimants who were also social assistance recipients were treated quite differently across provinces. Some provinces/territories offset CERB payments with dollar-for-dollar reductions in social support payments; others, representing the vast majority of the population, undertook partial claw backs. Only one province and two territories allowed recipients to retain both transfers. Despite incomes remaining constant or increasing, cash management problems ensued, especially where rent for living accommodations was paid directly by the social assistance program. Once the COVID-19 moratorium on evictions was over, some income assistance recipients faced the loss of their housing.
Beyond CERB, in the early days of the COVID-19 pandemic, well above average applications for EI were also made. The EI program was temporarily modified with some administrative steps simplified to reduce the burden on EI staff and to speed up the delivery of benefits. COVID-specific claims were also sped up. Canada has a one week waiting period for EI eligibility — a type of deductible — and this was waved for quarantine cases.
Effective September 27, 2020, workers previously covered by CERB have been transitioned to a modified EI program with generous temporarily measures for both entrance requirements and minimum benefit rate so that marginally attached workers and those affected by the pandemic are eligible. In Canada, EI’s eligibility threshold and weeks of entitlement (maximum 45 weeks) are functions of hours worked in the qualifying period (typically one year, depending on the regional unemployment rate), but the duration has been extended for CERB beneficiaries. For the next year, applicants are treated as if they reside in a region with an unemployment rate of at least 13.1% and are given a “credit” of 300 hours towards qualifying for benefits. Moreover, the minimum (taxable) weekly benefit has been increased to $500.
For those not eligible for EI, three new programs were also created:
- The Canada Recovery Caregiving Benefit (CRCB) for those forced to take time off work to care for a dependent due to the pandemic.
- The Canada Recovery Benefit (CRB) for those who do not qualify for EI.
- The Canada Recovery Sickness Benefit (CRSB) for those employed and self-employed individuals unable to work because they are sick or need to self-isolate due to COVID-19, or who have an underlying health condition.
A series of targeted programs was also designed to help certain sub-populations, especially persons with disabilities, students, Indigenous peoples and seniors. Selected programs include:
- Persons with disabilities: As of October 30, 2020, a non-taxable, non-reportable, one-time payment provides up to $600 for extraordinary expenses incurred by (eligible) persons with disabilities during the COVID-19 pandemic.
- Students: The Canada Emergency Student Benefit (CESB) — operating from May to September 30, 2020 — provided financial support to post-secondary students, and recent post-secondary and high school graduates, unable to find work due to COVID-19.
- Indigenous persons: A range of broad-based financial support was provided to address several issues including community supports, health preparedness, on-reserve income assistance and mental health services.
- Seniors: In July 2020, those eligible to receive the Old Age Security pension received a one-time payment of $300; those eligible to receive the Guaranteed Income Supplement also received $200.
There has been some criticism of the federal government for not moving more quickly but given that, in the vast majority of instances, entirely new programs were being developed and introduced, the government’s response has been rather swift, with the exception of the one-time payment for persons with disabilities, announced only recently.
Overall, this COVID safety net was designed and executed remarkably quickly. It has been criticized for having poor eligibility screening and for being too wide and too generous. However, spending too much time on designing and screening for means-tested criteria would have certainly delayed the availability of support. Given the unprecedented nature of the crisis in both depth and speed of job losses, and the need to encourage self-isolation and quarantine, it is better that too many rather than too few received support.
The potential work disincentive of such support, however, has raised two serious debates. First, transfers that do not negatively affect output are not normally of concern to economists, but disincentives to work are viewed as problematic. Yakabuski points to the remarkable level of support provided to workers in Canada. To this point in the COVID crisis, Canadian labour income fell by $100 billion, but the federal government provided $225 billion in direct transfers to workers and employers. The full potential downside of this may only become apparent in future. Further, despite the rather substantial transfer, for businesses, as discussed later, the criteria were said by some to be too narrow and too stringent. Second, public discussion has focussed on the poor wages of many essential workers and their lack of benefits, especially sick leave, which may have exacerbated the spread of the pandemic, particularly in long-term care homes.
A preferable strategy for some may have been greater emphasis on subsidizing employment in situations where self-isolation and shutdowns were not required. Canada’s effort here was smaller than for CERB and the debate is really about the emphasis placed on alternative programs.
At the intersection of support to workers and support to businesses, non-profits and charitable organizations is the Canada Emergency Wage Subsidy (CEWS), from March 15, 2020, until June 2021. It was originally a 12-week program that was then extended. CEWS’s primary goals were to support workers, to maintain employment relationships, to keep workers with firm-specific knowledge in their workplaces, and to reduce EI and CERB claims. CEWS is similar to the EI work-sharing program, but it provides faster access to funds, is less administratively burdensome, is usually more generous, and is paid for from general federal revenues rather than by employers and worker EI premiums. CEWS was originally a 75% wage subsidy to a maximum of $847. The subsidy was reduced to 65% from September 2020 until the end of the year, with subsequent declines until June 2021. The key eligibility requirement is for firms to have had a minimum revenue decline. This figure was 15% from March 15 to mid-April 2020, then 30% until early July, and subsequently “any decline” until December 2020. The required decline for 2021 has not yet been announced. At the outset, there were complaints about the CEWS threshold revenue loss being too high, and the administrative burden for businesses being too great.
As of November 22, 2020, CEWS had approved 355,990 unique claims and paid out over $50 billion in subsidies (in contrast to about $80 billion for CERB). The number of unique employees subsidized is not available given worker turnover, but at the peak of the program in May/June 2020, just over 3.9 million workers were being supported. By October/November 2020, that number fell to about 1.5 million in a Canadian workforce of about 19 million.
- All monetary figures in this document are in Canadian dollars.
