Crisis Response Monitoring Country comparison

So called “gig” work is hard to define and is often conflated with non-standard employment and precarious employment. Consequently, data collection on the incidence of gig work remains ad hoc. However, Statistics Canada classifies gig workers as unincorporated self-employed workers who do not report a business number on their tax returns and who contract work with firms or individuals generally through digital platforms. While no COVID-19 programs directly target gig workers, recent changes to programs for individuals, discussed above, will make it easier for them to access certain types of benefits.

Unemployment insurance was effective at providing income to unemployed workers insofar as unemployed people continue receiving their benefits during the lockdown and the confinement period postpones the exhaustion date of unemployment benefits. However, short-time work was the main scheme used to counteract the impact of the strict containment policy. In France, employment protection regulations require dismissal notices of several months and complex and costly procedures for most workers. Many firms whose activity has been very significantly slowed down by the lockdown would not have had enough liquidity to face these constraints and should have been liquidated in the absence of help. In this context, short-time work was the main program chosen by the government to sustain firms and to allow workers to keep their jobs. Since March 1, 2020, short-time work schemes have been extended until December 31, 2020, to certain categories of employees who were previously excluded, under specific conditions (employees whose working hours are atypical, childminders and home workers, employees of public employers carrying out an industrial and commercial activity mainly, vulnerable people and parents of children under the age of 16 unable to work, etc.). The authorization to use partial activity has been granted for a maximum duration of 12 months (compared to 6 months previously) and cannot exceed 1,607 hours per year per employee until December 31, 2020 (against 1000 hours ago). Administrative procedures have been simplified. In particular, the authorization to use short-time work is considered granted within 48 hours after the filing of the request in the absence of a response from the administration (this period was 15 days previously).

The net replacement ratio has been increased to 100% at the minimum wage and 84% for higher wages up to a maximum of 4.5 times the minimum wage, which covers more that 95% of wage earners. The cost of short-time work is borne by the administration. The short-time work allowances are paid by employers who are reimbursed within an average delay of 12 days. according to the agency in charge of reimbursements of short-time work allowances. Until June 1, there was no residual cost to the company unless it was covered by collective agreements which impose higher replacement income than those provided by law, which is scarce. Since June 1, 10% of the short-time work allowances are paid by employers except in sectors most affected by the crisis (i.e. tourism, hotels and restaurants, sports, culture, air transport, events) and those dependent on them.

In addition, the law of June 17, 2020 introduced a specific regime for long-term short-time work, aimed at providing long-term support, up to 24 months, to companies whose activity will be permanently reduced. Entry into the scheme is subject either to the conclusion of a company-wide agreement or to the drawing up of a document by the employer in accordance with a branch agreement. This agreement or document will then have to be approved by the administration.

The government also announced that collective dismissals are subjected to increased scrutiny before getting the authorization from the administration during the containment periods. Accordingly, the number of collective layoffs dropped dramatically: it is about three times lower in March-April 2020 than in March-April 2019.

After the summer of 2020, the very generous short-time work scheme was limited to establishments open to the public subject to total or partial administrative closure, or located in a territory subject to specific restrictions (curfew, gauges in establishments open to the public, etc.) and suffering a drop in turnover of at least 60%; or in establishments falling within specific sectors (such as those of tourism, hotels, restaurants, sports, culture, air transport and events) which have suffered a sharp drop in turnover of at least 65%.

Hence, at the start of the coronavirus crisis, the use of short-time work has experienced exceptional growth. In the beginning of May 2020, about 50% of employees have required short-time work, with on average 420 hours of unoccupied hours requested per employee (12 weeks of 35 hours per week) (Figure 2). The number of employees in short-time work fell sharply after May and June and increased again in the second lockdown which started on October 29, 2020. Eventually, after the relaxation of the most restrictive restrictions in May 2021, partial unemployment gradually decreased to reach a plateau between 400 and 500 thousand people from autumn 2021.

