“We are freezing the economy.”
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in Denmark
Thompson: Denmark’s government has announced a very aggressive plan to help workers in the next few months. Tell me what it’s doing.
Larsen: Denmark’s government agreed to cover the cost of employees’ salaries at private companies as long as those companies do not fire people. If a company makes a notice saying that it has to either lay off 30 percent of their workers or fire at least 50 people, the state has agreed to take on 75 percent of workers’ salaries, up to $3,288 per month. (This would preserve the income for all employees earning up to $52,400 per year.)
Thompson: Some American economists say the U.S. should copy Germany’s work-sharing plan, Kurzarbeit, in which workers’ hours are reduced and then the government takes on part of workers’ salaries. Is Denmark’s plan like that?
Larsen: Not exactly. In the German plan, the government and the employer share the cost of paying for work. Here, the government is paying companies for employees who are going home and not working. These workers are being paid a wage to do nothing. The government is saying: Lots of people are suddenly in danger of being fired. But if we have firing rounds, it will be very difficult to adapt later. This way, the company maintains their workforce under the crisis and people maintain their salaries. You are compensating people even though they have to go home.
While the White House and lawmakers haggle over the terms of an emergency economic-stabilization package, Denmark has gone big—very, very big—to defeat the unprecedented challenge of the coronavirus.
This week, the Danish government told private companies hit by the effects of the pandemic that it would pay 75 percent of their employees’ salaries to avoid mass layoffs. The plan could require the government to spend as much as 13 percent of the national economy in three months. That is roughly the equivalent of a $2.5 trillion stimulus in the United States spread out over just 13 weeks. Like I said: very, very big.