
Japan to subsidize 100% of salaries at small companies - yoquan
https://asia.nikkei.com/Economy/Japan-to-subsidize-100-of-salaries-at-small-companies
======
millstone
No insight into Japan, but the US in particular should be aggressively
shoveling money at business payroll as well. Some reasons why:

First is to keep workers out of state unemployment insurance programs. These
differ per state, but are often deliberately miserly and/or burdensome so that
they motivate recipients to go find a new job. But we don't _want_ the
unemployed to hit the bricks. Payroll support is then a more easily-
administered form of federal UI. (Plus state UI is written in COBOL, they will
literally crash.)

Also, retaining workers will help to ensure a V-shaped economic recovery. Once
the health crisis ends, retained workers can just go back to work. But layoffs
followed by rehires means more retraining (not retaining), and a slower
recovery.

The point is that we literally cannot pinch pennies now: anything we "save"
will hit us twice as hard as a new entitlement cost, or a cost to the states,
or in reduced tax revenue, or whatnot.

Money is a fiction; the real risk is mouldering factories and disused skills.
If a year from now the US is trillions more in debt, and prices are 2% higher,
YET we are healthy and working and productive, we will have been successful in
countering the health and economic crisis. We should be so lucky.

~~~
capdeck
What I saw today driving through the neighboring small town - half of the main
street shops and restaurants are closed. Not just temporarily, but the space
is empty and there is a big "for rent" sign in the window. I've been going to
some of those restaurants for decades - and now they are all but a memory.

It is not enough to give corporations money for payroll - in NY large part of
the cost of running business is the space itself. Also I don't understand all
these "lending" programs - all they do is defer an even larger payment for
later - most of the businesses will not be able to repay that if they have
been closed for months. You are basically taking a loan to pay the rent so you
can go bankrupt later. Doesn't make any sense.

I don't know what to do but we need to give money and healthcare to people
independent of work. Let businesses fail (big and small) and rebuild new ones
once this blows over. Corporations will only buy back stocks and and line
shareholders' pockets with dividends. Single digit percentage points of the
stimulus money will reach employees.

Bankruptcies aren't that bad - usually companies are not dissolved, but go
through restructuring and gain a new management team (which one, knowing there
is no bailout in the future, will plan better for emergencies like this one).

What we are doing now is perpetuating corporate negligence that will now
factor in 100% government bailout and run on even thinner margins and bigger
stock price growth and dividends for the shareholders.

~~~
jandrewrogers
The forced economic shutdown has decimated the entrepreneurial class in the
US, particularly small businesses, I anecdotally know of many (non-tech)
examples in my own circle of friends.

The jobs they created will not come back for the foreseeable future in many
cases. It isn’t like they can just reboot with a clean slate, much of their
capital was destroyed in the process. For a lot of businesses, “pausing” them
is a death sentence, and there won’t be nearly as many people stepping up to
replace them.

~~~
WalterBright
There is precedent - losing a war. Economies do recover. Germany recovered
from being bombed/burned/bankrupted flat in WW2 to become the economic
powerhouse of Europe.

Other countries did not recover so well, mainly because they chose more
socialist economic polices.

No, it wasn't because of the Marshall Plan. Most of the MP money went to other
countries, not Germany.

~~~
zinckiwi
Unfortunately it took a couple of generations! At a macro level, everything
will be fine eventually, you're right. But short term pain regardless.

~~~
WalterBright
It took from 1948 or so to the 1960s, less than one generation.

Germany also had the problem of wholesale death of its men of working age. The
currency was repudiated. The government at all levels had ceased to function.

~~~
usrusr
But there was also a lot of capital brought in from outside (which isn't quite
the same as a money printing spree that happens everywhere at once) and what
was left of pre-war financial elite was more concerned with keeping a low
profile and pretending that they were on vacation or something like that for
that last ten years than with leveraging their power into an even firmer grip.
It's a very different situation and those differences could be very meaningful
for the outcome.

~~~
WalterBright
I don't see any reference to that in things about the German Economic Miracle.

~~~
ciceryadam
After the 1st world war, Germany was paying crippling amounts of reparations
to the winner countries. That wasn't so successful, lead to hyperinflation and
the Nazi power grab. So after the 2nd world war you had the Marshall plan,
debt forgiveness, and trade integration between the western European
countries. This was the basis of the EU pacts that live till now.

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ethanbond
1\. Cancel rent payments, mortgage payments, and property taxes. People simply
stop paying and stay where they are, no enforcement burden and no distribution
necessary.

