Resisting the crisis: short-time work in Germany

Purpose - After a brief glance at the global labour market after the financial meltdown the paper aims to explain some general mechanisms of short-time work in Germany. Furthermore it seeks to present an overview of the costs of short-time work for the establishments with respect to the latest labour market reforms in Germany. In the multivariate analyses with the IAB Establishment Panel the paper aims to identify the determinants of short-time work and its intensity in Germany. Thus it's goal is to contribute to the discussion of the modified and amended legislative framework for short-time work. Design/methodology/approach - The microeconometric analysis is based on data from the IAB Establishment Panel, a representative survey of the labour demand in Germany. With data from the survey waves 2008-2010 the probability of the use of short-time work with probit regression models and its intensity with truncated regression models are explained. Findings - The manufacturing industry as a German key industry was more affected than other sectors and suffered even harder. Despite the fact that the German labour administration has successfully reduced the bureaucracy of short-time work, the programme is still rather adopted by bigger establishments. German establishments have utilized their flexibility reserves and complementary short-time work to protect their core staff during the crisis. There is also some empirical evidence that the establishments tried to avoid brain drains. With the first signs of a recovery of the economy at the beginning of 2010 the establishments benefitted. a lot from that strategy as they were instantly able to satisfy increasing demands in their markets again. Empirical evidence is also found that establishments made more intensive use of short-time work the harder they were suffering from the crisis. Originality/value - For the first time the latest data from the survey wave 2010 of the IAB Establishment Panel is used and compared with the 2009 survey wave. The structure of the panel questionnaire allows the implementation of some specific questions concerning the use of short-time work. The IAB Establishment Panel has a sample size of approximately 16,000 cases.