1. See details at the Agence de Services et de Paiement.

Although still only preliminary administrative data are available, it is clear that there has been a massive inflow into short-time work (STW) schemes during the initial phase of the COVID-19 crisis in Germany. The well-established instrument of STW was one of the main factors contributing to Germany’s resilience to the 2008-09 crisis (Rinne and Zimmermann 2012; Balleer et al. 2016). During the Great Recession, STW helped preserve permanent employment to a particularly large extent in Germany, while it had essentially no impact on temporary employment (Hijzen and Venn 2011; Cahuc 2019).

However, since the 2008-09 crisis was characterized by a temporary external demand shock that almost exclusively affected predominantly larger, export-oriented manufacturing firms, and economic activity picked up again relatively soon, the situation appears entirely different this time. In the current crisis, a broad range of sectors is affected by the demand slump, also many SMEs are at risk, and uncertainty about the speed of economic recovery is large and widespread. In addition, the current recession is accompanied by a structural transformation due to ongoing technological change and digitalization – not limited to, but also in manufacturing and in the automotive industry.

These factors could make the use of STW in the current crisis more difficult and potentially also less effective. For example, the management and implementation of STW is probably easier within larger firms and with works councils that have already acquired experience in using this instrument. In the current situation, firms in the service sector and many smaller firms that are affected may be confronted with unfamiliar bureaucratic obstacles and practical challenges when implementing STW. Furthermore, the temporal scope of using STW appears limited if the crisis interacts with structural change, e.g., in retail (online vs. offline) or in the automotive industry, as a return from STW to “regular” work may not be taken for granted. Skepticism also seems to be justified to what extent the existing subsidies for training and qualification measures during STW are actually used, to what extent they can accommodate workplace mobility, and to what extent they are ultimately effective (Eichhorst and Rinne 2019).

Easing the conditions governing the use of STW was among the first policy responses to the COVID-19 crisis in Germany (Deutscher Bundestag 2020b). The new rules, which came into force retroactively as of March 1, 2020, made the instrument more accessible for firms as only 10 percent (previously: one-third) of workers need to be affected by a minimum reduction in working hours of 10 percent. In response to trade union complaints about insufficient STW allowances, especially during longer periods of STW, the generosity of these allowances has been temporarily increased (until December 31, 2020; BA 2020c): While the compensation still amounts to 60 percent of the missing net remuneration (67 percent for parents) in the first 3 months, it increases to 70 percent (77 percent for parents) from month 4 onwards and to 80 percent (87 percent for parents) from month 7 onwards. Next to that, some firms decided to voluntarily top up STW allowances for their workers.

Recently, the temporary regulations governing the increased generosity of STW allowances have been prolonged until December 31, 2021 (Bundesregierung 2020c). Also the maximum duration of STW allowances has been extended to 24 months (limited until December 31, 2021; Bundesregierung 2020c). In contrast to other (European) countries and despite the fact that the number of short-time workers has been declining since spring 2020, Germany is thus still in “crisis mode” with regard to the rules for the use of STW. In Austria or France, for example, the envisaged entry into a “second phase” of STW is characterized by the fact that this instrument is gradually becoming less attractive and less “passive” (e.g., through the integration of further education and training). In Germany, strengthening the incentive to combine STW and further education and training is only taking place gradually: Starting in mid-2021, the full refund of employers’ social insurance contributions will depend on further education and training of workers in STW. This means that during a transition period in the second half of 2021, only 50 percent of the employers’ social insurance contributions will be unconditionally reimbursed during STW, while the remaining 50 percent are only reimbursed if STW is combined with further education and training (vbw 2020).

Unemployment insurance benefits are most accessible for workers with longer employment spells. Despite some relaxation of benefit requirements over the last years, coverage by unemployment insurance benefits will likely be lower for workers with interrupted careers and fixed-term contracts. Unemployment benefit levels are low in absolute terms for those with low hourly wage rates or part-time workers. As a response to the crisis, the duration of unemployment insurance benefits has been extended temporarily for those unemployed whose benefits would expire soon.

