The use of furloughs represents a change from previous slumps, says Sandra Sucher of Harvard Business School. Common in Europe during the financial crisis of 2007-09, they were barely used in America. Since then, however, many American firms who laid off workers found subsequent rehiring so difficult that they are loth to suffer the ordeal again, she says.
Another difference with past recessions is the way American firms are encouraging inactive workers to switch jobs to fill temporary vacancies in other industries. Hilton, for instance, is helping its suspended workers to apply for jobs at e-commerce firms like Amazon. This may help keep the labour market relatively fluid at a time of severe stress. (Amid employee absences and increased orders, some workers at Amazon, for instance, are demanding better conditions.) It is also well-suited to the time horizons of the pandemic. As social-distancing measures recede, some of the disease- specific demand for labour will ebb, enabling workers to return to their old jobs.
From pulling pints to pulling up potatoes
This is where Europe could learn something from America. Some industries have far too many workers, whereas others do not have enough. Airline employees are needed to work in hospitals, and rural bar staff could helpfully be dragooned into farmwork amid a shortage of migrant labour. But European countries’ schemes for subsidising the wages of furloughed workers often do not make it easy for them to take new jobs, even temporarily, and sometimes discourage it. As Giuseppe Moscarini of Yale University says, support for workers should not preclude labour mobility, even if it encourages them to maintain ties with their existing employers.
Both American and European labour policies have their pros and cons. In America rapid shake-outs in jobs markets help good firms grow and bad firms shrink, promoting dynamism. In Europe worker protections can reduce the devastating toll on employees and their families caused by slumps, but can slow the pace of recovery. American left-wingers believe that more European-style treatment of workers is long overdue—and will cheer examples of companies volunteering to furlough workers rather than fire them. But if America and Europe want to ensure that hospitals are staffed, deliveries are made and food is on the table, they must remember that flexibility, as well as some security, is essential.