- For a comprehensive list and description of federal programs introduced, including eligibility requirements, please consult the following: https://www.canada.ca/en/department-finance/economic-response-plan.html; and https://www.canada.ca/en/services/benefits/covid19-emergency-benefits.html.
- See https://www.canada.ca/en/services/benefits/ei/claims-report.html; and http://dashboard.cdhowe.org/.
- See, for example, Catherine Cullen, “Canadians Applying for New Pandemic Benefit Report Confusion, Frustration,” CBC News, Oct. 16, 2020, https://www.cbc.ca/news/politics/canada-recovery-benefit-crb-cerb-pandemic-covid-1.5764377; and Catherine Cullen, “CRA Warns 213,000 Canadians That They Might Have to Pay Back CERB Overpayments,” CBC News, Nov. 23, 2020, https://www.cbc.ca/news/politics/canada-revenue-agency-cra-cerb-pandemic-covid-1.5812925.
- Kathleen Harris, “Canadians Have Made 190,000 Repayments on CERB Claims, Says CRA,” CBC News, Jun. 10, 2020, https://www.cbc.ca/news/politics/cerb-repayments-claims-tips-abuse-1.5605838.
- Gillian Petit and Lindsay M. Tedds, “The Effect of Differences in Treatment of the Canada Emergency Response Benefit across Provincial and Territorial Income Assistance Programs,” Canadian Public Policy 46, no. S1 (2020): S29–S43, https://www.utpjournals.press/doi/full/10.3138/cpp.2020-054.
- Bonnie Allen, “Landlords Say Poor Tenants Who Received CERB Can’t Make Rent After Losing Social Assistance,” CBC News, Nov. 22, 2020, https://www.cbc.ca/news/canada/saskatchewan/landlords-tenants-cerb-rent-1.5810230.
- Yakabuski, Konrad, “Chrystia Freeland rolls the dice on federal finances” The Globe and Mail, Nov. 28, 2020, https://www.theglobeandmail.com/opinion/article-chrystia-freeland-rolls-the-dice-on-federal-finances/.
- See, for example, Stephanie Marotta, “Pandemic Highlights Paltry Sick-Day Policies,” The Globe and Mail, Nov. 28, 2020, https://www.theglobeandmail.com/canada/article-covid-19-pandemic-highlights-canadas-paltry-policies-for-paid-sick/.
- See https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-statistics.html; and https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html.
France has combined a strict containment policy with a large spectrum of measures to sustain households, firms and independent workers. The expected total cost of these measures is about 110 billion euros (4% of GDP) accompanied by the creation of a 300 billion euros budget to guarantee bank cash lines to firms. These measures have been quite effective at dampening the impact of the lockdown on employment, income of households and firms. They also might have contributed to reduce economic activity.
For workers, these measures include income support to sick workers and their families, to quarantined who cannot work from home, to persons losing their jobs or self-employment income and help for insecure workers to stay in their home. Unemployed people continue receiving their benefits during the lockdown and the confinement period postpones the exhaustion date of unemployment benefits. Temporary agency workers are paid for the entire duration of their assignment as initially foreseen even if they cannot work because of the confinement measures. People who quit a job for another one but could not be hired are granted exceptional access to unemployment benefits. The seasonal suspension of evictions from dwellings (evictions are forbidden form November 1 to March 31 in normal time) has been extended. The government has requisitioned hotel rooms for homeless people to be used for confinement. The emergency housing spaces that are made available during the winter period are made available all year long.
For firms, measures include deferral of payment deadlines for social and tax payments; possibility of tax rebates for firms facing very important difficulties in the framework of an individual examination of requests; deferral of the payment of rents, water, gas and electricity bills for the smallest businesses in difficulty; aid of up to 1,500 euros for very small businesses (turnover < €1M), self-employed workers and micro entrepreneurs experiencing a very sharp drop in turnover (70% loss compared with the same month in previous year) or subject to administrative closure; creation of a 300 billion euros budget to guarantee the bank cash lines that companies may need because of the epidemic; support from the state and the Banque de France (credit mediation) to negotiate rescheduling of bank credits; simplified and reinforced short-time work programs; support for the treatment of a conflict with customers or suppliers by the Business Mediator; recognition by the public authorities of the Coronavirus as a case of force majeure for their public contracts which implies that for all state and local public contracts, the delay penalties are not applied. Youth
In July 2020, the government launched a “youth plan” which has two main components:
1) Hiring subsidies: (i) All firms get hiring subsidies equal to 4,000 euros for any young person below 26, recruited between August 2020 and January 2021; (ii) An exceptional grant of 5,000 euros to recruit a work-study student under 18 years of age (under an apprenticeship or professionalization contract) or 8,000 euros to recruit a work-study student over 18 years of age.
2) Funding of more than 400,000 seats in various training programs for low-skilled youth.
Germany was relatively quick to adopt and, at a later stage, to adjust larger policy packages to mitigate the employment and social impact of the crisis (see KPMG Global 2020 for an overview about government and institution measures in response to COVID-19). While the extension of the long-standing short-time work (STW) scheme can be viewed as a standard response to economic recessions in Germany, STW is in the current situation also being used by firms that were not using it during the Great Recession in 2008-09 or in previous recessions. Preliminary data indicate that, for example, while STW has again been widely used in export-oriented sectors such as the metal industry, especially in the initial phase of the crisis STW has also been extensively used in service sectors (especially by hotels and restaurants where more than 90 percent of all workers had been included in notifications for STW; BA 2020d). This has recently changed as the number of short-time workers in industrial sectors fell only slightly until October 2020, but declined more strongly in service sectors (ifo 2020a).
Next to the increased generosity of STW, there has also been a remarkable (temporary) extension of the contribution-based unemployment insurance benefit duration as part of a social protection package (Deutscher Bundestag 2020a). At the same time, job search requirements have been reduced and activation principles have come to a halt, both for the contribution-based unemployment insurance benefits and the tax-based basic income support.
