How other countries handled their coronavirus jobs crises : The Indicator from Planet Money Not all countries approached the COVID-19 economic crisis the way the U.S. did. How different strategies on unemployment had radically different outcomes.

How Other Countries Handled Their Jobs Crises

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Hey, everyone. It's Cardiff. This is THE INDICATOR FROM PLANET MONEY. Right now, there are about 21 million fewer people with jobs in the U.S. than there were back in February, which was right around the time that the coronavirus pandemic had really started devastating the U.S. economy. Now that is obviously a massive, massive collapse. Did it have to be that way? Were there policies that could have prevented this catastrophe in the labor market even as the virus was attacking the country's public health? Well, one way to think about that question is to compare what happened in the U.S. to what happened in other countries. And helpfully, an old friend of THE INDICATOR has just finished a study looking exactly at that.

MARTHA GIMBEL: My name is Martha Gimbel. I'm the manager of economic research at Schmidt Futures, and I just finished a paper with Jesse Rothstein and Danny Yagan called Jobs Numbers across Countries since COVID-19.

GARCIA: Martha and her colleagues compared the U.S. against six other countries - Germany, Japan, South Korea, Israel, Canada and Australia. These are all countries with relatively advanced economies, kind of like the U.S. economy. And so after the break, Martha's going to tell us which of these countries did better than the others at keeping people employed. And Martha's going to share with us an idea that seems to be working pretty well in some of those countries, an idea that is an option that could be used a lot more in the U.S. if only more businesses and workers would try it.

Martha Gimbel, welcome back to THE INDICATOR.

GIMBEL: Thanks for having me.

GARCIA: OK, so I think we should start by answering the question on everybody's mind, which is, which countries were the most successful in actually keeping workers employed as the coronavirus pandemic started devastating their countries and their economies?

GIMBEL: So not the United States.

GARCIA: I guessed that. I guessed that.

GIMBEL: Yeah. But of the countries that we looked at, Germany and Japan did particularly well, and also Israel.

GARCIA: OK. And was there anything that those countries had in common about their approach to the labor market that allowed them to be successful?

GIMBEL: So one thing that Germany and Japan have in particular is really robust work sharing programs. And that played a huge role in keeping people connected to work.

GARCIA: OK. And for the listeners out there who aren't familiar with this, maybe because they live in the U.S., what exactly is a work sharing program? How does it work?

GIMBEL: So a work sharing program says if you're an employer who has to cut payroll costs by 20%, you can fire 20% of your workforce. But that is really painful for them, right? Those people have lost their jobs. They have lost their income. Alternatively, you can cut everyone's hours by 20%. Of course, then everyone has lost 20% of their pay. And what work sharing programs say is instead of people going on unemployment insurance for having lost their job, they get to get a government payment making up for their hours lost.

GARCIA: So they work somewhat fewer hours, and they get paid a little less by their companies, but then the government sort of tops them up. And so that in a way makes them whole. And then more people get to actually keep their jobs as the economy gets worse.

GIMBEL: Exactly.

GARCIA: OK. And it sounds like it's a little bit of a bummer if that was working in other countries, and the U.S., I don't think in general, has that approach to work sharing.

GIMBEL: So it's interesting that you said that because that is a very common conception. And we actually do have a work sharing program. Many states allow you to take part in what we refer to as short-time compensation, which is our version of a work sharing program. But the number of people in the United States who are on that program is vanishingly small compared to the number of people on unemployment insurance overall. It frankly really doesn't play a role.

GARCIA: And you think it's because people aren't aware that it's an option? Do you think it's because companies won't go along with it, or is it a cultural acceptance thing? What's going on here?

GIMBEL: I mean, we can debate this till the cows come home. I think it's a little of column A, a little of column B. I think part of it is that people truly do not know that the program exists. I think part of it is also cultural, right? Like, the United States tends to be a very individual-focused society, less of a sense of we're all in this together. And so we may be more OK with someone else losing their job rather than us having to give up some percent of our hours so that that person doesn't lose their job.