2\. For landlords who cannot sustain the loss of cash flow, offer to buy them
out at market price and then hire them as property managers for their
previously owned properties.

With essentially zero overhead, you've eliminated small business's first or
second largest expense (payroll and rent). If they still can't make payroll,
it's not a super huge deal since those employees also have their rent frozen.

Now the economy can hibernate.

When we're ready to resuscitate it, do a direct stimulus check as you reopen
businesses. Let money start flowing without any component going to rent for
some amount of time until we're back on solid footing.

~~~
hpoe
So I know a guy that he bought some real estate he owns 3 properties I think.
He isn't a millionaire just a software engineer working the 9-5 and the
properties exist mostly to help him prepare for retirement. Now he has some
money set aside so that if one of his properties goes dormant he can cover it
for a while, but if he were to lose all three of them at the same time. That
would be bad.

Then you suggest the government can just buy him out at market rates. Who
decides what the market rate is? What if the government decides to value the
property for $50,000 less than it is worth?

Well suddenly he has just had $150,000 taken from him by the government. When
things restabiloxe what do we do then? The government owns tons of housing?
Who is going to manage and administer that? If they dump them than all that
you've done is transferred the properties from small owners to massive multi-
million dollar firms that managed to take the hit. What about people who got
laid off and still don't have a job after it is over? Because it was a result
of the coronavirus do we just continue to say it's okay don't pay rent? If we
do that guarantee a year from now tons of properties won't be paying rent
still.

It sounds like an easy and simple fix but it is usually more complicated than
that and drastic decisions made will often have downsteam effect for years and
decades that we can't see now.

~~~
ethanbond
As far as pricing: simply purchase the properties for whatever their value was
last declared on tax forms. Can even add 5-10% for good measure. You lowballed
the government to decrease tax burden? No problem, that’s the price you get.

This isn’t an anti-millionaire plot, so it doesn’t matter much what he earns.
This is a hibernate-then-stimulate plot.

We cannot hibernate if businesses and individuals are getting absolutely
gutted at the end of each month.

We cannot stimulate if stimulus checks are going directly into landlords’
pockets.

After this is over, yes, either the government can keep it (as Singapore does)
or even sell them back, giving preference to the original owners at the
original price (who had been kept employed throughout the hibernation).

The land itself is not charging landlords to hold it, so landlords don’t
_need_ to be charging tenants to exist on it (except mortgages/taxes, which
would be frozen).

~~~
JMTQp8lwXL
In some states (e.g., California) the taxed value is not equal to the market
value. Especially for home purchases made decades ago.

~~~
benrbray
Sounds like a problem that should be fixed by setting the tax value equal to
market value.

~~~
JMTQp8lwXL
Prior to 1978, that was indeed the case. Rising property values were kicking
seniors on fixed incomes out of their homes, then Prop 13 was passed.

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tempsy
Coming to the realization that our economic crisis (primarily massive number
of newly unemployed) was largely avoidable with a scheme like this vs the PPP
loan program and multi-trillion money printing we got instead.

~~~
bpodgursky
The PPP loan program was actually pretty close to this, if executed well and
funded sufficiently (obviously, it wasn't). The unemployment benefit extension
and hack (unemployment + $600) was the real critical mistake that we'll spend
a long time fixing.

The QE / money printing is complicated, but it's worth nothing that Japan has
been "printing money" for a long, long time, and QE is a mainstay of Abe-
nomics (so the Japan subsidy here is absolutely coupled with aggressive QE).
Battling deflation to hit inflation goals is a reasonable goal for a central
bank, IMO, but obviously it's not cut and dry.

~~~
coffeevradar
>The unemployment benefit extension and hack (unemployment + $600) was the
real critical mistake that we'll spend a long time fixing.

What was the alternative? Existing unemployment benefits are insufficient for
households to pay bills and the PP program at best would have saved a small
portion of the overall jobs lost.

~~~
bpodgursky
Ideally, basically what Japan is doing. Don't try to discriminate on company,
don't make it complex, just cut a check to keep employees on the payroll.
There's no dumb drama over "who gets the loans", if all employers do.

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johnzim
Given that the BoJ literally can't seem to generate inflation no matter how
hard it tries, this seems like a no-brainer. As close to helicopter money as
they've yet come.

~~~
ShorsHammer
Technological advancement really is a curse.

Given that Japanese quality of life has barely moved in decades despite the
economic hardships perhaps it's time for regulators to stop focusing on the
arbitrary 2-3% inflation metric which causes so much distortion in monetary
policy?

Why exactly can the inflation range targeted by Central Banks never change?

