Quotes of the Day

If you had told hard-charging professionals in the City of London just a few months ago that they should take a 20% pay cut to work one day less per week, they would have likely mocked the idea as a French socialist plot to undermine the British economy. But when the U.K. arm of accounting firm KPMG recently asked its staff if they would be willing to reduce their workweek — and thereby save jobs — in the event that business dried up, an overwhelming 85% signed on. About 200 employees in the tax division have already shifted to a four-day week, says spokesman Gavin Houlgate, who claims the deal is a first for a British financial services firm. It's unlikely to be the last. "There's been quite a bit of interest from other organizations," Houlgate says.

As financial meltdown has turned into global economic crisis, the human cost in terms of lost jobs and displaced workers is growing at a terrifying pace. The International Labor Organization (ILO) predicts that 38 million people around the world could lose their jobs this year alone, sending unemployment rates in Europe and the U.S. into double digits for the first time in years and slowing — or in some places reversing — the massive jobs growth of recent years in Asia. Alarmed by the social and political consequences, governments, companies and labor unions in countries across the globe are scrambling to put in place a range of measures aimed at minimizing job losses.

For white- and blue-collar workers alike, shifting to shorter working hours and lower pay in exchange for tacit job guarantees is suddenly a no-brainer — not just in Britain, but also in Taiwan, Iceland and a swathe of other countries in Europe and Asia. Other schemes being tried include temporary work suspensions at factories, and even work-sharing programs. Two countries stand out as having the most developed and systematic approach: Japan and Germany, which both provide government subsidies to companies who keep on workers even though there's little or no work for them to do. Both have recently extended their schemes. In Germany, the government now subsidizes companies and idled workers for a full 18 months, up from six months, and the number signing up for the so-called short-work programs is soaring. In February, 724,000 workers were registered, more than double the number in January and 20 times the number a year ago. Most of the nation's auto makers including BMW and Porsche have adopted short-work programs in some of their factories. In Japan, too, the number of workers who have applied to the "employment-adjustment subsidy" program leaped sixfold between December 2008 and January 2009, to almost 900,000.

But in this gut-wrenching downturn, the Germans and the Japanese are no longer alone. "It's happening a lot," says Raymond Torres, director of the ILO's International Institute for Labor Studies. "People are trading off their jobs for wage cuts and other measures." There's even some anecdotal evidence that it's starting to happen in the U.S., where companies have traditionally not hesitated to lay off staff in a downturn; last month the New York Times announced a 5% pay cut for some of its staff in return for extra vacation days.

Torres and other labor experts say it's an open question whether these schemes make much of a difference. In the short term, they may well slow the rise in unemployment. But if the current crisis continues, as many economists are predicting, at least for this year and probably into 2010, even pay cuts, work-sharing schemes and shorter working hours won't be enough to safeguard jobs. "The real issue is can it be sustained?" Torres asks.

At the 30-nation Organization for Economic Cooperation and Development in Paris, chief economist Klaus Schmidt-Hebbel argues forcefully that governments should do more to retrain workers and overhaul their labor-market policies to ensure that once recovery comes, new jobs are created in sufficient numbers to swiftly bring the jobless rate back down again. But ask him about the German short-work measures, and he's skeptical. "They can't stop rising unemployment," he says, "they just delay it." Indeed, in its latest economic forecast released March 31, the OECD expects unemployment in Germany to rise from its current 8.6% to 11.6% by the end of 2010 — higher than many of its European neighbors — despite the special job-preservation measures. The organization expects Japan's unemployment rate will also rise, although less dramatically, to above 5.5% next year from 4% in 2008.

For all the economists' doubts, there's immense political pressure on authorities to do something to slow growing joblessness. Several national and regional governments are subsidizing job-preservation efforts along German and Japanese lines, sometimes for the first time. Regional authorities in Wales, for example, have just introduced an on-the-job-retraining scheme under which companies in trouble can receive a subsidy of up to $2,800 per worker if they keep them on the payroll and teach them new skills.

Where nothing else works, there's always political pressure. In India, airline Jet Airways reversed a decision to lay off 1,900 staff after the government made its displeasure known — and weeping victims melted Chairman Naresh Goyal's heart. "I could not sleep at night," Goyal confessed at a press conference. "I was mentally disturbed when I saw tears in their eyes." Civil Aviation Minister Praful Patel said he told Goyal that "the ministry would certainly not be very happy with the approach of Jet Airways." Something similar happened in France last month when the French oil company Total announced the closure of two refineries, with the loss of 550 jobs. The move provoked a furious public outcry including denunciations from two government ministers, and the firm quickly backtracked, saying it had been a "communication error." For companies receiving government bailout money, the pressure is even more intense: French President Nicolas Sarkozy has told Renault and Peugeot that the price for receiving subsidies during the crisis is that the auto makers cannot cut jobs in France.

