Securing Livelihood in the Corona Crisis

New Study by the Max Planck Institute for Social Law and Social Policy on recent measures to safeguard jobs, the economy and social protection

The Corona Pandemic plunges the global economy into crisis. For Germany, a decline of GDP by 6.3 % is expected. According to prognosis by the commission, Italy’s GDP might even decline by 9.5%. Additionally, the labour market is put under extreme pressure. In order to stabilize the economy, preserve jobs and secure livelihoods, governments spend excessive amounts of money. Germany introduced the biggest aid package of its history, which amounts to 353.3 billion Euros. A team of legal scholars led by Prof. Ulrich Becker, director at the Max Planck Institute for Social Law and Social Policy, has examined the economic, labour market and social law measures adopted by the end of April 2020 to combat the crisis in five European countries: Germany, Italy, Great Britain, France and Denmark. “The current situation holds up a mirror to the normal state of affairs, since existing deficits become particularly apparent. Beyond the comparison of the means of crisis management, our study may also provide an opportunity to reconsider fundamental questions to the welfare state such as the distribution of responsibility”, concludes Ulrich Becker.

The study shows parallels between the five countries, but also displays revealing differences. One of the most important socio-political tools are compensation payments for short-time work or temporary unemployment in order to preserve jobs. Denmark has even introduced respective benefits to prevent dismissals, a specific scheme is also planned in England. In both countries, this does not only lead to new social benefits but also to a partial departure from the flexibility in terms of labour market policy and its little protection against dismissal, as it was held so far. In all of the five countries, access to benefits in case of unemployment is facilitated. Activation measures and sanctions were largely suspended in all of the five countries. However, the countries show extremely different reactions in terms of labour law-related additional support to safeguard jobs: While Germany and England refrained from any such measures, Denmark and France introduced specific leave provisions, and Italy implemented special protection against dismissal.

In order to stabilize the economy, all five countries grant to companies tax reductions, loans on favourable conditions and the possibility to defer social security contributions. Self-employed persons and smaller businesses additionally receive cash benefits in order to recoup damages emerging from the containment of the crisis. The amount of those cash benefits differs from one country to another; they take operating costs that are not covered (Germany, Denmark), losses of profit and turnover (England, France) or the complete loss of earnings (Italy) as a starting point. The countries therefore assume responsibility for the perpetration of damage. This confirms the principle that times of catastrophes are times of the right to compensation in a welfare state, which lends less priority to other economic goals.

Socio-Political Contradictions in Basic Security

Facilitations and partial improvements are also apparent in terms of access to basic security benefits. However, socio-political discrepancies emerge at the same time: On the one hand, persons affected by the recession should not depend on this support if possible. Therefore,  special benefits are introduced. On the other hand, the access to basic security is made easier. This renders the main characteristic of special benefits – need as an eligibility requirement – temporarily less decisive. Great Britain is the most consistent in this respect, compensating for existing gaps in social protections by a significant and general increase of the Universal Credit: Its basic rate for a single person amounts to approximately 460 Euros since 6 April instead of the previous 355 Euros per month.

On the whole, the Corona crisis shows: Times of crises reveal socio-political deficits. Since times of crises tend to lead to simple and quick solutions, they are at the same time not well suited to reach fundamental decisions in terms of improved alignments and adjustments to social security benefits. After they have been overcome, however, crises can stimulate the discussion on principle questions of the welfare state anew.

A team of legal scholars led by Prof. Ulrich Becker, Director at the Max Planck Institute for Social Law and Social Policy, has examined the economic, labour market and social law measures adopted by the end of April 2020 to combat the crisis in five European countries: Germany, Italy, Great Britain, France and Denmark.

The results of the study "Existenzsicherung in der Coronakrise: Sozialpolitische Maßnahmen zum Erhalt von Arbeit, Wirtschaft und sozialem Schutz im Rechtsvergleich" have now been published in volume 6 of the Institute's working papers law series.

For any questions or interview requests please contact Dr. Julia Hagn, Press and Public Relations, Tel: +49 (0)89 38602428, Email: hagn (at) mpisoc.mpg.de