Including the latest stimulus package, which has been agreed upon in June 2020, Germany’s measures – together with liquidity aid and loan guarantees – equal more than 30 percent of the country’s annual GDP (BMF 2020a; BMF 2020b). The stimulus package in summer (worth EUR 130 billion) has moreover shifted the focus towards boosting consumption. Important elements are a temporary VAT reduction (from 19 percent to 16 percent and from 7 percent to 5 percent, respectively, from July 1, 2020 to December 31, 2020) and a one-time EUR 300 lump-sum payment per child.
Nonetheless, the particular emphasis on direct ad hoc support measures for small businesses and self-employed by way of lump sum payment, credits and guarantees appears remarkable (DB Research 2020). This novel feature of the current crisis response (when compared to previous recessions) could be due to the increased visibility of freelance work in Germany, but it could also relate to the larger extent to which SMEs and self-employed workers are affected by the contact ban and the shutdown (e.g., creative jobs, restaurants).
Women could be one of the “blind spots” receiving less attention in policy responses so far (OECD 2020). For instance, they are overrepresented in the workforce of crisis-related or “essential” sectors (most notably in the health sector, but also in the food retail sector), and they typically take a major part of the burden resulting from school and child care facility closures. A related issue is that also less attention has been paid to the flexible workforce of marginal part-time workers who are, for example, not included in unemployment insurance and will probably often not register as unemployed.
On May 14th, the Italian government approved the third and most ambitious intervention, the Decreto Rilancio (Relaunch Decree), to revive the Italian economy. This 55-billion-euro plan aims at helping businesses with non-repayable grants and tax breaks; a sizable amount, about 16 billion euros, has been allocated to strengthen and broaden tools for income support, such as Cassa Integrazione Guadagni (short-time work programs), and allowances for self-employed.
This decree followed two previous interventions, the Cura Italia (Save Italy) and the Decreto Liquidità (Liquidity Decree). The first one was an immediate response to the COVID-19 outbreak, which aimed at (i) strengthen the heath care service, (ii) support businesses and families by pumping liquidity and suspending tax payments, (iii) and preserve employment levels by extending temporary unemployment benefits to all firms and by suspending layoffs for the coming 2 months. The Decreto Liquidità instead mainly focuses on firms; the measures involved state guarantees for 200 billion euros in favor of banks, ultimately enabling them to grant loans to firms of all sizes. The guarantees cover between 70% and 90% of the loan amounts, depending on firms’ characteristics.
The first two interventions suffered from delays and difficulties in their implementation, mainly because of the excessive bureaucracy in the application procedures for accessing benefits and loans. The Relaunch Decree should simplify administrative procedures by cutting down bureaucracy.
In March-May, 139 thousand firms with in total 2.7 million employees (36% of all employees in the Netherlands) claimed short-time work subsidies (NOW, Tijdelijke Noodmaatregel Overbrugging voor Werkgelegenheid). In June-August this figure dropped to 63 thousand firms with in total 1.3 million employees (18% of all employees). Firms that have a drop in sales of more than 20% can get a subsidy of 90% of the wage bill that corresponds with the drop in sales. As a result, the Dutch government has supported firms with an amount of 9.9 billion euro in March-May and 5.3 billion euro in June-August. Furthermore, it is estimated that around 374 thousand self-employed (25% of all self-employed in the Netherlands) have claimed a special form of welfare from municipalities in March-May (Tozo, Tijdelijke overbruggingsregeling zelfstandig ondernemers), which dropped to 103 thousand in June-August (7% of all self-employed). The first part (March-May) of this special form of welfare did not depend on partner income or wealth, whereas the second part (June-August) did involve a partner income test. Additionally, the government has granted firms tax deferrals (for a total of 13 billion euro by the end of August) and provided a lump sum transfer for ‘flexible’ workers that lost a substantial part of their income but did not have access to unemployment insurance or welfare (TOFA, Tijdelijke overbruggingsregeling voor flexibele arbeidskrachten). The use of this latter scheme was however rather limited (10 thousand persons receiving 17 million euro).
The focus of the Dutch government with the NOW and Tozo was on getting support to firms and workers quickly. This has kept individuals out of unemployment, at least for the time being. This is generally considered to have been a timely and successful initial policy response. At the end of August both schemes (NOW and Tozo) have been renewed for another 3 quarters until July 1st 2021, although the terms have changed somewhat: the NOW-subsidy on the wage bill will be gradually reduced from 90% to 60% while the minimum required loss in turnover will be increased from 20% to 30% as of January 1, 2021. The Tozo was intended to become subject to a wealth test as of October 1, but this is postponed to April 2021 due to the second partial lockdown. The adjustments to the original schemes are aimed to make the support more targeted, and to mitigate adverse incentives for reallocation and working hours. The government has also made a budget available to support retraining and job-to-job transitions for individuals in affected sectors.
- For an overview of all financial policy measures in the Netherlands related to COVID-19, see: https://www.rijksoverheid.nl/onderwerpen/coronavirus-financiele-regelingen/overzicht-financiele-regelingen.
- Source: Ministry of Social Affairs and Employment (2020).
- These figures are identical from those in the September report because the Ministry of Social Affairs has not provided any update since then.
- See: https://www.rijksoverheid.nl/actueel/nieuws/2020/08/28/belastinguitstel-tot-1-januari-ruime-terugbetalingsregeling-voor-ondernemers
- According to survey results from the end of March reported in Von Gaudecker et al. (2020), only about 10% of employees was worried about their job in the next 4 weeks, in part due to the special policies to maintain employment, whereas about 30% of self-employed was worried about losing their work.
