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Chancellor Merkel's cabinet is likely to extend the reduced working hours scheme until the end of 2010, Die Zeit reports.
The scheme was introduced in Autumn 2008 with the intention of enabling companies to hold on to their core personnel during times of thinner order books.
The Federal Agency for Labour (BA) pays workers on the reduced working hours scheme up to 67% of the difference between their normal full-time salaries and their reduced working hours salaries. During the first six months, the agency pays employers on the scheme 50% of their social security contributions, after that period the agency pays 100% of social security contribution up until the end of the scheme.
Professor Rudolf Hickel of the Institute for Labour and Economics (IAW) told German daily 'Passauer Neue Presse' that "the reduced working hours scheme must be extended. The government should encourage employers to keep their staff for as long as possible. It is far too early for the government to pull out of crisis management. We are still miles away from the moment where the economy can look after itself."
It is estimated that Germany would have an extra 500,000 unemployed if the scheme had not been put in place.