_ Dr. Ulrich van Suntum, honorary professor, University of Münster, former Secretary-General, German Expert Council for the Assessment of Overall Economic Development (SVR). 12 November 2022.*
When the Schröder government (SDP) introduced the Hartz reform in 2005, this was considered great progress. Unemployment and social assistance were combined, mini-jobs created tax-privileged positions for small additional income, and the employment offices were to become job agencies. Much of it was successful, but the euphoria is long gone. In the meantime, “Hartz IV” has long become synonymous in German society with poverty, exclusion and social injustice.
Left-wing parties and social organizations have done a great job with their constant propaganda fire against the reform. “Unconditional basic income” for everyone is now their wishful thinking. It hasn’t gotten that far yet. But with the „Bürgergeld” “(Citizens’ income) planned from January 2023, the traffic light government (SPD, Greens, FDP) is going a bit in this direction.[1]
What exactly is planned? At the forefront of the debate is currently the raising of the standard rates for subsistence. They are to be adjusted more quickly to the rate of inflation in the future and will already rise by 12 percent in 2023. For an individual, this means an increase from the previous 449 to 502 euros per month. But the rates for all other members of a benefit community are also raised accordingly.
A family with three children of different ages, for example, will then have a net monthly social transfer income of 2,039 euros instead of the previous 1,825 euros. In addition – as before – the rent and the full heating costs are paid by the state. However, this does not apply to other energy costs, such as electricity. Nevertheless: Such an amount a working father has to earn on the normal labour market first!
Financed from taxes
Furthermore, the draft law of the traffic light government provides for a doubling of the so-called protective assets. This means that part of personal savings that does not have to be used to support oneself despite receiving benefits. For the head of a household, it increases from 30,000 to 60,000 euros, and an additional 30,000 euros is added for each additional household member. Our example family of five could therefore have 180,000 euros in the bank account and would still be fully financed from taxes without any personal contribution.
The Federal Court of Auditors rightly criticized this as inappropriate and unfair to taxpayers.[2] Although the grace period is only two years, the protective assets that apply afterwards will also be higher than before in the case of the Citizens’ income.
The third – and probably most critical – key point of the reform is a kind of grace period for new beneficiaries. It is planned to be six months, during which sanctions for misconduct will largely be waived. This includes, for example, not accepting a reasonable job or staying away despite being summoned to a job interview. In addition, you don’t have to move out of an apartment that is actually too big in the first two years. Even the correspondingly high heating costs are fully reimbursed. In this way, those affected should “have a clear head” for the job search, which they alleged will then pursue intensively, at least in the opinion of the traffic light coalition partners.
Criticism from economists
However, criticism is pouring down on the last point in particular. And not only from the opposition, but also from the ranks of science. Because in contrast to a study by the Berlin INES Institute that was recently published in the media, the vast majority of scientific studies show that the Hartz IV sanctions are working after all.[3] It is true that they have been used quite seldom so far, probably also because of frequent legal resistance. But the mere possibility of suffering financial losses in the event of a proven unwillingness to work already ensures more cooperation.
Especially in the first few months of the transfer receipt, it is of crucial importance to find a job again quickly. Because all studies agree on this: the longer unemployment lasts, the smaller the chance of getting a foothold in the primary job market again. Because then both qualifications and motivation drop, and people begin to settle into a permanent relationship with transfer. It is not for nothing that we currently have almost 900,000 long-term unemployed, although workers are desperately needed everywhere.
It is true that in Germany, as a working person, you always earn a little more than when you are on Hartz IV. This is ensured by the so-called employment allowance, a kind of supplementary social assistance if your own wages are not sufficient. But in reality, no one is applying for that. In addition, the guaranteed income advantage of around 350 euros per month is certainly not sufficient to motivate a previous Hartz IV recipient to work 40 hours. However, the fault does not lie with the “lazy unemployed”, but with the system. And the Citizen’s income increases the problem even further, since it again significantly reduces the incentive to escape the poverty trap. It goes therefore “completely in the wrong direction”, as the Institute of German Economics also diagnoses.
Citizen’s income for something in return?
But how could it be made better? A reduction in the standard rates in order to create more personal incentive to work is politically hardly enforceable. But the opposite way about (even) more generous opportunities for additional income is also misleading. Our above model family can already increase their net income by a further 600 euros if both spouses each earn 1,000 euros gross. With the future citizens’ income, even 780 euros will remain.
This means that the incentive to leave the system in favour of regular work is becoming less and less attractive. In addition, those in full employment will ask themselves why they still go to work at all. In the end, almost everyone would be in transfer terms.
It is more promising to stick to generous standard rates, but to demand something in return. Why shouldn’t healthy people, who have all daytime and are fully funded by the taxpayer, do at least part of the day community service? There is enough demand for this in the state and in non-profit organizations, perhaps even in jobs that correspond to held qualifications.
One could also consider employing people who are able to earn basic income as temporary workers in the private sector. The salary would then first go to the state, which in turn would share it with appropriate deductions. But such proposals are the devil in Germany – if only because the AfD party has proposed a concept going in this direction.
Notes
[1] Deutscher Bundestag (2022). Bundestag stimmt für Bürgergeld-Gesetz. URL: https://www.bundestag.de/dokumente/textarchiv/2022/kw45-de-buergergeld-917430
[2] Junge Freiheit (2022). Bundesrechnungshof zerpflückt Bürgergeld-Pläne der Ampel. URL: https://jungefreiheit.de/politik/deutschland/2022/buergergeld-rechnungshof/
[3] Serafin S. (2022). Bürgergeld: Wird sich Merz auch diesmal weichklopfen lassen? Junge Freiheit. URL: https://jungefreiheit.de/politik/deutschland/2022/buergergeld-rechnungshof/
* Translated and republished from the original: Van Suntum (2022). Bürgergeld: Das System neu starten Junge Freiheit. URL: https://jungefreiheit.de/debatte/kommentar/2022/buergergeld/