Findings, music, and occasional reflections by Paul Woodward

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Can Denmark’s attempt to freeze their economy help the world avoid a Great Depression

Derek Thompson interviewed Flemming Larsen, a professor at the Center for Labor Market Research at Denmark’s Aalborg University:

Larsen: [T]he government is paying companies for employees who are going home and not working. These workers are being paid a wage to do nothing. The government is saying: Lots of people are suddenly in danger of being fired. But if we have firing rounds, it will be very difficult to adapt later. This way, the company maintains their workforce under the crisis and people maintain their salaries. You are compensating people even though they have to go home.

Thompson: I think I understand you, and I’m going to try to summarize, but tell me if this summary is wrong: Denmark is putting the economy into the freezer for three months. You’re saying: We know that all these people won’t be able to work for the next few months. It’s inevitable. Rather than do rounds of firing followed by rounds of hiring, which will delay the recovery, let’s throw the whole economy into a deep freezer, and when the virus winds down we can thaw it out and almost everybody will still be with the company they worked for in January.

Larsen: That’s exactly it. We are freezing the economy. Because otherwise the government is afraid of the long-term damage that this will do to the entire system. The hope is that this will be over in three or four months, and then we can start up society again. [Continue reading…]

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