At the same time, participation in active labor market policy measures and the activation of jobseekers has been substantially reduced. The reduction of active labor market policy measures, in combination with substantially lower hiring rates by employers, will most likely lead to prolonged unemployment spells. This issue might become more severe if some providers of active labor market policy would ultimately have to terminate their business and if the capacity of active labor market policy measures cannot accommodate potentially large and more heterogeneous target groups after the initial crisis phase.

1. In January 2022, the unconditional refund of employers’ social insurance contributions during STW will end completely. However, 50 percent can still be reimbursed if STW is combined with further education and training (until July 31, 2023).
2. Unemployment insurance benefit duration has been temporarily extended by 3 months for those workers whose benefits would otherwise expire between May 1, 2020 and December 31, 2020 (BA, 2020e).

The Cura Italia decree limited the negative effects of the COVID-19 outbreak on employment mainly by suspending the layoffs for two months. At the end of March 2020, the National Institute of Statistics (ISTAT) registered a decrease in the employment rate by about 0.1% with respect to March 2019. However, this suspension, which has been further extended until December 2020, will not prevent firms from dismissing workers in the future. The measures promoted by the Italian government only mitigated the effects of the pandemic on the demand for labor: a recent study shows that in March 2020 the net job creation was about 60% lower than the one registered in the previous year (Anastasia et al. 2020). At the same time, the share of inactive in the labor market increased by 2.3% and the unemployment rate decreased by 11.1% thus suggesting an increase in the number of unemployed individuals who stopped looking for a job during the lockdown.

To sustain income, the Italian government extended Cassa Integrazione Guadagni (CIG), i.e. short-time work, to all firms independently of the sector of activity and size. The CIG is a tool that allows workers to temporarily receive unemployment benefits, which generally accounts for 80% of the total salary, while still keeping their job. Once firms restart their activities, employees can go back to work as usual. In April and May 2020, the total number of requests for unemployment benefits almost exceeded the whole number of requests received in 2009, one of the worst years in terms of employment outcomes. As of May 21th, the Social Security Administration (INPS) received more than 1.1 million requests for Cassa Integrazione Guadagni (CIG), 869,000 were authorized but only 510,000 were actually processed and paid. These delays are due to the long and complex procedure to grant workers the unemployment benefit and to the increase in the number of applications following the lockdown. The Relaunch Decree should ease and shorten the procedure for unemployment benefits. As of June 2020, out of roughly 3.5 million beneficiaries, 30,342 workers are still waiting for their benefits to be paid.

A recent report produced by INPS and the Bank of Italy (Bovini et al. 2020) found that in March and April 2020 51% of the Italian firms, accounting for 40% of the private sector employment, adopted short time work schemes. On average, this allowed firms to save about 1,100 euros per employee; at the same time, employees saw their hours worked reduced by about 90% and experienced a 27% loss in their gross monthly wage.

1. https://www.istat.it/it/files//2020/04/Occupati-e-disoccupati-marzo-2020.pdf
2. https://www.lavoce.info/archives/65325/mercato-del-lavoro-gia-contagiato-dal-covid-19/
3. See Giupponi and Landais “Subsidizing Labor Hoarding in Recessions: The Employment & Welfare Effects of Short Time Work” for an extensive review of the functioning of the CIG
4. https://www.inps.it/nuovoportaleinps/default.aspx?itemdir=53641
5. https://www.inps.it/docallegatiNP/Mig/AllegatiNews/Notizia_int_salariali_covid_11-9-20_1.pdf
6. https://www.inps.it/docallegatiNP/Mig/Dati_analisi_bilanci/Studi_e_analisi/Prime_evidenze_CIG_28072020_Final.pdf

In June 2020 the CPB observed that the decline in employment, though substantial, was limited compared to other western countries (CPB, 2020b). This is generally considered to be related to the special policy measures taken at an early stage, including financial support for short-time work, which initially also involved a penalty on dismissals, and financial support for the self-employed, see also above. Measures were typically not complemented by sector-level or firm-level agreements, although support for specific firms was conditional on wage cuts, as was the case for government support for Air France – KLM. Dramatic unemployment forecasts made early on in the crisis – in its September 2020 forecast the CPB still expected the unemployment rate to be 5.9% in 2021 – have not materialized. In August 2021 the unemployment rate was 3.2%, just 0.3%-points above the record low level of the unemployment rate before the COVID-19 crisis. Right now, labour shortages are top of mind.

