Rescuing the labour market in times of COVID-19: Don’t forget new hires!
The spread of COVID-19 and the ensuing drastic lockdowns are placing economies and labour markets worldwide in a state of emergency. Governments are struggling to safeguard jobs and firms. Short-time work and comprehensive liquidity support for businesses and the self-employed are some measures being used. This column illustrates the consequences of a substantial hiring stall on unemployment and proposes hiring subsidies – directly reduce firms’ costs and thereby stimulate hiring – as a cost-effective stimulus measure for European countries to reduce the risk of unemployment hysteresis effects.
By Christian Merkl (University of Erlangen-Nuremberg) and Enzo Weber (University of Regensburg)