- Indeed, e.g. Cahuc (2019) and Krugman (2020) note that short-time work arrangements like the NOW work best for a short-lived V-shape recession, but inefficiencies due to reduced reallocation will increase as the recession is more likely be U-, L- or ‘Nike-swoosh’-shaped.
The OECD listing of measures is an appropriate summary of the government actions to tackle the impact of the health crisis over the National State of Emergency period (March 18th – May 2nd). However, since May 3rd Portugal started to ease the lockdown restrictions (and entered a National State of Calamity). New guidelines were issued, which include measures to reduce workers’ exposure to COVID-19 in the workplace, such as a recommendation for telework when and as much as possible during May, and partial telework with lagged schedules or shadow teams from June.
According to a report by the Portuguese Minister of Labour and Social Solidarity (Godinho, 2020), as of 16 June 2020 the set of exceptional support measures to families, workers and firms had already benefited 1,222,000 people, 144,464 firms, and 778 million euros had been paid to recipients. Employment protection measures were by far the most expensive component of the measures adopted. The simplified layoff involved, thus far, an investment of 580 million euros (this measure was extended until July 2020). Income support for self-employed and members of statutory bodies cost 104 million euros. Exceptional support measures to families, such as subsidies for prophylactic isolation, for sick leaves, and to care for children aged under 12 (schools were closed at the start of the State of Emergency) cost 43 million euros. The automatic extension of unemployment benefits and of social inclusion income (for those who were receiving these subsidies in March 2020) cost 18 million euros. Furthermore, credit lines for financial support to firms involved an investment of 6,2 billion euros. To access these credit lines, however, firms have to declare that they assume the responsibility of not dismissing permanent workers and of not initiating any collective dismissal process before the end of December 2020.
All political parties approved the tools adopted to sustain the effects of the nationwide lockdown. It is difficult to sort the measures according to their relevance in social terms – all are important and each tackles a different issue. However, albeit costly, the temporary layoff scheme is arguably one of the most important measures adopted. This tool not only sustains the transition from employment to unemployment (at least for permanent workers), but can also be taken as a signalling device from the government to ensure that this is a temporary exogenous shock. In fact, the government appears to be in an active effort to avoid a shift in expectations amongst the economic agents, which could have severe consequences for the recovery phase. Therefore, the feeling is that it is “worth it” to help the labour market keep its structure and allow it to come back to business as the shock subsides. Since schools were closed during the lockdown (and will not open before the next academic year), income support for parents to stay home and look after their children is also a tool of utmost importance.
Although the social climate is quiet, the measures do not fully address the income loss suffered by all economic agents. Furthermore, temporary workers, the self-employed, small business owners and labour market entrants are particularly vulnerable groups (both in terms of income loss and of labour market status). Media also reported that the number of requests to the national network of food banks tripled in April when compared to the previous month.
Following the budget revision approved on the 23rd of July, the government implemented the “Extraordinary support for progressive recovery” to take effect from the 1st of August to the 31st December. This is a financial support for companies facing a strong decrease in turnover associated and a temporary reduction of the normal working period, with the aim to keep jobs and support economic recovery and workers’ pay. This support has differentiated solutions depending on the business crisis scenarios. Table 2 summarizes these measures.
- See plan for lifting lockdown measures: https://covid19estamoson.gov.pt/plano-desconfinamento-medidas-gerais/
- The OECD inventory provides a relevant summary. The only important update is introduction of Kurzarbeit for companies since April 17th, which we assume will be updated in the database in due time.
- The overall policy set can be considered as adequate.
- The actual data about state compensation programs between mid-March and June 2020 published by the analytical unit of the Ministry of Labour show that as of June 10th, 496 thousand workers were supported by the government programs targeted on employers and self-employed. The majority of support requests were approved (87% of the amount as of May 2020 and 99% in June 2020 requested was approved and distributed). The average amount per employee has doubled between March and April. This increase was expected, as the compensations for April covered the whole month while March compensations reflected the period after the declaration of the emergency state in March 12th. In March the support varied between 251 EUR per self-employed to 284 EUR per employee in establishments closed or regulated because of the anti-pandemic governmental measures. In April 2020 the amounts increased to 474 and 493 EUR, respectively.
- As of October 30, 2020, the total amount of support targeted on employees, employers and self-employed increased to 636 million EUR and supported 1.825 million employees (135.4 thousand employers) and 274.9 thousand self-employed workers.
- Of the total state compensation programs targeting the labor market, the largest support went to the manufacturing sector (39% in March and 46% in April, 2020) and to the wholesale and retail services (20% in April). The largest amount of the support per employee was in accommodation services (260 EUR in March and 546 EUR in April, per employee). As the support for March was paid only in May, the HORECA sector service providers were complaining that the support was late and insufficient. Indeed, in March 2020 42% of all newly registered unemployed were from this sector. Nevertheless, the share of the HORECA sector in unemployment decreased to 13% in May 2020. We note, however, that in spite of the partial re-opening of restaurants in May 2020, 14% of them were not expecting to re-open at all because of bankruptcy.
- As of October 1, 2020, the manufacturing sector received 48% of the financial support, whereas the wholesale and retail services sector received 11.9%. The largest average support per employee went to the public sector and defense (411 EUR), distribution of gas and electricity (392 EUR) and construction (383 EUR), whereas the corresponding amount in the manufacturing sector was 257.7 EUR.
- At the beginning of the pandemic, the representatives of employers complained about late and inefficient help from the government to enterprises and were afraid of significant job losses if more robust help was not provided. They mostly criticized complicated administration of the measures adopted to alleviate the economic impact of the pandemic as well as insufficient support to big employers. A comparative study of the Centre for Public Policy, Bratislava, and Inline Policy, London, also concluded that the initial support of the Slovak government was not sufficient; a program of guaranteed loans for entrepreneurs was seen as the one missed the most.
