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* Temporary layoffs reduce company costs, prop up economy
* Costly schemes only realistic for matter of months
* Belgium study shows a fifth of workers on scheme could
lose jobs
* Permanent shifts to economy likely from COVID-19
By Philip Blenkinsop
BRUSSELS, May 17 (Reuters) - Temporary unemployment schemes
operating across Europe could struggle to save the jobs of
leisure and travel sector workers facing drawn-out or partial
recoveries from the COVID-19 pandemic, even if they help
industries that rebound quickly.
Short-term unemployment or furlough schemes have taken in a
quarter of Britain's workforce, nearly two-thirds of those
employed by France's private sector and many millions across
Europe.
Championed by Germany, where it is known as kurzarbeit, the
schemes typically provide at least 80% of pay for workers for
whom there is no work now, but a swift return is expected after
a limited period.
The schemes have spread far wider and faster than during the
last major shock, the 2008-2009 global financial crisis.
Raymond Torres, chief economist of the Spanish think-tank
Funcas, says furlough schemes are one of the responses that have
really worked in the initial management of the crisis.
"I wish the same had been done in 2009 where they were
hardly used and caused unemployment to rise," he said, although
he expressed concern that the scheme in Spain would only run to
the end of June, with many further months of economic crisis
expected.
The head of Swiss pharmaceutical company Novartis
gave an unsettling warning on Friday that any vaccine to fight
the new coronavirus will not be ready for use for at least two
years.
The layoff schemes come at a cost, though, so are temporary
in nature. In Italy, for example, companies can use them for up
to 18 weeks. Many elsewhere last until the end of June.
British Finance Minister Rishi Sunak says the UK bill for
covering 7.5 million workers is 8 billion pounds ($9.75 billion)
a month, about two-thirds of what the country spends on its
health service. Sunak has warned this is not sustainable,
although he extended it for a second time on Tuesday.
Even with the scheme, Britain's unemployment rate is set to
more than double to 10% in the second quarter.
In France, the cost is likely far to surpass the 26 billion
euros ($28.1 billion) budgeted. Labour Minister Muriel Penicaud
said the government planned to lower wage reimbursements by the
state from June.
PERMANENT SHIFTS TO ECONOMY
A study in Belgium released this week gave a taste of
economic life after temporary layoffs end. Belgium has some
900,000 people covered by such a scheme, currently until the end
of June.
The survey of companies by the country's new economic
task-force showed that 180,000, or 6% of the workforce, risked
losing their jobs within a relatively short time period.
Of those, a quarter worked in hotels, cafes and restaurants
and almost half in the culture and recreation sector. A further
75,000 self-employed people believed they were likely to go
under.
Italy has banned dismissal procedures until mid-August and
Economy Minister Roberto Gualtieri has repeatedly promised no
one will lose their job because of the coronavirus. However,
that is not expected to save the jobs of all self-employed,
fixed-term contract service sector workers and those in the grey
economy.
Temporary layoff schemes mean companies do not face firing
and potential re-hiring costs. Workers are more inclined to keep
spending and less preoccupied by saving, propping up the
economy. Regular unemployment has the opposite effect.
Gregory Claeys, senior fellow at economic think-tank
Bruegel, says temporary layoff schemes work well for sectors of
the economy that can bounce back well, such as the auto
industry, which is resuming operations. However, the tourism or
entertainment sectors did not look set for a V-shaped recovery.
Temporary layoffs could only go so far, he said.
"If it's more than a year, you need other solutions and will
need other policies like retraining. It's good in a lockdown,
but if there is more social change, you need alternatives."
Irish Prime Minister Leo Varadkar has said Ireland's wage
subsidy scheme could be targeted at certain sectors.
Independent British think-tank the Resolution Foundation,
warning of the risk to workers in the hospitality sector,
recommended a differentiated phase-out for sectors most hit by
the lockdown.
Some industries, such as airlines, have already bitten the
bullet with a series of job losses at the likes of Ryanair
, British Airways and Air France-KLM.
Governments, though, also needed to recognise that the
post-COVID world might not be the same as life before, according
to Roel Beetsma, MN Professor of Pension Economics, University
of Amsterdam.
"You also have to consider long-term sectoral shifts. For
airlines, people will come back, but maybe not on the scale of
before. Retail might see a permanent shift away to web shops,"
he said.
($1 = 0.8205 pounds)
($1 = 0.9248 euros)
(Additional reporting by Edward Taylor in Frankfurt, William
Schomberg in London, Gavin Jones in Rome, Leigh Thomas in Paris,
Belen Carreno in Madrid and Padraig Halpin in Dublin; writing by
Philip Blenkinsop; Editing by Toby Chopra)
