Short-time work and unionization

We investigate the effects of short time work (STW) schemes on firm performance considering the role of unions and collective bargaining. We use firm-level panel data for the metal-engineering industry (from 2009 to 2015), with information on firm characteristics, STW use and industrial relations attributes, merged with accounting data. We estimate the elasticity of working hours, labour cost, productivity and profits to STW hours using an Instrumental Variables Fixed-Effects estimator. We find that a more intensive use of STW causes a significant decline of both working hours and labour cost per employee. We also show that an increase in STW hours is associated with lower labour productivity per employee, with no significant effects on hourly productivity and an overall negative (although small) effect on firm's profits. All these effects are temporary and fade away in two years, once the legal duration of STW schemes is reached. Unions presence and power in the firm influences the elasticity of the margins of adjustment. In low unionized firms, labour cost cuts are the prevailing adjustment mechanisms, while in highly unionized firms, per-capita labour cost is insensitive to STW and adjustment occurs through a reduction in working hours. These results are coherent with the use of STW as a work sharing device to protect incumbent workers who are mainly union members.