Government suasion is particularly strong in China, where the global economic crisis has led to the closure of 7.5% of the country's small and mid-size companies since the end of 2008. In February, the central government's powerful State Council ordered companies throughout the country to notify local government-backed labor unions if they planned to cut either 10% of staff or more than 20 employees. In Beijing, state-owned enterprises have been ordered not to lay off any of their employees this year. The government is also looking to make positive examples of private businesses that keep on staff. That's why Liu Jingyu, a local entrepreneur in a suburban district of Beijing called Daxing, was recently handed the keys to an expensive Audi A8L; he'd created more than 1,600 jobs at his company, most of them for local Daxing citizens. Jingyu is promising not to cut either jobs or salaries, to take on more employees and to pay end-of-year bonuses as usual.

In some parts of Asia, palliative measures to combat a sudden surge in joblessness were first tried out a decade ago, during the region's economic crisis in the late 1990s. That doesn't mean they're always popular, especially if they involve involuntary pay cuts. Several Taiwanese high-tech companies, for example, began a forced policy of unpaid leave at the end of last year, prompting hundreds of workers to protest in front of the government's Council of Labor Affairs. The council requires that employers pay at least minimum wages and sign agreements with their employees on the terms of the unpaid leave. Even so, workers often feel they have little choice but to accept the policy. Michael Kramer works at Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest semiconductor foundry. Since January, he and all the other 20,000 employees have been required to take at least one day a week of unpaid leave. That's quite a change from a year ago — a time when workers put in

12-hour days and Kramer had to take unpaid leave to prepare for his Aikido black-belt test. Even so, he's not thrilled. "I actually literally thought to myself before that I'd be willing to take a 20% pay cut to work 20% less hours," Kramer says. "But now that it's actually happened, I'm thinking work isn't so bad after all."

At Taiwan's Hsinchu Science and Industrial Park — where over 90% of the world's notebook computers, motherboards and cable modems are made — three-quarters of the nearly 130,000 workers took at least one or two days of unpaid leave a week during the first two months of 2009. For firms with an eye on an eventual recovery, one of the main reasons to cut working hours and not jobs is that it reduces costs at the same time as preserving the talent base. But cutting hours also adds to the bigger macroeconomic problem currently hammering the world economy: lack of demand. Pay cuts eat into consumer spending, which in turn amounts to more bad news for a world economy in need of stimulus. "If you go too far, you'll just aggravate the demand crisis," says Torres of the ILO.

There are other drawbacks to these employment measures, subsidized or not. The biggest is that only workers on fixed full-time employment contracts tend to be covered by the schemes. But they aren't necessarily the most vulnerable to job cuts in hard times; rather, it's the millions of part-time or temporary workers on more precarious labor contracts who are the first to lose their jobs. Numbers vary widely from country to country, but in Spain, for example, around one in three workers are in temporary employment. Unemployment there has soared to more than 14%, up from 9% in the beginning of last year. Migrant workers are also especially vulnerable. The World Bank estimates that, after years of heady growth, remittances sent by international migrants back to their home countries in the developing world will drop this year by between 5% and 8%.

In Taiwan, at least, there are the first signs that the jobs crisis may be easing. TSMC and its rival chipmaker United

Microelectronics Corporation have already gone back to normal hours, and the Hsinchu Science Park Administration predicts that only around 25% of hi-tech park professionals will be on forced leave in April. Back in London, John Philpott, the public-policy director of a lobby group called the Chartered Institute for Personnel and Development, sees the rise of short-work programs and pay cuts in industry as a natural reaction to the crisis. In the case of accountants KPMG, he says, "if you have a highly skilled workforce that you don't want to lose, it can make a lot of sense." But the idea of governments getting involved with big subsidies for such schemes on a regular basis makes him shudder. "There will always be jobs that disappear, and in the long run it's not in our interest to keep them," Philpott says. In many places, in the current dire economic circumstances, that's no longer an argument that carries much weight.

With reporting by Yang Lin / Beijing, Coco Masters / Tokyo, Madhur Singh / Delhi, and Natalie Tso / Taipei

• PETER GUMBEL
• As the economy shrinks, companies from London to Tokyo are searching for ways to avoid firing workers. Here's how job-sharing, salary cuts and reduced workweeks can help — and how they also fuel the crisis