Short-Time Compensation: Is Germany's Success with Kurzarbeit an Answer to U.S. Unemployment?
Felter, Megan, Boston College International and Comparative Law Review
Abstract: The recent financial crisis caused a global recession that affected the economies of both the United States and Germany. While the ranks of jobless workers expanded in the U.S. and unemployment remain high, Germany's labor market was less affected by the recession because of its success with Kurzarbeit, a work sharing program. Germany's experience with Kurzarbeit can provide the United States with useful insights to improve its own version of work sharing-short-time compensation-to better combat unemployment.
Unemployment rates soared throughout the world during the 2008-2009 economic crisis.1 The United States and Germany were vul- nerable to the recession's impact; both countries' economies experi- enced significant downturns.2 Germany contained its unemployment problem more successfully, however, with Kurzarbeit, a work sharing pro- gram.3 The program has garnered international attention because it allows the government to supplement workers' income during tempo- rary periods of decreased demand.4 Because the German program al- lows individuals to remain employed and receive a sufficient income while working fewer hours, widespread application of a similar frame- work in the United States could prove useful in managing unemploy- ment rates.5
Part I of this Note describes U.S. and German responses to the re- cession's impact on unemployment rates, focusing on Germany's suc- cess with work sharing and noting the existence of similar short-time compensation (STC) programs in the United States. Part II juxtaposes the success of Kurzarbeit in Germany against the underutilization of STC programs in the United States, and explores why U.S. work sharing pro- grams have not achieved their full potential. Part III considers strategies, informed by Germany's experience with work sharing, to increase the United States' use of STC programs to combat unemployment.
A. The Recession's Impact on the United States and Germany
Many countries' unemployment rates soared during and after the 2008-09 recession.6 In the United States, the unemployment rate dou- bled, rising from 5% to 10% during this two year period.7 By mid-2009, U.S. workers filed a record 6.8 million unemployment claims.8 Making matters worse, many of those filing claims faced unemployment for ex- tended periods.9 There is a growing concern that such long-term un- employment will leave some workers destitute and perpetually ex- cluded from the job market.10 In fact, in January 2012, almost 43% of jobless Americans were considered "long-term unemployed," having been out of work for at least twenty-seven weeks.11 Because the econ- omy's slow recovery has done litde to prompt employers to hire more workers,12 the unemployment rate has remained above 8% for three 13 years.
The recession battered Germany's economy to an even greater extent.14 Germany's gross domestic product (GDP) decreased by almost 7%-"a much stronger decline of GDP" than many other advanced and emerging countries experienced.15 As a major exporting country, Germany was particularly vulnerable to the recession in its service and manufacturing industries.16 Nonetheless, Germany avoided the signifi- cant increase in unemployment rates that the United States and many other countries experienced.17 While the U.S. unemployment rate jumped from 5.8% in 2008 to 10% in 2009, Germany's unemployment rate remained relatively stable at approximately 7%, increasing by only .4% during the same period.18
B. Kurzarbeit: Germany's Work Sharing Program
Kurzarbeit, meaning "short work," is a government program that allows workers facing reduced hours due to temporary instances of de- creased demand to keep their jobs and receive government funds to partially supplement their diminished income.19 Kurzarbeit exemplifies work sharing programs found worldwide, in countries such as France, Italy, Japan, Korea, and the Netherlands.20 Used in Germany during the Weimar Republic, work sharing spread to many industrial countries following World War II. …