On 31 March 2005, the Institute for Labour Market and Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB [1]) - the research arm of the Federal Employment Agency (Bundesagentur für Arbeit, BA [2]) - published a study [3] on both the extent of short-time working and its impact on employment. The figures reveal that not only establishments in the manufacturing and construction industries, but also those in the service sector use short-time working to deal with unexpected downturns in demand. Moreover, preliminary results indicate that short-time working may prevent lay-offs, and may reduce labour turnover.[1] http://www.iab.de/[2] http://www.bundesagenturfuerarbeit.de/[3] http://doku.iab.de/forschungsbericht/2005/fb1205.pdf
At the end of March 2005, the Institute for Labour Market and Employment Research (IAB) published a study on the extent of short-time working in Germany. According to the IAB, short-time working exists in both the secondary and tertiary sectors. It may prevent downsizing during temporary lulls in demand.
On 31 March 2005, the Institute for Labour Market and Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB) - the research arm of the Federal Employment Agency (Bundesagentur für Arbeit, BA) - published a study on both the extent of short-time working and its impact on employment. The figures reveal that not only establishments in the manufacturing and construction industries, but also those in the service sector use short-time working to deal with unexpected downturns in demand. Moreover, preliminary results indicate that short-time working may prevent lay-offs, and may reduce labour turnover.
If an establishment experiences a sudden fall in demand for its goods or services, it can announce, to the BA, a temporary reduction in its normal working hours. However, this can only be done if several conditions, which are laid out in social legislation (Sozialgesetzbuch III, §§ 169) and in employment protection legislation (Kündigungsschutzgesetz, §§17), prevail. After approval, the BA pays a short-time allowance for a specified period, which can last six months at most, to every affected employee. The allowance amounts, for employees without children, to 60% of the difference between the net numeration that an employer pays during a period of short-time working and the net wages that are earned under normal circumstances. This figure rises to 67% for employees with at least one child.
| . | Share of establishments with short-time working as a percentage of all establishments (first half-year 2003) | Sector’s share of all establishments with short-time working (first half-year 2003) | Share of employees receiving short-time allowance (first half-year 2003) as a percentage of all employees (30 June 2002) | Sector’s share of all employees receiving short-time allowances (first half-year 2003) |
| Primary Sector | 1.0% | 1.5% | 0.8% | 1.3% |
| Manufacturing | 5.6% | 27.2% | 4.1% | 61.6% |
| Construction | 4.7% | 22.6% | 4.1% | 17.2% |
| Commerce, Transport, Financial Services | 1.5% | 19.4% | 0.4% | 6.5% |
| Business-orientated Services | 2.3% | 16.4% | 1.2% | 9.2% |
| Household-related Services | 1.2% | 12.5% | 0.3% | 3.8% |
| Public Sector | 0.2% | 0.4% | 0.1% | 0.4% |
| All Sectors | 2.3% | 100% | 1.6% | 100% |
Source: IAB
According to the IAB (see Table 1), 2.3% of establishments in Germany, of which almost 50% belong to the service sector, announced short-time working in the first half-year of 2003. Figures for eastern and western Germany, which are not reported here, differ slightly; they do not vary significantly, though. With respect to the share of employees affected by short-time working, the distribution is, however, more biased towards the manufacturing and construction industries. Almost 78% of the employees whose working hours were temporarily reduced and, in addition, received the short-time allowance were employed in either a manufacturing or construction company. Both facts mean that, in the service sector, short-time working was predominantly announced by smaller firms. However, at the establishment level, the share of affected employees is, on the whole, the same in the service sector as it is in the manufacturing or construction industries. With respect to staff figures, differences between eastern and western Germany are, all in all, more pronounced.
Almost 33% of establishments that announced short-time working made staff redundant during the first half-year of 2003. Nonetheless, the bulk of firms (67.1%) maintained, at the very least, the level of their workforce. Indeed, almost 7% of establishments hired new entrants, even though they had announced short-time working. Figures for employment trends from July 2002 until June 2003 reveal a very similar picture. In addition, labour turnover is, except for companies in the commerce, transport and financial-services sectors, negatively correlated with the incidence of short-time working. According to the study, short-time working enables firms to retain trained workers and preserve firm-specific human capital.
In compliance with the law, short-time working is often accompanied with other measures by which firms try to deal with a temporary fall in orders. In particular, a reduction in overtime as well as a building up stocks appear to complement, rather than substitute, short-time working. Yet it remains an open question whether more flexible working arrangements, such as working-time accounts, will reduce the significance of short-time working in the future.
This information is made available through the European Industrial Relations Observatory (EIRO), as a service to users of the EIROnline database. EIRO is a project of the European Foundation for the Improvement of Living and Working Conditions. However, this information has been neither edited nor approved by the Foundation, which means that it is not responsible for its content and accuracy. This is the responsibility of the EIRO national centre that originated/provided the information. For details see the "About this record" information in this record.
Eurofound recommends citing this publication in the following way.
Eurofound (2005), IAB publishes study on short-time working, article.
