European policymakers have done a better job of protecting their economies from the coronavirus pandemic than their U.S. counterparts, a Nobel laureate has claimed.
Christopher Pissarides, professor of economics and political science at the London School of Economics and winner of the 2010 Nobel Memorial Prize in Economic Sciences, told CNBC on Friday that the European focus on preventing income loss would play a vital part in the eventual economic recovery.
"The European approach will help the economy better because it's keeping workers and their employers attached to each other, and that will call for a more speedy recovery when the time is ready," he said.
"You don't have workers wandering off doing other things, losing their skills that they will then have to come back and relearn."
Policymakers around the world have rolled out unprecedented fiscal and monetary stimulus measures in a bid to offset the economic impact of government-imposed lockdown measures.
President Donald Trump in March approved a historic $2 trillion coronavirus relief bill that included one-time payments to individuals, loans and grants for businesses to deter layoffs, and strengthened unemployment insurance.
In the nine weeks since coronavirus-induced lockdowns closed large parts of the U.S. economy, 38.6 million American workers have filed jobless claims as companies have been forced to lay off or furlough their workers.
In the U.S., furloughed workers technically remain employees at a company until it decides to reopen — but while they might maintain some benefits like medical insurance, they will not continue to be paid. Instead, furloughed workers are eligible for unemployment benefits, which vary by state.
Lawmakers in Europe have generally taken a more aggressive approach in their response to protecting the labor market from the effects of Covid-19, with many countries introducing wage subsidy programs.
Germany's "Kurzarbeit" scheme allows companies to send workers home or substantially slash their hours, but it keeps them officially employed, with the state funding around two-thirds of their salary even if they are not working. Employees are permitted to work part time, which reduces payroll costs for the government.
France has a similar program in place, with the government paying 70% of employees' gross earnings if their hours are reduced or cut off because of the coronavirus crisis.
In the U.K., the government is paying 80% of furloughed workers' income up to a maximum of £2,500 ($3,086) a month, while the Irish government is covering up to 85% of furloughed employees' pay.
More than 30 million workers in Europe's five largest economies — Germany, France, the U.K., Italy and Spain — had turned to the state for wage support by the end of April, according to the Financial Times.
Pissarides, a British-Cypriot economist, claimed on Friday that by focusing on protecting livelihoods, European policymakers would, to some extent, also bolster morale within the labor market — which would help to kickstart the region's economic recovery.
"If, despite all the things going on around us with this pandemic, you still have your job and employers have stayed in touch even if you cannot go to the office, these are very important things for when the recovery comes," he said.
"So I have to say, the European approach is the one that I would definitely have chosen."
Gross Domestic Product (GDP) for the European Union shrank by 3.3% in the first quarter, the OECD said on Tuesday, whereas U.S. GDP fell by 1.2%. On an annualized basis, U.S. GDP fell 4.8% in the first quarter, according to government numbers released in late April.