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Coronavirus: Could UK Adopt Germany’s Paid Charging Scheme?

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Image copyright EPA Image caption Mercedes and other German automakers used government funding for wage subsidies

Unlike Britain, the Germans did not have to create a job assistance program from scratch when the epidemic hit. They have already prepared the oven.

While British corporations hold in their hands the novelty of slandering workers at government expense, their German companies simply fell into a tried and tested scheme.

Now, while British Prime Minister Rishi Sunak argues that the coronavirus job retention plan will not continue until October, Germany is extending the Kurzarbait job subsidy action until the end of 2021.

At the same time, France is following the German example and is expected to do so for two years.

In the UK, influencers, including former Prime Minister Gordon Brown, are urging the government to introduce a German or French system after October.

So what are the German and French Islands and how do they work?

Short-term work in Germany

“We are very excited to have this system,” says Dr. Volker Verch, Director of the Central Westphalian Employers Union.

“Without this Kurzarbait, we would have lost more jobs in our region and across the country.”

“Obviously you have to pay for it all, but it’s well worth it in terms of social harmony.”

When the British plan began, it was based on paying workers to stay home and do nothing. It wasn’t until July that serene employees could work part-time.

However, the German system has always been about working short hours, allowing employers to save time while keeping employees on the job. The government pays workers a percentage of the money they will get from working their lost time.

Image copyright Robert Hack Image caption Rolls-Royce Power Systems employs 5,500 people in Germany

According to Munich-based Ifo Institute for Economic Research, at the peak of the epidemic, half of all German companies had at least some employees involved in the plan.

These include Rolls-Royce Power Systems, a German engineering company owned by Rolls-Royce Holdings and specializing in power generation and propulsion systems. It employs 9,000 people worldwide, of which 5,500 are in Germany.

CEO Andreas Schell told the BBC that the company was relatively late to the Kurzarbeit plan.

“When the crisis hit, we were sitting on a good order,” he says. “But we expected a decline in orders and had less work to do in the third quarter, so we had to adjust capacity.”

In June, the company put 1,000 German employees into “short work”. It rose to 1,800 in July, then fell in August and September as workers took vacation instead.

“This is a really good support program from the German government,” says Schell. “Otherwise, we would have struggled financially. But it also helps to mitigate the economic consequences of our employees. It gives us flexibility as a company and that’s a good thing.”

Image copyright Robert Hack Image caption Andreas Schell only praises Kurzarbeit plans

Kurzarbeit has a long lineage dating back to the early 20th century. However, it stood out during the 2008-09 global financial crisis, which is believed to have saved up to 500,000 jobs.

It can be used by businesses that are usually undergoing restructuring or are suffering from seasonal fluctuations in their business.

However, it usually lasts only for 6 months. It has increased to a maximum of 21 months during the pandemic, and the standards have been changed to include more businesses and workers.

The rate of loss of wages paid by the government will also step up from 60% in general to 80% after the first six months.

Compared to the UK’s further plans, Kurzarbeit’s cost appears to be relatively small and will probably reflect a more limited range.

Berlin invested 23.5 billion won to strengthen its plans at the beginning of the epidemic, then expanded again in August and operated throughout the next year at an additional cost of about 10 billion.

In contrast, the Office of Budget Responsibility estimates that by the time the UK’s further plans ended in October, it would cost 60 billion, about twice what the Germans would spend.

‘Partial unemployment’ in France

The French system, known as “partial unemployment” or “partial activity,” occurred even before the coronavirus pandemic.

It is also designed to subsidize people’s jobs by reducing working hours and can also be used in the long run.

According to the French scheme, enterprises can reduce the working hours of their employees by up to 40% for up to 3 years. Employees still get almost all of their regular salaries, and the government pays a percentage of the cost.

The system is governed by French bureaucrats of all kinds and requires companies to agree with trade unions and provide formal guarantees of job security, but the principles are the same as in Germany.

Image copyright CIC-Orio Image caption CIC Orio is a professional industrial company

Olivier Six is ​​the CEO of two very different companies based in the Grenoble region.

The larger of the two companies, CIC Orio, is a metallurgical company with 150 employees making industrial boilers and other special equipment. The other, G-Tech Guidetti, specializes in hiking accessories.

“I lost my confidence when the crisis began,” he told the BBC. “Businesses are sitting on the money and no one has paid.”

G-Tech Guidetti, a consumer-facing company, took immediate action because all corporations had to close, and all 15 employees had a partial plan of action.

“But after the confinement ended, consumption increased and the recovery was very strong,” he says.

However, CIC Orio is still using this scheme. Employees are currently working for four out of five, and the government compensates for the lost day’s income.

“It’s a good thing to have a plan like this because I’m afraid the crisis will come back,” he says. “This will last a long time. Perhaps there will be very weak economic activity for another year.”

The French government describes the plan as a “Boo Clear Van License”, or an anti-duplicate shield.

It seems to work for now. However, with the rise of coronavirus cases again in France, anyone can guess how long it will be needed.

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