Welcome to this app, where you can explore the effects of short-time
working policies! You will see changes in income distribution, after
adjusting values of the following two sliders:
•
a certain proportion of the working population that works less than normal
("percentage of people with reduced working hours")
•
the amount of cut in working hours ("percentage loss of working hours"), thus
making people subject to partial or complete loss of their incomes
Note that under short-time working policies, the government provides partial
compensations for lost wages. So if you work only 30% of your regular
working hours, you will get more than just 30% of your regular income.
More on that below.
In the plot you can see two histograms. They correspond to the income
distributions with (orange) and without (blue) the effect of short-time
working, according to the values of the parameters you choose. In addition,
the poverty lines of both distributions (which are defined as
60% of the respective median incomes [1]) and their corresponding
poverty rates (i.e., percentages of the population with an
income below the respective poverty lines)
are displayed.
And now, have fun exploring!
Additional Information
Short-time working is a governmental policy designed to support companies
that are going through economic hardships. When employees experience
reductions in working hours, companies only need to pay for the hours that
they work. Then, the government provides partial compensations for their
lost wages [5]. This policy reduces the number of bankruptcies, the extent of
unemployment and the increase in poverty. In this interactive app, we will
examine the impacts of short-time working on incomes and poverty in Germany,
where this government policy is called "Kurzarbeit". Since short-time working
involves many complicated matters, such as taxation and family status, we
set up assumptions and rules to simplify the subject matter. You can read more
on that below.
We simulated incomes of 50,000 individuals in 2019 and regard each of them as
a single-person household. We do not include any top 3% incomes, as people
making such money would be unlikely to fall into poverty. Besides, these
incomes follow a probability distribution (the "Pareto distribution") that
is beyond the scope this course [2]. Incomes below the Minijob threshold of 450
Euros per month are not discussed here as well, because they are not subject
to short-time work compensations. An important underlying assumption of this
simulation is that there is no additional governmental assistance for
households with low incomes. For the sake of simplicity, we assume that
everyone affected by short-time work experiences the same amount of loss of
working hours.
In Germany, short-time working is applicable only when people experience more
than 10% loss in wages [5]. We assume that people are paid by the number of
working hours solely, and therefore the amount of lost working hours becomes
an indicator of when a person starts short-time working. Single-person
households initially receive 60% of the lost net income as additional
compensations. The rate increases starting from the fourth month of
short-time working [5]. In this example, we focus on the first three months.
Short-time working compensations are closely related to how income taxes are
calculated. We reduced the complexities of German income taxes by simplifying
the tax brackets and setting income amount as the sole determinant of income
taxes.
As you adjust the parameters, you will notice the appearance of spikes in
the income distributions. This is completely normal, because not every income
group is affected by short-time working to the same extent.