GARCIA: OK, so you've got the U.S., I think, on one end of the spectrum. And of the countries you looked at, I think it was the least successful in keeping people employed. You've got Germany and Japan, relatively successful. There were a few other countries in there, like Australia, South Korea. How did they do?

GIMBEL: Yeah, so they were also doing much better than the United States. And part of this is, you know, about other types of programs that they put in place. So Australia had what's called their JobKeeper program, which was subsidies to employers to pay for people's wages. But also frankly, it's about better health responses, right? So South Korea famously had a much better health response than the United States did. And I think we've all seen pictures from South Korea of people just going about their lives in masks and going to fitness classes, which is not happening in the United States.

GARCIA: Yeah, and by health response, you mean actually attacking the virus early on, taking steps to try to slow its spread, where it was more successful - South Korea was - then, for example, the U.S. or Canada or other countries that have not just had a lot of people losing jobs, but perhaps relatedly, they've also just had a lot of spreading of the disease itself. And, in fact, in the U.S., it actually continues right now.

GIMBEL: Yeah. I mean, people keep saying to economists, what is it going to take to end this economic crisis? And we can't answer that - and as economists, we love to have the answers - because this is really a public health crisis. And until we figure out how to solve the public health crisis, we can't solve the economics crisis.

GARCIA: OK, so we've got job sharing programs that seem to be working pretty well at keeping people employed in Germany and Japan. We've got the approach of stopping the virus itself, which is the cause of all this economic devastation, doing things to slow it down. And then you have the U.S. approach, and I'm not exactly sure how to characterize it, but it seems like a very reactive approach. How would you characterize it?

GIMBEL: Yeah. I mean, one, I don't think the public health response in the United States has been great. I'm not an epidemiologist, but that's my understanding. You know, the other thing about the U.S. is we made a considered policy decision to use the unemployment insurance system. We pushed millions of people onto that program. And there's a question of, you know, how much economic suffering is that going to cause relative to emphasizing programs like work sharing.

GARCIA: Yeah. And I think a lot of people might think, well, OK, if we use the unemployment insurance system, that can help with the health response because some people shouldn't be doing certain jobs. Like, they shouldn't be working in restaurants while the virus is still out there. They shouldn't be working in movie theaters. Those places are all closed. So if they're on uninsurance (ph) and they're getting subsidized for a while, that's a good thing. But it sounds like what you're saying is there's a problem because they're also losing their connection to their place of work, to their business. And that might be troubling down the road.

GIMBEL: Yeah. So there's evidence showing that part of the reason why Germany managed to perform relatively well in the Great Recession was because of their work sharing program, which they call Kurzarbeit. And, you know, it keeps those connections to employers and allows people to come back. Now I will note that there are people who are making the opposite argument right now, which is that we don't know what the plot of this economic crisis is going to look like. It could go on for a really long time, and maybe we don't want to keep people who, for instance, are working at restaurants tied to restaurants for a really long time. Maybe that's not a good idea. And that gets back to the overall point of this paper, which is that we need to really be tracking the range of responses across countries and what their economic situation looks like over the next few months in order to figure out how well we responded.

GARCIA: Martha Gimbel, thanks so much.

GIMBEL: Thanks, Cardiff.

GARCIA: Where can our listeners find this study so they can read it themselves?

GIMBEL: If you go to Danny Yagan's website - Yagan is spelled Y-A-G-A-N - you can find it there.

GARCIA: This episode of THE INDICATOR was produced by James Sneed and Camille Peterson. THE INDICATOR is fact-checked by Brittany Cronin and edited by Paddy Hirsch. And THE INDICATOR is a production of NPR.

And if you, our listener, would like to know more about Germany's Kurzarbeit system, the work sharing program, you can read all about it in the Planet Money newsletter. We'll include a link in the show notes to today's episode. Thanks so much.


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