- The more recent figures on the demanded and actual take-up signal that situation has improved by May 2020, and employers could reach the support demanded.
- Although the May unemployment figures suggest some stabilization in the labour market, this might be temporary only, as the numbers of cases have started to increase in the second half of June in Slovakia and several other countries. The existing strategies of containing the pandemic may not be sufficient to prevent future lockdowns. Slovakia indeed implemented various measures to limit social contact in October 2020, and implemented, as the first country in the world, a mass testing of its entire population with COVID-19 antibody tests on October 31 and November 1, 2020. Pilot testing in four districts took place one week before the national testing.
- Some of the groups that may be less well covered by the first-aid measures include municipalities (who will lose on income taxes) and socially excluded and marginalized groups (who may be falling through the safety nets and the measures implemented), and employers and employees in the culture, sports and the HORECA sector. Some loan programs for municipalities have been announced in late June; however, it remains to be seen whether municipalities will be willing and able to use these programs in a larger scale.
- The support has been increased and broadened as of October 1, 2020. The main changes were that self-employed with contemporaneous employment contracts could receive first-aid financial support (helping especially the culture and sports sectors), the maximum support to employees increased from 880 EUR to 1,100 EUR, and the support to self-employed increased by 50%. A specific instrument was introduced for the HORECA sector (support 1.4% to 10% of revenues, depending on the decrease of revenues (compared to 2019), if the decrease is at least 40%)
- No impact studies about the effectiveness and efficiency of the adopted measures are available as of November 2, 2020.
- https://www.employment.gov.sk/files/slovensky/ministerstvo/analyticke-centrum/analyticke-komentare/isp_2020_prva_pomoc_slovensku_20200615.pdf (Table 7)
- AZZZ statement before the tripartite meeting on May 18th, 2020: https://hsr.rokovania.sk/2020-/
Spain is one of the few countries that has adopted measures along the 10 dimensions analyzed in the OECD inventory since the beginning of the health crisis. Different measures (“Social Shield”
) have been adopted in order to ensure an adequate level of social protection of workers.
Workers under precautionary confinement and/or suffering from COVID-19 benefit from a more generous coverage than the one for regular illnesses (similar to workplace accidents – 75% of social security regulatory base instead of 60%). During the two weeks of full lockdown, a full paid leave was granted for workers of non-essential activities that could not be carried out by teleworking with a compensation of non-worked days before the end of the year. Workers with family responsibilities due to school closures or need to provide care for family members can adapt their time and working conditions during this period (recently extended until three months after the end of the state of alarm). Firms cannot terminate temporary contracts during the crisis.
Minimum contribution periods for unemployment benefits have been suspended during the crisis, including for temporary workers and eligibility has also been extended for some groups of workers (those with permanent discontinuous contracts or domestic employees). Extraordinary allowances and benefits for self-employed workers, affected by the suspension of economic activity, have also been adopted. It is also possible to combine unemployment benefits with temporary employment in agriculture under certain conditions.
There have been significant changes in the temporary employment adjustment schemes (ERTEs – Expedientes de Regulación Temporal de Empleo). Procedures have been simplified and access is now granted to all workers affected by employment suspension or working time reduction, regardless of their contribution period. The objective is to minimize dismissals during this period and facilitate a quick recovery of the activity once the confinement measures are lifted. Unemployment benefits received under the temporary employment adjustment scheme do not count in terms of consumption of unemployment benefit rights during the state of alarm and there is an exemption of social contributions during the period (100% for SMEs, 75% for the rest). Recent legislative changes have also allowed that ERTEs can be applicable in sectors considered essential but having nevertheless suffered a reduction in revenues due to confinement measures. All temporary employment adjustments process related to the Covid-19 crisis are covered under these provisions, even if they were initiated before the approval of the measure. The condition to use ERTE’s is that economic dismissals are not allowed in these firms, being this one aspect that was reformed after an agreement with firm associations and trade unions. ERTEs were initially designed to cover the situation of workers until the end of the state of the alarm, but they were extended until June 30th and prorogued again until September 30th. A new extension until January 31st 2021 has been recently approved and legislation has been changed to allow new entries into the system due to restrictive measures recently approved.
Additional measures have been adopted to support vulnerable families and workers. Social services programs have received additional funding and specific measures have been adopted to provide food to children affected by school closures. A three-month credit moratorium on the payment of credits and non-mortgage loans by vulnerable groups has also been introduced. Utility companies cannot cut services (water, gas, energy) in case of non-payment. A social benefit to cover the costs of energy provision has been extended to households affected by COVID-19. Evictions are prohibited due to missed payments for all households during the state of alarm and for vulnerable households (those affected by the ERTEs or whose incomes have fallen by more than 40% due to COVID-19) during the next 6 months. The discussion now at the policy level is whether ERTEs would be ceased immediately after the new normality has been reached or would be extended, at least, until the end of September.
But the most relevant measure in this area is the approval of a new minimum income scheme (Ingreso Minimo Vital – IMV) entering into force on June 15th 2020. It guarantees an annual income level to all citizens depending on a vulnerability assessment based on the characteristics of the household and its wealth and income levels. For a household formed by a single adult, the minimum guaranteed amount is 5,538 euros per year but this figure increases up to 12,184 for a household formed by 2 adults and 3 children. The government expects that about 850,000 households and 2.3 million people would benefit from this scheme with a total expense of around 3 billion euros.
