BERLIN — As the U.S. Congress looks into a temporary basic income for coronavirus relief and Germany debates a stimulus package that would potentially nationalize some firms, other countries are moving to implement the time-tested German concept of Kurzarbeitergeld (“short-time worker money”), in which the government gives companies money to pay their workers a portion of their normal pay during periods of reduced activity. The system has in recent days received attention in the United States, the United Kingdom, and India, among other places.
But a Kurzarbeitergeld system is not a panacea: It can be slower to implement than blanket, direct cash payments, which delays relief. It can also encourage at least some working hours, hurting virus-reduction efforts, and it risks leaving many people out of any subsequent recovery. These disadvantages can make an emergency basic income more preferable, say some experts on the topic — either as a cushion in addition to Kurzarbeitergeld or, if payments are large enough, as a substitute.
Kurzarbeitergeld regulations have existed in some form since 1918, according to Alexander Herzog-Stein, the head of macroeconomic labor-market research at the Institute for Macroeconomics and Business Cycle Research of the Hans Boeckler Foundation. In a correspondence with the Washington Examiner, Herzog-Stein stated that several other European countries already have similar policies and that for those countries with existing systems, the payouts can be scaled up relatively promptly.
“The advantage is that [Kurzarbeitergeld provides] financial support for workers who are severely hit by the economic crisis as a consequence of the spread of COVID-19,” Herzog-Stein stated. “If the system is well-established, it also provides this financial support very quickly.”
Such programs, however, can be slower to scale up in countries where they’re new, costing valuable time. And even in countries that have existing social safety nets, means-tested programs can sometimes leave people who need aid badly waiting in long lines to fill out paperwork at government offices, as has recently happened in Australia. This is a problem that a universal basic income would not have, say advocates, since a simple mailed check without income verification can be sent and cashed rapidly.
A non-UBI solution may also leave out many edge cases, according to Andy Stern, author of Raising the Floor: How a Universal Basic Income Can Renew Our Economy and Rebuild the American Dream. “First of all, employer-based funding is often excluding a significant portion of the formal workforce who are self-employed, gig workers or care workers,” Stern told the Washington Examiner. “Not to mention … the informal workforce and undocumented immigrant workforce. Second, the system is providing no relief to families taking care of other family members.”
That’s been partially fixed in Germany, where legislation providing €50 billion ($54 billion) in extra relief for freelancers and small businesses passed this week, but it remains as a possible loophole in other countries implementing Kurzarbeitergeld-style policies. And even with protections, Germany’s safety net can leave some out: migrants, the long-term unemployed, and the homeless, for example.
Leaders in Berlin have worked to think outside the box in recent weeks, going as far as proposing nationalization of some companies. Enzo Weber, the head of research department forecasts and macroeconomic analyses at the German Institute for Employment Research, spoke with the Washington Examiner last week. He proposed a novel solution: a rescue act for hires, which would encourage growth after the crises by allowing companies to avoid paying Social Security contributions on any new hires for a year.
Both Weber and Herzog-Stein have said that unlike in the U.S., there has been little political talk in Germany of a true universal basic income. “There are no political initiatives [that would] drive that forward,” Weber said. “If you don’t have the employers and you don’t have the trade unions, then in Germany, it’s extremely difficult to get something done.”
Even the U.S. payments currently being debated, with blanket monthly payments of up to $2,000 likely to be part of the conversation that leads to the next relief legislation, are unlikely to be a cure-all or substitute for other benefits at their currently suggested rate, according to Soomi Lee, a professor of public health at the University of La Verne who has researched universal basic income payments.
“Some UBI advocates seem to sell the idea as a panacea. But I think UBI is a mere baseline,” Lee told the Washington Examiner. “I don’t think an emergency UBI or a [regular] UBI should be interpreted as a solution. In an emergency like this, we should utilize the simplicity of UBI that does not require work and is given to everyone.”
While some advocates have argued that employer-based subsidies keep people locked away from other opportunities, Lee and the two economists contacted by the Washington Examiner dispute this.
“I am not sure how significant this lock-in effect is,” Lee stated. “In a normal recession, more high school students go to college; more people go to graduate school. So I believe that Kurzarbeitergeld may have some effect like that. But I just don’t know how people react to a pandemic-driven economic downturn.”
In the longer term, Weber says that most economists are against a universal basic income, believing that automation will not reduce the number of jobs, making the payments expensive and unnecessary.
The physicist and author Max Tegmark disagrees. In his book Life 3.0: Being Human in the Age of Artificial Intelligence, he worries about the rise of what he calls artificial general intelligence: AI capable of building more AI. He says to consider a thought experiment involving horses in 1900, conversing and pondering their future.
“I’m worried about technological unemployment,” a horse says.
“Neigh neigh, don’t be a Luddite,” a second horse says. “Our ancestors said the same thing when steam engines took our industry jobs and trains took our jobs pulling stage coaches. But we have more jobs than ever today, and they’re better too. … I’m sure there’ll be new jobs for horses that we never imagined. That’s what’s always happened before, like with the invention of the wheel and the plow.”
Tegmark then notes that those new jobs didn’t arrive, and that horse slaughters brought down the American equine population from 26 million to 3 million over the next several decades.
Stern argues that a universal basic income gives the most flexibility to workers who may not have jobs, whether that’s now or in 20 years. “Clearly, tying a worker’s relationship to an employer, particularly in times of crisis … reduces their liberty, independence, and ability to make decisions about training or new employment,” Stern says. “Individuals should have the freedom to control their own destiny, not to have employment and life choices tied to the whims of employers, which can vary in terms of motivation, respect, honesty, and flexibility.”
Patrick Maynard (@patrickmaynard) is a freelance journalist based in Germany. His reporting has appeared in the Baltimore Sun, Vice, and the Detroit Metro Times.
