MESSAGE
| DATE | 2020-08-24 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [Hangout - NYLXS] COVID-19 Cost of Unemployment - Europe and the US
|
wsj.com
In the Covid-19 Recession, Europe Props Up Jobs While the U.S. Props Up
Workers
Tom Fairless and David Harrison
13-17 minutes
Karren Madere and Andrea Knebel are both victims of the Covid-19
recession. Ms. Madere was laid off in June from her job at a
travel-management company, where she negotiated hotel-room rates for
corporate clients. Ms. Knebel was sent home in April from her job as a
business consultant at an auto-parts factory.
Ms. Madere, 61 years old, has since applied for nearly 200 jobs. She
spends her days looking for jobs online and follows the news, hoping
Congress will agree on another economic-relief package for laid-off
workers.
By contrast, Ms. Knebels lifestyle hasnt changed all that much. She
spends her time cycling around the picturesque valley where she lives,
buying items for her house, and meeting friends for virtual breakfasts
and lunches. She isnt looking for work. She doesnt worry about how to
pay for health care, unlike Ms. Madere, who expects to go without health
insurance for a few months.
Karren Madere of Baton Rouge, La., was laid off in June from her job at
a travel-management company.
Photo: Pamala Stafford
The difference: Ms. Madere lives outside Baton Rouge, La.; Ms. Knebel
lives close to the Black Forest, in southern Germany. Their
circumstances reflect the divergent policies the U.S. and most of Europe
have used to support their labor markets.
Like tens of millions of Europeans, Ms. Knebel is on furlough from her
job at engineering group Robert Bosch GmbH. Though she didnt work for
nearly four months, and now works only some days, she continued
throughout to receive roughly 90% of her normal salary, two-thirds of it
paid by the German government.
I dont feel that I lost that much financially, said Ms. Knebel, 54, who
lives with her teenage daughter.
Not WorkingEurope's economy has so far been hit harder than the U.S. by
the pandemic...GDP from 1Q 2018 to 2Q 2020, change from previous
quarterSources: Bureau of Economic Analysis (U.S.); Eurostat
(Eurozone)Note: Seasonally adjusted
0%
U.S.Eurozone-12.5-10.0-7.5-5.0-2.50.02.5
...but European unemployment has risen much less...Unemployment
rateSources: U.S. Bureau of Labor Statistics (U.S.); Eurostat
(Eurozone)Note: Seasonally adjusted
%U.S.Eurozone2019'20051015
...thanks to sweeping job-protection programs.Potential unemployment
rate by PIMCO*Source: PIMCONote: Total of unemployed plus workers on
short time work
Unemploymentrate in MayPeople on short-time work in May
FranceItalyEurozoneSpainGermanyU.S.0%1020304050
In Louisiana, Ms. Madere received 13 weeks of severance pay after being
laid off and this month started getting unemployment benefits of $222 a
week. She enrolled in Medicaid, the federal low-income health-insurance
program, but is at risk of becoming ineligible because, with the
unemployment benefits, her income may not be low enough.
Hopefully things will change. Hopefully things will get better, she
said.
Unemployment has risen far more in the U.S. than in Europe this year.
But this isnt the result of a deeper recession in the U.S. or
less-aggressive fiscal response. U.S. gross domestic product has
contracted less than Europes, and its fiscal stimulus has been larger as
a share of GDP.
Rather, it reflects different approaches to the labor market. European
governments have paid companies tens of billions of dollars to keep
idled workers such as Ms. Knebel on payrolls. Under the continents
so-called short-time work programs, the state reimburses workers who
have lost income because they are working fewer hours. Around a quarter
of all workers in Germany, France, Italy and Spain were tapping such
programs in May, receiving between 60% and 85% of their lost income,
according to Pimco, an investment manager.
The U.S. has enacted some wage subsidies: Congress established the
Paycheck Protection Program in March, which gives small employers loans
that are forgiven if they retain their workers.
The FruitGuys in South San Francisco, Calif., tapped a nearly $1.7
million forgivable loan from the Paycheck Protection Program.
Photo: Marissa Leshnov for The Wall Street Journal
The program boosted employment at eligible firms by around 3.25%, or
roughly 2.3 million jobs, according to research by economists at the
Federal Reserve, the Massachusetts Institute of Technology and ADP, a
payroll-processing company. Congress also offered tax credits of as much
as $5,000 to support the wages of each employee retained by a business
hurt by the pandemic.
But most U.S. support went directly to the unemployed. Federal lawmakers
added an additional $600 a week to payments, extended the duration of
benefits and made gig workers eligible. Most workers received more from
the enhanced benefits than they did from the job they lost, according to
a University of Chicago study. At the peak in June, nearly 33 million
workersabout 20% of the labor forcewere receiving benefits, according to
the Labor Department. The extra payments ended on July 31, and Congress
is divided over how to extend them.
If all workers using short-time work programs were classified as
unemployed, Europes jobless rate would have been around 33% in May,
compared with 15% in the U.S., according to Pimco.
There are advantages and risks to both approaches, economists say.
By effectively freezing their labor markets, European governments hope
to keep viable businesses alive. Companies retain valuable skills and
relationships, enabling them to quickly fire up as the economy recovers.
Workers get paychecks and job security, which should support consumer
spending.