1. This is consistent with the evidence presented in Cahuc et al. (2018) and Giupponi and Landais (2020) for the short-run effects of short-time work policies in France and Italy, respectively, during the Great Recession.

Official data reports an increase of 91,488 registered unemployed workers between February and May 2020, which corresponds to 36% compared to May 2019 (see Table 1). We also know that 111,536 firms joined the simplified layoff scheme (thus 1,332,114 workers are at risk of being at least partially out of work, whilst still keeping their jobs). The magnitude and the conditions of access to the simplified layoff suggests that should there not be any ALMP such as those implemented to tackle the crisis, labour market outcomes could be very different.

The suspension of employment contracts (layoff) is predicted in the General Labour Law. On March 15 the government defined new conditions of access to this tool (in particular, it clarified/ adjusted the meaning of “entrepreneurial crisis” which is a necessary condition to implement layoff) and simplified the procedures for requesting layoff, e.g. firms are exempted from presenting some documental proofs, but may be subject to inspection in the future and penalties can be applied. Under layoff, workers receive ⅔ of their gross pay, up to a maximum of €1,905. 70% of the workers’ pay is paid by Social Security and 30% is paid by the employer. Usually, layoff lasts for a month and can be extended monthly up to a maximum of 6 months (Order 71-A/2020, March 15). During the layoff period, and for 60 days after it has ended, employment contracts cannot be terminated under collective dismissal or by reasons of extinction of the job for workers who were under layoff (Article 13, Decree-Law 10-G/2020, March 26).

Another measure aimed at supporting the income of dependent workers relates to the extraordinary extension of unemployment benefits and all benefits of the Social Security system. For example, a person for whom the period of entitlement to unemployment benefits ended from March onwards, had that period automatically extended until June 30 (Decree-law 10-F/2020, March 26).

We do not have much information on support for job-seekers, which is understandable because the economy came to a halt during the State of Emergency and did not improve much during May. What we do know, however, is that the duty to actively search for a job while unemployed was suspended on March 19 (Dispatch 3485-C/2020, March 19). Once the lockdown measures are progressively lifted, and firms restart their activity, it is likely that a discussion about measures aimed at creating jobs will surface. At this moment, the government and social partners are more focussed on trying to stop the bleeding rather than on healing the wound.

1. Exceptions include the end of temporary employment contracts and fair cause for dismissal.

• Except allowing for post or email registration with the Labour Offices, the unemployment insurance scheme remained unchanged. As of April 24th the extension of unemployment benefit by one month was granted to those whose entitlement were running out during the crisis. Trade unions demanded the general duration of the UB be extended beyond this one-off technical extension. The measure was extended also in May. The last extension was adopted in July; however, this last extension also stipulated the end date of the extension, August 31, 2020.
• No new specific support to unemployed nor new ALMPs have been announced as of November 2, 2020.
• Kurzarbeit was introduced in Slovakia as a temporary measure, but there was discussion about the possibility to implement it as a systematic measure also for the future. There also was a proposal to increase social insurance contributions by 1 percentage point (0.5 pp paid by employers and 0.5 pp paid by employees) to finance such permanent Kurzarbeit scheme.
• The Government approved a permanent Kurzarbeit scheme on October 21, 2020, which however still needs to be approved by the Parliament.
• TheThe distribution of the support among firms of different size during the first wave (March-April, 2020) is reported in Table 2.

1. https://www.employment.gov.sk/files/slovensky/ministerstvo/analyticke-centrum/analyticke-komentare/kurzarbeit-porovnanie.pdf

The extraordinary measures described above have been effective at the moment. Short-time work measures reduced inflows into unemployment particularly in those sectors in non-essential activities with a higher direct impact of the lockdown, but that have experienced a recovery in demand during the last year. However, there are some other sectors that still face substantial limitations in their capacity due to social distancing measures to prevent a new wave of contagions, but at the same an important fall in their demand. This has been clearly the case of touristic activities that have faced important restrictions for international visits that have not been fully compensated by domestic demand, but also other firms in the leisure activities sector.

