Friday, November 13, 2009


I was asking the other day about Germany's relative success in keeping unemployment low despite a substantial GDP hit in the crisis. I wasn't the only one who noticed. Paul Krugman today recommends that the US consider a German-style Kurzarbeit program: government subsidies to employers for keeping workers on at reduced time rather than proceeding to layoffs.

How quickly times have changed. Krugman actually defends (against Larry Summers) work-sharing programs in all their forms. That would include France's 35-hr. week. During the presidential campaign, Sarkozy ridiculed the idea that sharing the available demand for labor among more workers accomplishes anything, and Krugman concedes that "in ordinary times" such programs are generally considered to be a drag on long-term growth. But these are not ordinary times, he says.

Economists, who know the meaning of ceteris paribus, have no difficulty shifting positions when the parameters of a situation change. But politicians who draw upon economists for campaign themes tend to become wedded to their commitments, because they use them to draw lines in the sand: on the other side, where my opponent stands, lies madness. Changing one's mind is derided as "flip-flopping" (cf. Keynes: "When the facts change, I change my mind. What do you do, sir?"). But the proper balance to be struck depends on a careful analysis of local conditions. France has had long and not altogether happy experience with subsidized employment as well as shortened working hours. Other active labor market measures might be better adapted to present conditions. Earlier in Sarkozy's administration there was talk of increased funding for worker retraining coupled with enhanced job search assistance, in emulation of Scandinavian flexicurity schemes. We haven't heard much about this lately, perhaps because the unions showed little enthusiasm for the idea.


James Conran said...

Indeed Krugman himself was rather critical of the 35 hour week in his "Accidental Theorist" collection.

Leo said...

There is a fundamental difference of outlook between kurzarbeit and the 35 hours work week.
The 35 hours are carved in stone by the Law and here to stay, witness all the contortions that are necessary to (feebly) sweeten them. Kurzarbeit is a budget decision; valid for one or two years and then weg. By the way, if my memory does not fail me there were some kurzarbeit like elements in Sarkozy's plan de soutien.