John Schmitt: Vatt's viss Ze Tchermin Tchob Kryssis?

Please forgive the deliberate misspelling on John Schmitt's title - I guess down deep I am still a Tscherrmann, even sou I fought for the US in Vietnam! The great Recession hit harder in the United States than in most of the rest of our world. Among the world's rich economies, we experienced the largest increase in unemployment, trailing only Spain and Ireland. Most advanced economies saw substantially smaller increases in unemployment, trailing only Spain and Ireland, but Germany actually saw its unemployment rate decline. Can we learn anything from countries - Denmark and Germany are currently particularly informative. Denmark had a model labor market before the downturn, but ironically offers a cautionary tale, while Germany's economy has been up and down since unification in the early 1990's, but points one way out of OUR mess: Germany has done well because its labor-market institutions encourage employers to cut hours, NOT workers. Instead of laying off 20 percent of workers, a firm can lower the average hours of its employees by 20 percent. Both accomplish the same goal, but from a social point of view, cutting hours is much better, because it shares the pain more equally, and keeps workers tied to their jobs: The German system gives employers many incentives to cut hours instead of workers. The most obvious is their "short-time work" system, which pays partial unemployment benefits to workers who have their hours reduced. German workers who lose one day of work per week are entitled to receive unemployment benefits equal to one-fifth of the usual weekly unemployment check. Other aspects of the German system also help: Legal protections against dismissal make it cheaper for employers to reduce hours than to fire workers, and many Germans are covered by union contracts that allow flexibility around the length of the work week, and the spread of hours throughout the year. Together, these systems helped to reduce the total number of hours worked in Germany by about 4 percent between 2008 and 2009. Over the same period, total unemployment remained unchanged!