Public Employment Services are devoting all their efforts to process the demands related to ERTEs, but anyway, there is no real possibility of keeping the rest of services linked to ALMP working as usual particularly during 2020. The situation has improved during 2021, but the situation varies substantially among regions due to the high level of decentralization of these services.

The Swedish labor market is characterized by very low wage dispersion which has remained reasonably constant across the past two decades. On the other hand, income inequality has increased, partly because caps on most social insurance payments, including UI, have remained largely fixed in nominal terms for a very long time. The combination of uniformly growing nominal (and real) wages together with fixed UI-payments have generated a situation where much of the income inequality is related to the employment margin. In this respect, the policy direction during the initial phase of the crisis has the benefit of effectively preventing poverty. This is true in particular, as the replacement rates in the short-time work program are very high – workers in this program are much better insured than they would be if they lost their job. On the losing side, however, are those marginal workers who are on temporary contracts that will not be renewed when expiring. The reduction of UI eligibility requirements may serve as to alleviate some of this impact.

Job search monitoring was temporarily halted during the spring, but has since been resumed. Otherwise, we have not been able to document how various aspects of Swedish active labor market policies have changed in response to the crisis. According to forecasts in the 2021 budget, the Public Employment Service will only spend 80 percent of budgeted funds for active labor market policies despite of the large increase in unemployment. But the situation was very turbulent already before the Corona crisis. Funding was cut dramatically because of political turmoil in the budget for 2019. At the same time, there was a political push to privatize more of the services. The agency responded by announcing large layoffs and closure of local offices. Some of these decisions were later overturned, but the whole process created a set of practical disturbances to the general functioning of the agency. This makes it difficult to assess how much of the contraction in spending on active labor market policies is due to Corona and how much is due to other problems within the agency.

Going forward, funding for active labor market policies will increase by 17 percent during 2021, but this is far from the forecasted increase in the number of unemployed workers (up 40 percent relative to 2019). This is somewhat concerning considering the increase in UI-benefit levels, which would have called for more activation measures and monitoring of job search behavior.

1. The background description in this paragraph draws heavily on Nordström Skans et al. (2017), for a summary in English of that source, see https://www.sns.se/en/articles/sns-economic-policy-council-report-2017-policies-for-an-inclusive-swedish-labor-market/. For a description of the Swedish wage structure see Carlsson et al. (2019).
2. We have not been able to document how various aspects of Swedish active labor market policies have changed in response to the crisis.

I assess the effectiveness notably of the short-time work (STW) scheme to avoid additional unemployment in the short and medium run as being high. During the peak times of the crisis between mid of March (start of lock-down) to mid of May, about 190,000 firms covering about 1.94 million employees applied for STW [SECO 2020c]. This corresponds to 37% of the Swiss work force. The broad and extended application of the scheme, its simplified administration and the elimination of barriers to getting STW (e.g., no waiting period for the employer anymore) helped avoid larger rates of increase in the unemployment rate.

Data on effectively claimed STW coverage are released with a time lag. In March 2020, the effective claim of STW jumped up to covering 0.944 million employees, 0.939 million more than in February. The peak of STW claims was reached by end of April, as Figure 6 documents, covering 1.3 million employees. By August 2020 this level reduced to 0.3 million employees. The evolution of affected establishments (firms) is highly parallel and peaked at 150,000 by end of April. The enormous leap in claimed working hours is visible in Figure 7. It reached unprecedented levels, as the comparison with the increase during the Financial Crisis in 2009 documents.

