Brexit and the threat to jobs - Congress proposes a short time work scheme

4 Nov 2019


A European-style short-time work scheme could minimise the impact of Brexit on jobs

Ger Gibbons - Policy Officer ICTU

While the potential impact of Brexit on jobs may not be comparable to the fallout from the post-2008 crash, when the number of unemployed rose from 115,000 (5 per cent) in late 2007 to over 350,000 (nearly 16 per cent) by early 2012, there is little doubt that it poses a serious risk to the livelihoods of thousands of persons. Budget 2020 provides for an additional €365 million in social protection spending if there is a no-deal Brexit. This roughly equates to 30,000 to 35,000 potential job losses. Of course, the impact should be less damaging if there is a negotiated exit. Even so, the impact could be extremely damaging if, as forecast, any losses were concentrated in particular sectors and regions.

The Irish Congress of Trade Unions believes that the introduction of a European-style short-time work scheme could help minimise the impact of Brexit on jobs. This is a public scheme that aims to preserve jobs in ‘vulnerable but viable’ firms who experience a temporary reduction in demand. It does so by supporting the incomes of workers who agree to go on temporary short-time and by enabling them to upskill during their non-working time so that they, and consequently their firm, are better placed when normal working time returns. It also reduces redundancy and rehiring costs for participating firms.

Such schemes were rolled-out in many European countries after 2008. One of the most effective was Germany’s. A 2013 IMF report found that Germany’s job losses over 2008/2009 would have been 40 per cent higher if its scheme had not been available.

The key to the most successful schemes is that they are based on genuine dialogue and negotiation between employers and unions. This enables the scheme to be tailored to meet the unique needs of individual firms and their workforces.

It is the case that Ireland does currently have a rather crude and inflexible arrangement whereby workers whose working time is (often unilaterally) reduced by their employer, for any apparent reason, by at least two days can get Jobseekers’ Benefit for non-worked days. This is open to full-time workers only with sufficient PRSI contributions; full-time workers with insufficient contributions can apply for a (means-tested) Jobseekers’ Allowance.  

This arrangement cannot be considered as a short-time work scheme as commonly understood across Europe - the Central Bank has described it as ‘effectively a partial social transfer’. For one, the (limited) income support only applies when working time is reduced by at least two days. The worker bears the full cost for any reduction in working time of less than two days (i.e. a cut of up to 40 per cent of previous pay). By contrast, a worker on a four-day week under Sweden’s scheme, which was negotiated by Sweden’s employers and unions in 2012, would see up to 90 per cent of their previous pay maintained. Furthermore, workers in Ireland cannot upskill during non-worked days. And incredibly the Government’s official advice is that workers who do not agree to being put on short-time ‘can be made redundant’.

The OECD’s new Jobs Strategy, published last December, recognises the potential of well-designed short-time work schemes to preserve vulnerable but viable jobs during downturns. Having examined the most effective schemes (e.g. Germany’s and Sweden’s) it recommends that they be targeted at firms in temporary difficulty, that firms be required to participate in the cost, and that it applies for a limited period only – all so as not to waste public resources on firms who do not need it. It also recognises that the most successful schemes are those based on genuine dialogue and negotiation, pointing out for example that Sweden’s (currently dormant) scheme stands to benefit from the ‘strong presence of the social partners in Swedish workplaces’.

Congress continues to believe that the introduction of a similar scheme - one that respects and promotes collective bargaining and that builds upon the work by the OECD over recent years - could be a useful tool to minimise the impact of Brexit on jobs and on regional economies. We will continue to make this case with Government and other stakeholders.