Given the dramatic impact of the Covid-19 restrictions on the labor market it is not surprising that the Swedish government, as governments elsewhere, imposed a number of targeted economic policy measures, some of which we summarize here. The specific policy measures appear to have had three objectives:
1. Reduce the financial burden from sickness absence.
2. Protect firms and jobs.
3. Increase access and generosity within the unemployment insurance system.
On sickness absence: The Swedish health insurance temporary covered the first day of sickness absence – normally paid by the absentee – and the first two weeks of sickness absence thereafter – normally paid by the employers. The measures were some of the first responses to the virus and its aim was clearly to ensure that workers with symptoms of Covid-19 should stay at home and not be tempted to remain at work for financial reasons. The measures are perhaps particularly important for the Swedish Covid-19 strategy as it relies heavily on workers remaining at home after self-assessment of symptoms. These measures have been prolonged until the end of 2020.
Protecting jobs and firms: A number of policy measures aimed at protecting firms and jobs were put in place during the early stage of the crisis. Several of the policies are explicitly short-term in nature. A scheme for general compensation for reduced sales relative to the previous year compensates for sales losses in March and April. It was announced early May to avoid strategic reduction of sales and is labelled as a “restructuring support program”. The scheme is announced to be prolonged for an additional 3 months, but the formal decision has not yet been taken. The system will also be complemented with targeted support replacing 75 percent of earnings-losses among unincorporated self-employed (if losing at least 40 percent relative to the same period in 2019) during March to July. This group was not eligible to apply for support within the initial system.
Payroll taxes for the first 30 employees were reduced from around 30 to 10 percent of wages during March to June. This scheme covers wage costs up to a low wage cap of 25,000 SEK/Month which is close to the 10th percentile in the wage distribution. A reduction of payroll taxes of workers below age 24 from April 2021 has been announced. Financial support were available for landlords who rent out space to firms in some targeted industries (hotels, restaurants, and some retail) between April and June; the support reimburses half of any temporary rent-reduction for firms in covered industries, but at most 25 percent of the original rent. A targeted support system for cancelled events in arts and sports cover cancellations in April to May. A prolongation has been announced, but details are not yet released.
The most important policy tool, at least from a labor market perspective, is, however, the short-time work system that was set up as a response to the crisis. The system, which is in place for the full duration of 2020, allows firms to reduce working time for their employees by 20, 40 or 60 percent (May to July also 80 percent). Firms, workers and the central government share the costs, but most of the costs are born by the government. With a 60 percent reduction, employers reduce their wage cost to half, and workers retain over 90 percent of their initial salary, see Table 2. There is a wage cap around the 80th percentile in the wage distribution (SEK 44,000/month). Costs above this cap are not covered by the subsidies. Firms are expected to do whatever else they can to reduce their labor costs, which implies that they should not hire new workers unless absolutely necessary. Only workers with at least 3 months tenure at the time of application can be covered by the system. Notably, this subsidy could be combined with the payroll tax reduction which implies that firms with less than 30 (low-wage) employees essentially had all their wage costs covered if workers were on 80 percent short-time work during the most intense part of the crisis. Applications for short-time work covered more than 500,000 workers (10 percent of the labor force). However, there is still some uncertainty as to how large share of workers have been covered by the scheme, for which periods, and by what intensity (percent of full time). Employers are required to report ex post on the actual intensity by which they used the scheme, but details from this back-reporting have not been released at the time of writing this text. At the moment, it appears as if the training component of the short-time work is mostly absent, but the government has announced in the current budget proposal that there should be more training going forward; exactly how this will play out in practice remains to be seen.
In addition to these subsidies, there are various liquidity measures aimed directly at firms, including a measure which allows firms to postpone 3 months of payroll taxes and VAT for one year at a low interest rate. These measures are complemented by interventions to ensure market-level financial stability by the Riksbank and other government agencies.
Unemployment insurance: The government has taken several measures to extend unemployment insurance coverage and increase benefit levels during the crisis. As a starting point, it is worthwhile to note that the UI system in Sweden has a very low cap which in effect means that the compensation is at the same flat rate for nearly all full-time employed workers. Compensation is even lower for workers who have chosen not to be members of a UI fund. Many workers are covered by additional insurance through schemes organized by unions or jointly by the social partners. These schemes cover workers who are union members and/or are employed at workplaces that are covered by collective agreements.
The main reforms put in place during the current crisis is a reduction of the work-requirements for UI eligibility from 80 to 60 hours/month during 6 of the past 12 months and a lowered required duration of membership in UI funds from 12 to 3 months. The lowest benefit level (for those without UI membership) and the benefit cap have both been increased quite substantially; the increases are around 30 percent relative to previous levels. The changes in benefit levels have been announced to be prolonged until the end of 2022. In addition, the Swedish financial supervisory authority have granted banks the right to provide general exemptions from rules regarding amortization of mortgages. The aim is to provide workers with additional liquidity in the case of job loss or other income disturbances.
Remaining challenges: Current measures have either focused on running costs (short-time work, payroll reduction and financial support for rental costs) or replacing past lost earnings during specific months (compensation for reduced sales and cancelled arts/sports events). There is still considerable uncertainty as to what will happen with firms in the hardest hit sectors (e.g. event organizers) that still are prevented from operating, after the end of the year when their participation in short-time work will need to end.
Overall, the set of adopted policies is quite comprehensive and seems to serve well its initial purpose to shield the affected participants of the economy against the short-run impact of the Covid shock. At the core, there are three sets of measures: short-time work (STW) and unemployment insurance (UI); income compensation; loans and guarantees for businesses directly or indirectly affected by the lock-down. The most important set of measures is – in terms of participants and financially – the STW/UI, whereby the vast majority of affected individuals and of the funding is in STW. For this purpose, so far CHF 20.2 billion of additional federal funding has been transferred into the UI fund [EFV]. Second in terms of importance are the “Covid bridging loans”. CHF 40 billion have been made available as loan guarantees by the Swiss Confederation. Additionally, CHF 1.3 billion are available for airlines and CHF 0.1 billion for startups [EFV]. In practice, CHF 17 billion of bridging loans have finally been granted by banks to the firms. So far, only CHF 2 billion of these potential loans have been pre-booked as losses (due to defaulted loans) by the Confederation, whereby 1 billion will go on next year’s account [EFV]. It is expected that the credit default rate will remain relatively low; however, this heavily depends on how persistent the ongoing crisis and recession will turn out to be. As expenditures for income compensation (EO) related to the first Covid wave an amount of CHF 5.3 billion has been booked by the Confederation, whereby CHF 4 billion is assigned to directly affected self-employed and employees and CHF 1.3 billion to the indirectly affected [EFV]. Thus, the focus of the income compensation scheme is primarily focused on directly affected self-employed during the lock-down periods. In reaction to the strong incidence of the second wave, the Confederation has granted another CHF 2.2 billion for income compensation.
