How To Protect Jobs During COVID 19 Crisis

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PAYCHECK PROTECTION PROGRAM (PPP)

It was launched by US dishing out $349 billion to businesses that employed up to 500 people.
It involves loans of up to $10 million to each company for covering the payroll costs, upto a maximum annual salary of $100,000 per employee.
The loan need not be repaid,
unless the businesses have laid off workers or resorted to pay cuts between Feb 15 and April 26 — they have until June 30 to revert such changes.
The funds were finished within 13 days, prompting the Congress to approve another round of $310 billion.

It is a German program that translates literally to “short-time work.”
Under the program, financially distressed employers can drastically reduce worker hours.
The government will pay most of their lost wages.
In this, companies can apply when 10% of their employees have reduced hours, down from the previous 30% threshold.
Germany has also made these benefits available to temporary workers, and will increase compensation rates.

Austria, has also adopted the German Kurzarbeit model by announcing a €38 billion package for companies to pay their staff only for the hours worked and not retrench them.
It is also planning to lower taxes for the low and middle income people, while increasing the taxes on multinational companies.

In the UK, the government on April 20 launched a short-time work program, the Coronavirus Job Retention Scheme.
It pays up to 80% of wages for furloughed workers, up to £2,500 ($3,112) a month until the end of June.
The program is estimated to cost at least £42 billion, and received 67,000 claims from employers in its first half hour online.

The Kurzarbeit model was successfully implemented by Germany after the 2008 global economic crisis — when the German economy contracted 5% in 2009,
The unemployment rate by the end of that year was 6%, lower than what it was in 2008.
The US, where the first tranche of the PPP saw6 million loans being approved between April 3 and April 16,
Recorded a decrease in its weekly unemployment insurance claims by almost 5%.

One pitfall of wage subsidies is they preserve jobs that might have been lost even without the coronavirus.
The OECD warned in a report that policy makers should aim to avoid subsidizing jobs that “are unviable even in the long-term.”
The IMF recommended this month that any wage subsidies have “clear phase-out mechanisms.”