~~~
gimmeThaBeet
There's a bit of truth there, not that my opinion means much, but Japan's
biggest issue is that they haven't invested enough in the people, and by
extension supporting domestic growth/consumption.

And when I say Japan here, that's Japan, the government, and more importantly
what is called "Japan, Inc." Corporate Japan has amassed an absolutely
staggering amount of money over the past 10/20 years, they haven't done enough
with it, and Abenomics (though I think they honestly know it's an issue, and
have tried to address it) hasn't managed to crack that nut.

Now, as to the second point concerning inflation, I maybe naively think that's
easier to talk to. I think the first idea isn't that you want inflation, it's
that you don't want deflation. Prices have to do something, and deflation
tends be be very unfun, and has proven tricky to get along with. It's just
that societies have found it easier to fight excessive inflation than any
amount deflation, so you end up with 'price stability' being interpreted as
'inflation, but not that much'. Ideally imo you're running above 0 with some
headroom.

I also think inflation is sort of is Darwinian-ly helpful (though it may be
very uncomfortable/destructive) in that it kind of naturally gives a mechanism
where everything is being constantly re-evaluated over time. In a world where
everything gets more expensive over time, if you can't get more efficient, or
maintain your pricing power, you're being compressed. And again, that's not
very fun in the context of wage growth, it's people's lives and livelyhood.
Debts also become nominally cheaper to service over time. A lot of stuff works
out cleaner when you have inflation vs deflation, but there's still unfun
aspects.

One thought experiment I have is a little about investment/consumption, and
debt. If you want to go buy something you need, and tomorrow the price will be
higher (inflation ad infinitum), when is the best time to buy it? Now.

If you want to go buy something you need, and tomorrow the price will be lower
(deflation ad infinitum), when is the best time to buy it? Never? How long do
you wait?

~~~
machiaweliczny
They could just print some money and pass then to people (like UBI) to
maintain healthy inflation. Guess there are no laws to enable that.

~~~
FartyMcFarter
UBI is not happening, but printing money to pass along to people and
businesses still seems to be happening anyway.

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adev_
The government is making the right move.

Japan has in its economy a large number of small family business in sector
like retail, crafting, Ryokan (hotels) or restaurants. Some of them are two
centuries old and still surviving from generations to generations.

They are part of soul of Japan and its cultural identity. Loosing them would
be such a waste, not only socially but also culturally.

Many of them have seen their income going to close to Zero due to COVID19.
Without government help, many of them would die and never recover.

------
joebloom
UK was early out of the doors with 80% wages furlough.

It gives both employees and businesses the ability to survive the period and
come out of the other end able to get straight back into work.

But who knows how long that lasts whilst there is a likely recession on the
cards next.

And so the government takes on 100 years of debt by giving future taxes to
lenders.

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sunsetSamurai
Every time I read news like this, I wonder where all that money is coming
from? As far as I know, Japan is one of the most indebted countries out there.
Look at the USA too, they've printed like 2 trillion dollars during this
crisis, my own country has a dept of around 50% of its GDP.

I feel like most countries have not intention of paying their debt ever, the
politicians are just kicking the can down the road until one day all this
explodes and all this debt is forgotten, maybe?

There's probably something I'm missing since I am not an economist.

~~~
ducttapecrown
The debt of a country is completely different from the debt of a person or a
company. Basically the difference is that countries can print money, but what
it means is that large amounts of debt are okay and even desirable. The U.S.
in particular is in an even safer spot because the dollar is the world reserve
currency.

The debt of the worlds countries will explode if and only if money goes to
hell.

I'm not an expert, so I'd encourage you to do some your own research.

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tsbinz
Germany/Austria/Switzerland have similar programs (called Kurzarbeit) which
are for situations like these (where companies don't have enough work at the
moment but are believed to recover), [https://en.wikipedia.org/wiki/Short-
time_working](https://en.wikipedia.org/wiki/Short-time_working) \- what was
done for the covid crisis here (Switzerland) was to simplify the application
process for it.

