Researchers expect more than three million unemployed

The corona pandemic could hit the German labor market harder than previously assumed. The number of unemployed is likely to rise sharply. But there is also a glimmer of hope.

Everything tight: Many companies send their employees on short-time work.

WScientists assume that the Corona crisis could have a much stronger impact on the German labor market than previously assumed. In an analysis published on Friday, the Institute for Employment Research – the research facility of the Federal Employment Agency – predicts that the number of unemployed could rise to over three million in the coming months. In March there were 2.335 million unemployed in Germany.

At the same time, the number of people in employment – most recently 45.1 million – could decrease by around one million people. Among them are several hundred thousand mini-jobbers who do not benefit from the possibility of short-time work, according to the study.

“Tremendous force”

It also contains good news: it can be assumed that the labor market will not collapse to the same extent as the economy, the authors write. Since the global financial crisis in 2009, it has been shown that employment in Germany is much more robust than before against economic fluctuations. In view of the enormous demand for skilled workers, many companies shied away from downsizing, even in times of crisis. They worry that they will not find new employees afterwards.

The fact that the labor market is still coming under severe pressure is due to “the enormous force of the economic shock,” write the IAB researchers. What is new is the almost complete loss of economic activity, for example in the hospitality industry, stationary trade, tourism and culture – areas that are usually less affected by economic fluctuations. The authors assume that real gross domestic product could shrink by 8.4 percent this year and will even collapse by 14.6 percent in the second quarter.

In the course of the second half of the year, the number of unemployed could then make up for a good half of the previous increase, the researchers write – provided that economic life returns to normal. The annual average then results in an increase of 520,000 people. They expect a similar effect for the development of employment: Here they expect an annual average decrease of 470,000 people.

Short-time working is likely to increase far more rapidly than unemployment. Most recently, 718,000 companies in Germany had registered short-time work – a good one in three in Germany. These include many companies from the hotel and restaurant industry as well as retail. It is still unclear how many employees will be affected. The IAB refers to a current survey by the University of Mannheim, according to which 10.8 percent of the workforce could have been on short-time work in mid-April – that would correspond to around five million people. The researchers expect an annual average of 2.5 million short-time workers.

Accordingly, the Federal Employment Agency’s financial cushion of almost 26 billion euros could be used up quickly. The head of the IAB, Bernd Fitzenberger, had already predicted on Thursday that this reserve would “in our opinion come to an end this year”. The Union and the SPD had decided on Thursday night to increase the benefits for short-time workers and the unemployed. In detail, the short-time work allowance is to be increased to up to 80 percent and for parents to up to 87 percent. The Federal Employment Agency currently pays 60 percent of the loss of wages for short-time work and 67 percent for parents. For unemployed people whose entitlement would expire between May and December this year, unemployment benefit I will be extended by three months.

From the point of view of the IAB, the high number of short-time work is also a hopeful sign. It signals “a strong willingness on the part of many companies to keep their workforce,” the authors write. Measured against the magnitude of the economic shock, the development of the labor market figures is therefore likely to be relatively limited.