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Germany Pays Workers to Stay Home to Avoid Mass Layoffs

The post-World War II Kurzarbeit program lets companies keep employees and their know-how.

An empty parking lot at a Volkswagen plant in Wolfsburg, on March 23.

An empty parking lot at a Volkswagen plant in Wolfsburg, on March 23.

Photo: Imago/Zuma Press

Kaluza + Schmid GmbH, a company in Berlin that helps organize trade fairs, corporate retreats, and other events, was having a good year. Managing director Ruediger Koch says his schedule was so full that he had to turn away business. Then, toward the end of February, as governments in Germany and elsewhere began stepping up efforts to contain the spread of the novel coronavirus, cancellations began rolling in. In the space of a few days, the 80-person outfit lost some 30 projects worth €1.6 million ($1.8 million)—roughly a sixth of its yearly sales.

Koch made a choice unimaginable to most managers in America: Instead of firing his employees, he sent them home and kept paying them. The entrepreneur availed himself of a state-funded program called Kurzarbeit, which translates into short-time work. Dating back to the period following World War II in Germany, it’s designed to help companies weather difficult times without having to resort to mass layoffs, disruptive to businesses and the larger economy. “We would have had to let go pretty much everyone if it weren’t for short-time work,” Koch says. “Now we’re able to hold on to our people and their know-how.”