Short-time work programs actually prevent unemployment, which we see the
U.S. has to go through, Markus Soeder, Bavarias minister-president, said
in an interview with German public television. German Finance Minister
Olaf Scholz on Aug. 16 proposed extending the program from 12 months to
24 months, which would cost the government an additional 10 billion
($11.8 billion).
Alphabet Economics: Why the Old Rules of Recoveries May Not Apply
0:00 / 6:36
6:36
Alphabet Economics: Why the Old Rules of Recoveries May Not Apply
Alphabet Economics: Why the Old Rules of Recoveries May Not Apply
Economists have long used letters of the alphabet like V and U to
describe economic recoveries. But the coronavirus downturn is so
different from past recessions that economists are coming up with new
shapes to describe the potential recovery. WSJ explains. Illustration:
Jacob Reynolds
Some economists worry Europes wage subsidies could delay adaptation to
longer-term changes and increase the share of unproductive zombie
companies, which dont make enough profit over time to cover their
debt-servicing costs. In Germany, the share of such companies is likely
to increase to 15% of all businesses this year from 7% last year as a
result of government subsidies, according to Creditreform, a credit
agency. Their survival hurts healthier competitors by undercutting
prices while preventing the flushing out of weak companies and bad loans
that typically happens after downturns. That hurts overall productivity.
SHARE YOUR THOUGHTS
What do you think is the most effective government plan to keep the
economy afloat during the pandemic? Join the conversation below.
Millions of furloughed employees might ultimately be fired anyway.
Around a third of British businesses expect to lay off staff by October,
when their job-furlough program will be wound down, according to the
Chartered Institute of Personnel and Development and Adecco, a staffing
group. German manufacturers expect to shed staff over the coming months,
according to the Ifo think tank.
We have learned from the last three recessions that shrinking sectors
such as finance never recovered, said Giuseppe Moscarini, a labor
economist at Yale University. People learn they can live without some
things and they like others. These are times to restructure these
sectors and automate.
In June, hundreds of people lined up in Frankfort, Ky., hoping to get
assistance with their unemployment claims.
Photo: bryan woolston/Reuters
Europes approach partly reflects the rigidity of its labor market.
Layoffs are costlier and job creation weaker than in the U.S. German
workers average around a decade in the same job, compared with 4.2 years
for Americans, according to Deutsche Bank.
Germany places one of the highest tax burdens on labor in the world, to
help finance the nations social-safety net. A single German worker with
no children earning the average wage takes home roughly 50% of the
amount their employer pays to employ them, including social-security
contributions. A similar American worker takes home around 70%,
according to data from the Organization for Economic Cooperation and
Development.
Germanys short-time work program, called Kurzarbeit, dates back to 1910,
when the German Reich subsidized workers hurt by reduced production of
potash. During the 2008-09 global financial crisis, short-time work kept
German unemployment much lower than in other rich countries. It enabled
exporters to quickly restart as demand picked up, grabbing market share.
But the program also hurt labor productivity, according to a 2017 study
led by Russell Cooper at Pennsylvania State University. More productive
companies struggled to expand because fewer workers were available.
Ms. Knebel and Ms. Madere both work in industries expected to shrink or
change shape even after the pandemic.
The auto sector, which employs almost a million workers in Germany, is
wrestling with a protracted drop in demand, in part due to a shift
toward fuel-sipping hybrid and electric vehicles.
Short-time work is currently masking large strains in employment,
Hildegard Müller, president of the German Association of the Automotive
Industry, said earlier this month. Manufacturers and suppliers are under
enormous pressureWe unfortunately have to reckon with a further decline
in employment.
Andrea Knebel is on furlough from her job at German engineering group
Robert Bosch GmbH.
Photo: Andrea Knebel
Bosch recently informed employees at Ms. Knebels factory that it wants
to cut as much as 30% of the workforce of around 4,200. The company
plans to move some production and development of auto parts to a
low-cost location, probably Serbia. To avoid layoffs it is asking
workers and managers to work fewer hours for less pay, or to take early
retirement.
But Ms. Knebel, who has a Ph.D. in biology, says she isnt looking for
other work. Last month, she helped organize a workers march through the
local town to protest the job cuts.
By contrast Ms. Madere is heeding the warning that travel may not come
back. Im not going to be able to find a job in my field, she said. She
has thought about taking real-estate courses, even though shes daunted
by the idea of going back to school. Shes thinking about car-rental
agencies, or office work for home health-aide companies.
Im 61 years old and Ive been doing this since I was 25, she said. And
its like, what do you do?
Write to Tom Fairless at tom.fairless-at-wsj.com and David Harrison at
david.harrison-at-wsj.com
https://www.wsj.com/articles/in-the-covid-19-recession-europe-props-up-jobs-while-the-u-s-props-up-workers-11598271229?mod=hp_featst_pos4
--
So many immigrant groups have swept through our town
that Brooklyn, like Atlantis, reaches mythological
proportions in the mind of the world - RI Safir 1998
http://www.mrbrklyn.com
DRM is THEFT - We are the STAKEHOLDERS - RI Safir 2002
http://www.nylxs.com - Leadership Development in Free Software
http://www2.mrbrklyn.com/resources - Unpublished Archive
http://www.coinhangout.com - coins!
http://www.brooklyn-living.com
Being so tracked is for FARM ANIMALS and extermination camps,
but incompatible with living as a free human being. -RI Safir 2013
_______________________________________________
Hangout mailing list
Hangout-at-nylxs.com
http://lists.mrbrklyn.com/mailman/listinfo/hangout
|
|