Initially some target groups among the self-employed, notably the ones indirectly affected by the shut-down measures, were neglected by the income compensation policies. However, this was adjusted mid of April, through allowing these groups as well access to the Income Compensation scheme (EO) [BSV 2020a]. Originally, the coverage was restricted to a maximum duration of two months and was supposed to terminate with the end of the Covid restrictions. Due to the wake of the second Covid wave, finally both the income compensation for the directly affected and for the indirectly affected have been prolonged [Bundesrat 2020d,e]. Thus, the application of these schemes did not stop by September 16, as originally implemented, but will continue to be available (the related ordinance is in effect until end of June 2021).
Important is as well the extension of the short-time work (STW) scheme to fixed-term contract employment and to employees working for temp agencies by March 20. By the same date, the STW was opened as well to persons in an “employer-like status” (mostly partners in small limited liability companies who work as salaried employees in the company), persons in apprenticeship and persons working in the business of the spouse [Bundesrat 2020a,b]. These measures ran out by end of August. However, within autumn, the new Covid-19 law and related ordinances granted the government the competence to re-activate most extensions if necessary. By mid of November, some important extensions have been re-established in view of the second wave and the coming winter period. Notably employees on fixed-term contracts as well as on-call workers on a permanent contract are currently eligible for STW [Bundesrat 2020f,g].
In the course of May, some further complements were added to the financial support measures. A support scheme for start-up firms was established by May 7 and was open for applications until end of August. Start-ups in liquidity problems could apply for government-backed loans of up to CHF 1 million [SECO 2020b]. Furthermore, it was decided that the Cantons are obliged to reimburse childcare institutions for parental contributions they lost due to the Covid lock-down measures in the period from March 17 to June 17, 2020 [SECO 2020d].
A potential issue of the adopted policy set is its relatively strong focus on providing loans and guarantees. This liquidity aid in form of “Covid bridging loans” is supposed to be paid back, which may lead to debt issues for substantial numbers of SMEs. However, so far only a smaller part of the credits approved by the banks have been finally taken up by the firms. It seems that (smaller) firms are reluctant to indebting themselves and currently mostly try to survive on their own resources, taking the credit only as a “last resort”. Thus, from a policy point of view it is questionable whether the loan and guarantee schemes will be sufficient to support the sustainability of some parts of the economy if the crisis turns out to harm firms over a longer time period. In the case of a longer crisis it may be advisable to extend the measures by possibly turning some loan schemes into cash grants and by adding some additional support for firms through fiscal policy. A further measure of effective additional support is the extension of the maximum duration of STW coverage.
Some of these points have been implemented recently. By September, the maximum duration of STW coverage has been extended from 12 to 18 months [Bundesrat 2020h]. As a new additional key element of the catalogue of support measures, government and parliament introduced the “hardship support program” by December 2020. This program is implemented by the Cantons but two thirds of the funding, currently amounting to CHF 1 billion, is borne by the Confederation. This support scheme for firms can take different forms: loans, guarantees “à-fonds-perdu” contributions (non-repayable grants). The program is focused on firms whose economic activity is heavily affected by the pandemic crisis, particularly enterprises related to the event and entertainment industry as well as the tourism and travel industry. It is up to the discretion of the Cantons to decide on form and size of the support. [Bundesrat 2020g,i] As a further complement of the support measures, the government assigned targeted financial support, in the form of subsidies or loans, to a few specific industries and activities – notably amateur and professional sports, culture, public transport, air travel industry and print media [EFV].
All in all, the support set seems relatively comprehensive, addressing the needs of a broad range of employees and firms. However, notably longer-run impacts of the crisis may require further measures or interventions in the closer future. In view of the second and potential further pandemic waves the government currently works on the legal base for a successor program of the “Covid bridging loans” which were launched with the first wave and ended by 31st of July [Bundesrat 2020g]. Beyond this, it will be necessary to be ready to deal with a larger wave of layoffs and of bankruptcies, particularly if a third wave cannot be avoided and the crisis continues to loom for a longer period. Some data on the evolution of bankruptcies are discussed in the following section “Immediate liquidity support to businesses”.
The extensions of both Coronavirus Job Retention Scheme (CJRS) and Self-Employed Income Support Scheme (SEISS) until October announced by the Chancellor Rishi Sunak on the 29th of May are now coming to an end. Although SEISS will be extended. After reduction in the generosity of the schemes to 70% of wage/earnings instead of the initial 80% in September, the future of the supporting schemes will be considerably different. As announced on the 24th of September by the Chancellor, the CJRS will end in October and to be replaced by the Job Support Scheme (JSS) which targets “viable” jobs by subsidizing wages of unworked hours of employees working at least a third of their usual hours. JSS will only apply to small and medium size businesses facing lower demand over the winter months. SEISS was extended but under considerably less generous conditions. Liquidity measures such as loan guarantees, tax deferrals and VAT cuts have been extended in their maturity. Completing these extensions and replacements two relevant policies have been announced in the Summer: Job Retention Bonus (JRB) and Kickstart Scheme (KS). The Job Retention Bonus offers an incentive for keeping previously furloughed workers in employment through a one-off taxable payment to employers for each eligible employee that has been furloughed under CJRS and was kept continuously employed until 31 January 2021. Targeting youth employment is the purposed aim of the Kickstart Scheme which covers a substantial part of the wage and employer contributions for new 6-month job placements for young workers (16 to 24 years old) currently receiving Universal Credit or at risk of long-term unemployment. In light of the most recent struggle to control the rise of infections in parts of the UK, a 3 tier system of local monitoring and phased lockdown has been announced on 12th of October. Complementing this announcement, the Chancellor has announced an extension of the CJRS with a lower generosity of 2/3 of wages supported by the government for businesses forced to close due to health restrictions.