~~~
adev_
Same in France and currently most European Union countries.

~~~
m4rtink
Can confirm Czech Republic is also doing it.

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yalogin
Our trickle down economics philosophy in the US does not let the government do
this. The onus will be on propping up businesses, when all they need to do was
support employees. Instead we bail out whole companies and that usually means
paying a lot more than just employee salaries.

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perfunctory
This might be the right thing to do at the moment. In the long term though I'd
prefer a system where stimulus package is not based on one's employment. This
has the same problems as employer-tied health insurance.

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gen3
> The employment adjustment subsidy has not proved popular so far, partly
> owing to its complicated paperwork and the roughly one-month wait for
> processing applications. In the current crisis, just 985 companies had
> applied in the two months leading up to April 17

The wait time on this seems very long. I wonder why? Lack of staff? I guess
its good that they already had a program going, instead of having to build one
from scratch or do what the US has done and partner with banks (Which seems to
have also been plagued with hurtles)

~~~
tempsy
Ask anyone here trying to access unemployment benefits. Bureaucracy is
universal, and sometimes an intentional design pattern to discourage people
from applying in the first place.

~~~
tenpies
I mean half the benefit of unemployment benefits is the employment you
generate via bureaucracy.

It's something I find a lot of UBI proponents miss. Sure you "save money" by
cutting bureaucracy, but that bureaucracy is employed people. The savings
probably aren't as considerable when you have to lay off a ton of people in
order to put them on UBI.

And sure, for the private sector, bureaucracy is generally something they try
to quash (with varying effectiveness), but in the public sector it's almost a
desired outcome because it means more jobs, more metrics, more budget.

~~~
AbrahamParangi
Sure, but better (less wasteful) to just give people money than employ them in
busywork.

~~~
clairity
almost nothing is truly only busywork (besides, that’s belittling), so it’s
better to employ people than give away money. employment has many beneficial
side effects, like esteem, that free money doesn’t have.

------
hnarn
In an extremely simplified way, from an economic standpoint, I see two ways
this crisis can be handled:

1) Shovel money into businesses essentially free of charge, taking over
responsibility for their payroll, giving generous low percentage loans or even
free grants, and anything else that can simply be considered "free money" for
company owners.

Or:

2) See this for what it is, which is an extremely high-risk investment that
no-one else is willing to make. If a company was able to find a better deal on
the market, they would take it. If companies are forced to apply for help from
the state to survive, the state should get a (minority) share of the company
and reap any potential future benefits until the owners have the money to buy
their shares back.

The way I see it, in #1 we do our best to halt the crisis, but we essentially
do it by giving away free money to corporations and small companies. In #2, we
still do the same thing (because there's in most cases not much difference
between a high-risk investment and a gift), but at least in this case the tax
payer may get something for it in the future.

If public money goes to bailing out private companies, the public deserves a
share of future profits, until those companies can buy the shares back at
market value. I don't see a loser in this scenario, and in fact, it would be
refreshing to see and end to this constant policy of "privatize profit,
socialize loss".

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siruncledrew
Japan has a good bottom-up focus by addressing employee payroll and by proxy
employee/employer job security during a negative economic outlook.

Grassroots money instead of helicopter money.

The government directly intervening to support employees sounds like a better
effort to influence widespread impact than propping up employers to trickle
down the money with vague guidelines and questionable oversight.

Businesses, in particular SMBs still need financial help, but that help should
be separate from the public support help for PTEs and FTEs.

The US still clings on to the top-down approach to solve these problems,
counter to Japan (not that Japan is perfect either).

------
nl
Australia has a similar program, but universally applicable (not just small
companies) to any company which can show negative effects from COVID-19.

They subsidise salaries at a flat rate of $1500/fortnight.

------
gigatexal
I’ve been saying this for weeks now: just have the treasury pay employees so
that people stay in their jobs and can keep buying.

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dhasso
After the announce of 100k yens per people (~$1000), they might finally become
more serious...

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throwawaysea
Perhaps what we need to consider is some scheme to automatically fund a salary
floor or salary continuation in emergency times, even if UBI is not on the
immediate horizon. Presumably the currency dilution that results is no worse
than what we are taking up anyways with the current piecemeal stimulus
packages.

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m3kw9
Basically it sounds good but the application process is a nightmare

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drallison
The Danish approach to closing down the economy in the face of a pandemic made
more sense to me than that used by Trump and the US Administration.
[https://www.theatlantic.com/ideas/archive/2020/03/denmark-
fr...](https://www.theatlantic.com/ideas/archive/2020/03/denmark-freezing-its-
economy-should-us/608533/)

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crimsonalucard
Makes a lot more sense then bailing out companies.

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throwaway122378
This will prove ineffective in a few months. Not all 100% Of jobs lost are
coming back.