From an economic policy point of view, a key question is to which degree the extension of the STW time limit and coverage has an impact on mitigating additional unemployment. The extension of the STW scheme to persons in an “employer-like status”, in apprenticeship and to co-working spouses has been in effect for the first wave until end of May. The larger (in terms of number of affected persons) extension of the scheme to fixed-term contract employment and to employees working on-call has been carried over as a measure for the second wave and is still operative (see also section “Orientation and targeting of adopted measures “). So far, the unemployment rate could indeed be kept at relatively low levels (see first section “Labor market impact of COVID-19”) – thus, the heavy investment into the STW scheme during these times has been a success story for the first part of this crisis’ duration. However, the ultimate test to which degree the STW scheme finally contributes to avoid the crisis-driven collapse of firms which are otherwise “fit for the future” is yet to come. The second wave and subsequent phases of the crisis will put the longer-term impact of the STW to a test. As an input to improve the longevity of the STW impact, the government extended the maximum duration of STW coverage from 12 to 18 months by September [Bundesrat 2020h]. This provides businesses struggling with the second wave additional leeway to economically survive the ongoing times of restricted activity. Furthermore, the government and parliament seem to be willing to support the funding of STW also beyond the approved additional CHF 20.2 billion for the UI fund (see also section “Orientation and targeting of adopted measures “), thus the political will to cover the accumulating cost of extended STW and UI also for second and subsequent waves of the crisis is present.

However, firms on STW permanently need to assess and revise their prediction concerning their future business prospects. If they are not sufficiently positive, firms may still decide at that point to lay off parts of their work force. Moreover, issues of financial stability and survival will become more and more salient as the crisis continues. As discussed in section “Immediate liquidity support to businesses”, this could lead to a substantial increase in firm insolvencies. Such more fundamental changes could lead to an additional increase in unemployment in the coming year – particularly if it turns out that the dip of the international economic crises is of a longer nature and that it is possibly related to some structural change within the economies.

The support delivered to job seekers was marked by a shift of weights from active to passive labor market policy measures during the first wave of the crisis. To avoid larger peaks of benefit exhaustion, the Swiss unemployment insurance (UI) extended the maximum entitlement to benefits for all types of job seekers by 120 additional daily allowances. This brought potential benefit duration for a prime-age individual up to 520 work days (about 2 years). Additionally, the submission of proof of job search efforts was waived. Job seekers were, however, still obliged to search for jobs [Bundesrat 2020c]. Since June, the monitoring of job search effort was gradually being re-established. It was at the discretion of the Cantons to define the practical monitoring intensity, the job seekers and Public Employment Service (PES) counselors remained “in dialogue” about the proof of regular job search effort. The extraordinary extension of the potential benefit duration as well as the waiving of the proof of job search effort were terminated by the end of August 2020. Accordingly, the temporary zero level of benefit exhaustions (since March) ended in August [SECO 2020f]. There is no political intention so far to re-instate these extraordinary measures for the second and subsequent waves; the hope is to pass these waves without needing to resort to a full lock-down again. The current level of labor demand reduction (see statistics of job vacancies in section “Labor market impact of COVID-19”) is, with exception of a few industries, much lower than it has been during the first wave. Thus, the job market is in a better – albeit not normal – condition.

During the first wave lock-down, activation by ALMPs came to a halt and counseling by caseworkers was reduced to an administrative minimum by telephone. Thus, the active part of labor market policy was broadly inexistent in this period. Since June 8th, the PES in most Cantons went back to running the important first meeting between job seeker and counselor (initial assessment and strategy definition) as face-to-face again (unless the job seeker belongs to a risk group). Further interactions are mostly by telephone, but face-to-face meetings are allowed. The SECO and the PES in the Cantons are working on improving the technical base to enable online counseling meetings. Currently, the mixture of different forms of counseling meetings is flexible, to allow for dynamic adjustments to the pandemic situation.

