Job retention schemes in perspective: lessons learnt and insights for future policy
Introduction
Job retention schemes, underpinned by EU financing, proved to be crucial and effective measures in safeguarding employment and incomes during the COVID-19 pandemic. By May 2020, nearly 42 million workers in the EU, around 27% of the workforce, had applied for support from job retention schemes, a level far exceeding that of the 2008–2009 financial crisis . This widespread use of the schemes was not only due to their swift national implementation, but also to the crucial role of the EU’s temporary Support to mitigate Unemployment Risks in an Emergency (SURE) instrument, which made EUR 100 billion available in loans to finance national public expenditure on short-time work and similar measures. On top of the impact on jobs, job retention schemes also played a key role in softening the blow to household incomes and helped limit increases in inequality and poverty during the crisis.
The experience with job retention schemes in the pandemic demonstrated that their deployment in economic shocks can contribute significantly to economic stability and resilience. The EU economy has been characterised by weak economic growth in the past two years. Furthermore, it now faces growing uncertainty due to rising geopolitical tensions, trade policy uncertainty and the effects of the twin transition. In this context, the labour market has started to slow down with a decrease in labour demand and an increase in planned job reductions in key sectors due to restructuring (see Chapter 1). Amid these developments, a few Member States have recently increased their reliance on job retention schemes. More broadly, Member States’ decision to implement job retention schemes may prove essential to preserve jobs and income in case of future temporary crises. In light of this, learning from the diverse approaches adopted during the COVID-19 crisis is crucial to improve the design and thus also the effectiveness of these schemes across the EU.
Against this backdrop, this chapter provides insights about the design of job retention schemes in the EU. It aims to complement the findings of the ex-post evaluation of the SURE instrument, with a focus on the design of job retention schemes in the EU. Section 3.2 describes the main characteristics of job retention schemes, the evolution of their design over time, and the recent rise in their use. Section 3.3 provides advice on their design based on economic theory and examines their interplay with other labour market policies and institutions. Section 3.4 assesses how different features of their design across the EU have affected the participation in these schemes and broader economic outcomes during the pandemic. Section 3.5 presents policy recommendations and concludes.