That the ERTE were a network that contained hundreds of thousands of jobs during the pandemic is something that no one disputes. In the end, despite the bad omens, time also showed that they did not become massively ERE (collective layoffs). This Wednesday, the OECD presented a study that analyzes the tool to confront the COVID crisis and ranks it as a “great success”, with data on its effectiveness that goes beyond what was expected, both in protection of jobs, as in the economic bill for the country. The balance is even positive for the State coffers, indicates the OECD.
The report Preparing ERTE for the future: Evaluation of support for maintaining employment in Spain during the COVID-19 pandemicpresented this morning in Madrid by economist Alexander Hijzen, points out that the tool was “highly effective in preserving jobs.”
Not only of the more than four million working people covered by ERTE at some point during the pandemic crisis, but its effect was multiplier. The effect of the ERTE on aggregate employment was even greater than the protection of workers covered by the tool, indicates the international organization.
Up to two jobs were saved for each one in ERTE
The ERTE avoided mass layoffs due to the cessation of activity and restrictions due to the pandemic, a common reaction in the Spanish labor market to crises. This prevented many of these people from becoming unemployed, but the OECD also points out other positive effects, such as “its role in preventing the effects of congestion” in labor markets.
These congestion effects “arise when many job seekers compete for a limited number of vacancies during an economic downturn.” It must be taken into account that Spain already has a high level of unemployment, at that time more than three million people, who would have begun to compete with hundreds of thousands more unemployed due to COVID. This situation ultimately translates “into an increase in the expected duration of unemployment,” explains the OECD.
The study shows that the effects of congestion increased the effect of the ERTE on employment “by 50% or more.” As a result, “the effect of the ERTE on aggregate employment exceeds the level of absorption.” OECD calculations indicate that for each worker covered by ERTE “between 1.1 and 2.2 jobs were saved.”
According to the study, in the absence of aid to maintain employment, the unemployment rate would have been “at least four percentage points higher” than its real rate on average during the 18 months since March 2020.
An investment that avoided a higher cost in unemployment
One of the consequences of this important protective effect on employment, not only for people covered by ERTE but also of the “congestion effect” on the labor market, was a large saving in unemployment benefits in Spain, notes the OECD.
Again, the international organization’s conclusion may surprise. The ERTE were a very expensive tool, worth around 35,000 million euros, which represented an effort for the State coffers in order to protect employment and the productive fabric of companies at a time of crisis.
There are those who debated whether it was a necessary effort or not, whether this disbursement of public money was justified for the protection of this group during the shock due to the pandemic, but now the OECD reveals that this money was an investment that paid off for Spain. The bill was positive for the State coffers, he indicates.
The study concludes that “the budget balance of support for job retention was positive.” “That is, the cost of employment support was more than offset by lower expenditures on unemployment benefits and higher tax revenues.”
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