Short-time work in and after the Great Recession

Abstract

We study whether the Swiss short-time work (STW) program reduced unemployment in and after the Great Recession using quarterly establishment-level panel data linking several administrative data sources. We compare changes in layoffs into unemployment, establishment survival, and employment between establishments that applied successfully and establishments that applied unsuccessfully for STW at cantonal employment agencies. The latter establishments provide a valid counterfactual for the former among others because of substantial idiosyncrasies in cantonal approval practices. We find that STW increases establishment survival and prevents rather than postpones dismissals: the 7,857 establishments treated in 2009 would have dismissed approximately 20,600 additional workers into unemployment (0.47% of the labor force) until 2012. Most of these workers would have been dismissed in the quarters immediately following application, and more than a third would have become long-term unemployed. We estimate that the savings in terms of unemployment benefits may have compensated the spending on STW benefits.