Job retention schemes have been among the main policy tools used in many OECD countries to contain the social and employment impacts of the Covid-19 crisis. Their use was unprecedented: in May 2020, job retention schemes supported around 50 million jobs in the OECD, about ten times more than during the 2008/2009 global financial crisis. What have the effects of these measures been? Were they implemented uniformly across OECD countries, and how far-reaching were they? Alexander Hijzen, Senior Economist in the Employment, Labor and Social Affairs Directorate of the Organization for Economic Co-operation and Development (OECD), Andrea Salvatori, Labor Economist at the OECD, and Agnès Puymoyen, Statistician at the OECD, answer our questions.
What different schemes were put in place in OECD countries to safeguard jobs?
Job retention schemes aim to preserve jobs in companies that experience a temporary reduction in activity by reducing labor costs while maintaining the incomes of workers whose hours have been reduced. These may include so-called "partial unemployment" mechanisms that directly subsidize non-worked hours, such as Germany’s Kurzarbeit or France’s activité partielle. They can also take the form of subsidies that apply to worked hours but that can also be used to top up the earnings of workers whose hours have been reduced. The Dutch emergency measure (Noodmaatregel Overbrugging Werkgelegenheid, NOW) or Australia’s Job Keeper Payment are examples of the latter. Regardless of the specific scheme used, all employees maintain their contracts with their employers during the suspension from work.
The majority of OECD countries that already had job retention schemes in place rapidly expanded them in response to the Covid-19 crisis. They simplified procedures by opening online applications to all and allowing workers to apply retroactively; removed the need for economic justification; and extended eligibility beyond workers on permanent contracts to include temporary and interim workers, and even some categories of self-employed workers. Many countries also made partial unemployment schemes more generous for both companies and workers.
A number of other countries introduced new, temporary schemes in response to the Covid-19 crisis, such as Denmark, Slovenia and the United Kingdom. Most of these new schemes apply only when hours are reduced to zero, i.e. in the case of temporary layoffs. This way, the schemes could be implemented more quickly and they are arguably less vulnerable to the fraudulent misclassification of part-time workers. However, they are also more rigid and exclude the possibility of sharing adjustment costs between workers through widespread reductions in working hours.
Several countries - mostly English-speaking - introduced ad hoc wage subsidies that can be used by companies for both hours worked (like standard wage subsidies) and hours not worked (like partial unemployment schemes).