The stable unemployment and employment rates until July are evidence of the relative success at preserving firm-worker matches and employment through different policies enacted by the UK government (particularly CJRS and SEISS), however this levels are unlikely to hold in the coming months even with the extensions and complements announced.
After initial labour market policies were introduced to provide the businesses with liquidity and to shield workers with permanent contracts and later self-employed, the new wave of policies is considerably less generous and aimed at what government describes as “viable” jobs as result of the structural change in the economy. Sectors most affected by lockdown are likely to suffer renewed considerable strain in winter months as health measures become more strictive without the same level of support. The subliminal notion that job seekers either new to the job market or transitioning after a job loss will successfully move to sectors facing higher demand under the new economic paradigm is somehow idyllical without a significant investment in human capital through training and most importantly re-training.
The cost of the measures in place as of July 21 is not negligible, the Office for Budget Responsibility estimates that CJRS and SEISS will represent an expenditure of 49.3 and 12.4 billion pounds respectively accruing to the equivalent to 3% of UK GDP in 2019 (Table 5). The most significant policies with respect to estimated cost are CJRS, SEISS, the Business Grant Schemes and Bounce Back Loan Schemes as presented in Table 5. All measures combined amount to cost equivalent to 9.6 % of UK GDP in 2019.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted at the end of March contained several important measures designed to mitigate the impacts of the pandemic on workers and businesses. To reduce employment costs for businesses, the CARES Act gave businesses a payroll tax credit and set up the Paycheck Protection Program, which provided forgivable loans to small and medium sized businesses if they did not lay off employees.
The Act also provided substantial federal support for unemployment insurance during the crisis. The unemployment insurance system in the United States is a federal-state partnership. While the federal government provides states with funding for the administration of the program, the benefits paid out to the unemployed normally come from state trust funds that are financed through taxes on employers operating in the state. The CARES Act extended by 13 weeks the maximum duration of unemployment benefits, and the federal government reimburses the states for these extended benefits. Moreover, out of concern that the unemployment benefit was too low in many states to sustain the unemployed and their families during a period when new hiring was very weak, the federal government provided a supplemental unemployment insurance benefit of $600 per week through July. When this provision expired at the end of July and, as discussed further below, Congress was unable to agree on a new package of supplemental unemployment insurance benefits, President Trump used his executive powers under a disaster relief program to provide a $300 per week federal supplemental benefit to those receiving state unemployment benefits. This supplemental benefit was available for up to six weeks and was limited to those receiving at least $100 in state unemployment benefits, thus excluding workers with very low earnings. How the program was administered varied greatly from state to state, though all but one (South Dakota) applied for and distributed the supplemental benefits.
Additionally, the CARES Act contained several provisions designed to promote the use of short-time compensation (STC) or work sharing during the recession. At the start of the recession, only 26 states, which accounted for about 70 percent of the U.S. workforce, operated work-share programs. The law provided financial support to states without work sharing to develop one. Through the end of the year, the federal government will reimburse states for all STC benefits paid out. This means that state UI trust funds, which have been drained by the high level of regular unemployment insurance payments, will be unaffected by STC use and employers will not face higher future unemployment taxes if they use work sharing in lieu of layoffs. Importantly given the already high level of unemployment, employers have been permitted to use work sharing to bring furloughed workers back to work and even to hire new employees. Those on work share receive the flat weekly federal supplement to their unemployment benefit, irrespective of the percentage cut in hours. These generous STC benefits have made work sharing attractive to workers.
The CARES Act also provided benefits to selected groups who normally are not eligible to receive unemployment benefits—primarily the self-employed, which includes independent contractors and freelance workers. The federal government reimbursed the states for all unemployment benefits paid to these groups. This new program, Pandemic Unemployment Assistance (PUA), took time to set up in each of the 50 states, but applications for unemployment benefits through the PUA have been large. In the week ending November 7, 45 percent of the 20.5 million people receiving some type of unemployment benefit in the United States were funded through the PUA.
Many workers, however, have already exhausted unemployment insurance benefits extended to them under the CARES Act, and for those still receiving them, the Act’s provisions will soon expire. One study estimates that twelve million people will lose their benefits with the expiration of the CARES Act at the end of December.
Another law enacted by the U.S. Congress in March mandated that small and medium sized businesses offer their employees paid leave under certain circumstances. The Families First Coronavirus Response Act was a response to the fact that, even if workers are not laid off from their job, some are unable to work for reasons related to Covid-19. Workers may themselves be sick with the virus or may have to care for family members who are sick. Additionally, many daycares and schools closed or, in the case of schools, moved to remote learning, leaving many parents without affordable childcare options. In response to these problems, the Act requires small and medium sized employers to provide paid sick leave (up to two weeks with full pay ) and paid family and medical leave (up to 10 weeks at two-thirds workers’ regular pay) to employees who must miss work for reasons related to the coronavirus outbreak. Although most large employers offer paid sick leave and family and medical leave, this act does not mandate coverage by employers with over 500 workers, and some have argued this omission represents a major gap in coverage. As is the case with the CARES Act, however, the provisions of the Families First Act will expire at the end of December.