Interestingly, the participation rates in different types of ALMP measures showed different evolutions during the first wave. Training programs essentially came to a full stop in the course of the lock-down, as figures by end of May show [SECO 2020a]. Compared to the level by end of October 2019 [SECO 2020g], participation levels in public employment programs dropped down to a half. The number of participants in the temporary subsidized employment scheme during UI (“Zwischenverdienst”), however, did not reduce; it was even 13% higher than in October 2019. By October 2020, public employment programs reached the same level of participants as a year ago, training participation is 12% higher, and participation in the temporary subsidized employment scheme during UI is even 31% higher [SECO 2020f]. Given the higher unemployment rates, an increase in ALMP participation is not surprising. In fact, the year-to-year increase in unemployment is substantially higher than the relative increases in participation in some of the ALMP. In that sense, ALMP use is probably still below “normal” levels. Moreover, in practice, a large part of training programs is run online. In the other two program types, participation/working hours may possibly be reduced according to the respective infection situation.

For the closer future, it is to be expected that for some services – like meetings, training and some of the monitoring tasks – the use of telephone and online channels will remain to be more common than before the crisis. The current focus of the PES is, however, on speedy hiring and educating additional counselors, in order to handle the rising influx of newly unemployed individuals.

Jobseeker’s Allowance (Unemployment Benefit) has suffered no changes apart from the waiving of interviews and appointment attendance. Universal Credit suspension of the minimum wage floor aims to facilitate eligibility of self-employed. Universal Credit generosity has been temporarily increased as a response to crisis: for single claimants aged 25 or over the monthly benefits have increase from 317 £ to 410 £ (similar adjustments to couples) accompanied by more flexible pay back times and reduced deduction rates against outstanding debts. These measures are likely to become ever more relevant with the phasing out of the main job supporting schemes CJRS and SEISS, and the already noticeable up tick in inflows to unemployment. As previously discuss the nature of the new policies proposed by the government start to give more focus more on supporting jobs that show viability. Despite some glances of policies that can help job transition, the government has still to announce a comprehensive strategy on how it will help workers who, falling under the “non-viable” category, are and will experience job loss to find a new job likely in a new industry.

As outlined above, the primary policy for employees and other dependent workers losing their jobs has been income support through state-run unemployment insurance systems, supplemented with a federal benefit and a federally financed 13-week extension of the maximum duration of benefits. States were overwhelmed with applicants in the early weeks of the pandemic and the processing of applications was slow at first.

The federal supplement to the state benefit was set at a fixed amount ($600 per week through the end of July 2020) to speed the processing of claims. The supplement, however, made benefits very generous for low- and middle-income workers. Analyses of unemployment insurance administrative data in the state of California showed that during the time this supplement was available, the wage replacement rate for the median worker on unemployment insurance was 140 percent—meaning that more than half of workers receiving benefits were earning substantially more than they did when employed. Consistent with this evidence, a study of the entire United States estimated that, with the $600 federal benefit supplement, the median unemployment insurance benefit replacement rate in the United States was 134 percent and that two-thirds of workers eligible for unemployment insurance could earn more unemployed than they would earn on their jobs. There were widespread reports from employers that it was difficult to get workers to return to work. Although in principle workers become ineligible for benefits if they turn down a job offer or are recalled to their old job, this rule could be hard to enforce during the economic crisis.

The size of the federal supplement was reduced to $300, and eligibility was tightened out of concern for work disincentives that the higher payment provided. Even then, many employers complained that generous UI payments were making it difficult to recruit workers. In response, several states declined the federal supplemental payments months before the payments were set to expire in September 2021. Studies, however, conclude that these payments had little effect on job growth.

While use of work-share programs was high by historical standards, at any point in time during the crisis, workers participating in work-share programs made up less than two percent of those receiving unemployment insurance benefits. Reasons for the relatively low use likely reflect the fact that the program was not available in all states, employers had little prior experience using the program, and the program required a special application process. Additionally, the industries hardest hit during the recession were hospitality and retail, which are characterized by a low-wage, high- turnover workforce and where work-share use had been especially low in prior recessions.

1. https://www.capolicylab.org/wp-content/uploads/2020/05/May-21st-Analysis-of-California-UI-Claims-During-the-COVID-19-Pandemic.pdf
2. https://www.nber.org/system/files/working_papers/w27216/w27216.pdf
3. http://www.marinescu.eu/publication/marinescu-impact-2021/
4. https://files.michaelstepner.com/pandemicUIexpiration-paper.pdf