Across Europe, just as in the United States, economies are being battered by the coronavirus crisis. Yet the jobless picture on the two sides of the Atlantic appears substantially different — and for now at least, much more daunting for Americans.
According to figures released Thursday, U.S. unemployment claims since mid-March — when most virus-related shutdowns took hold — soared to 26.4 million, with 4.4 million of those claims made last week alone. Combined with pre-pandemic unemployment, that sends the American jobless rate to more than 20%, a level not seen since the 1930s.
In Europe, most publicly available tracking of unemployment takes place over longer intervals, so the full extent of outbreak-caused job carnage isn’t yet clear. But economic analysts say there are crucial variances in how pandemic-generated unemployment is being approached by the Trump administration and by governments in Western Europe.
Policymakers in Washington and in European capitals have used “very different protective measures to ward off COVID-19-induced job loss,” said Jeffrey Brown, the head of technology policy at the Washington-based Bertelsmann Foundation.
In general terms, European methods revolve around wage subsidies for companies to keep people working.
Brown likens attempts to “flatten the curve” on joblessness to public health efforts to slow the spread of the coronavirus. Both are endeavors meant to stave off an increase that overwhelms national resources, buying time to prepare for more of the same, or perhaps worse.
A number of European job-preservation models are based on the German-pioneered labor market instrument. Kurzarbeit, or short-term working, was used to powerful effect during the economic crisis of 2009. It is meant to avoid layoffs by keeping people employed, often at substantially reduced hours, with most of their salary covered by the state.
While there are many variations across the Continent, the principle is similar: “You sort of freeze the economy,” said Jacob Kirkegaard, a senior fellow at the Washington-based Peterson Institute for International Economics.
Under such an arrangement, the state intervenes to keep employees attached to their companies, and as the economy reopens or revives, they go back to work as usual.
Cruelly, some of the European countries that have suffered the largest death tolls from the virus — Spain, where more than 22,000 had died, and Italy, whose fatalities had surpassed 25,000 as of Thursday — were already on shakier fiscal ground to begin with and risk greater economic devastation to come.
Of those countries seeking to implement a German-style system of job preservation, those with past experience in doing so, or those with an existing Scandinavian-style safety net encompassing generous social-welfare programs, are faring the best, Kirkegaard said.
While some are facing bureaucratic delays or other snags in ramping up such programs, “it seems to be working — I wouldn’t say seamlessly, but very well,” he said.
Avoiding job shedding on a massive scale while in the midst of a crisis like a pandemic helps societies and economies rebound once the emergency has eased, many analysts say. And workers more confident of their job status are likely to be the kinds of consumers who can help power a recovery.
By their very nature, though, high-priced job-preservation efforts are most workable in the short term, perhaps over a period of several months. So a more drawn-out crisis, one with recurring large-scale outbreaks of COVID-19 and accompanying stay-at-home orders, might prove a severe test.
Here is a look at some of the European economies and how they are coping with coronavirus-caused job loss:
GERMANY: Kurzarbeit helps firms retain highly skilled workers, and many big-name companies are embracing the system, accounting for a rapidly expanding employee base. It’s expensive, but for the government, subsidizing wages can be a cheaper option than paying out costly unemployment benefits. Austria, Denmark and the Netherlands are implementing similar models, and the 27-nation European Union as a whole is considering its own version.
FRANCE: The government is in effect paying businesses to retain workers, spending some $50 billion to do so. For companies that are fighting to stay afloat, it is offering state-subsidized furloughs and loans while pushing back payment deadlines for taxes and loans. At the start of April, thousands of companies, including big employers such as the aviation giant Airbus, had sought government-backed furloughs for nearly 4 million workers.
BRITAIN: The government of Prime Minister Boris Johnson launched a program to pay up to 80% of private sector salaries until June, with a monthly cap of about $3,000, as long as workers are not laid off. But British officials have been struggling to get the program, which is known as the Coronavirus Job Retention Scheme — in British English, “scheme” does not have the same nefarious overtones as in American English — up and running. The British Chamber of Commerce said that as of this week, more than 140,000 firms had applied. And many companies are facing a cash crunch before an end-of-the-month payday.
SPAIN: Because the country headed into the coronavirus crisis with an already punishing unemployment rate — one of Europe’s highest, at nearly 14% — recovery will probably be slow, which may have spurred the Madrid government’s early adoption of economy-reopening measures. Previous bright spots such as the tourism sector are not expected to revive any time soon. In part because Spain has a high rate of workers on temporary contracts that have now evaporated, the government has been considering measures such as a universal basic income and temporary unemployment-relief measures. Spain is pressing the EU for help, but the prognosis is grim: the International Monetary Fund said this month that Spain’s jobless rate could reach nearly 21% this year.
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