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Poor caught in welfare trap, OECD warns

The Local · 28 Sep 2010, 10:46

Published: 28 Sep 2010 10:46 GMT+02:00

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As the war of words over Hartz IV continued, Herwig Immervoll, senior economist at the Organisation for Economic Co-Operation and Development, told Tuesday’s edition of Frankfurter Rundschau that labour and welfare policies were stifling the motivation of the long-term unemployed to find work and creating a welfare trap.

“Since the mid-90s, Germany has pushed low-earning jobs too strongly,” Immervoll said. “The long-term unemployed still have a comparatively small financial incentive to accept a living-wage job.”

The government’s announcement on Sunday that it would lift the monthly payment for recipients of Hartz IV long-term unemployment benefits by just €5 has led to a storm of criticism, with opposition parties, unions and welfare advocates attacking the plan as unethical.

But the OECD said that low-paying jobs and the narrow gap in financial rewards between welfare and work were entrenching poverty, rather than low benefits.

By international standards, the risk of poverty in Germany was “very high,” Immervoll said.

Under the current system, people on Hartz IV lose a large chunk of their benefits when they make additional income through part-time or casual work. Immervoll said the government urgently needed to change this model, which meant the long-term unemployed had little incentive to accept work that pays a living wage because the rewards are not sufficiently higher than welfare payments to make the work worthwhile.

The government has set up a working group that will make recommendations in October for a new model to determine how additional earnings should affect welfare payments.

Chancellor Angela Merkel’s centre-right coalition government announced Sunday it was raising the monthly Hartz IV payment to adults who are unemployed long-term from €359 to €364. The change came in response to a Constitutional Court ruling in February that ordered the government to revise the way the benefit rates were calculated in a more transparent way.

On Tuesday, the battle over Hartz IV continued, with Foreign Minister, Deputy Chancellor and leader of the pro-business Free Democrats, Guido Westerwelle, defending the plan and urging the opposition parties not to block it in the upper house of the parliament, the Bundesrat.

“We need a fair balance between those who are dependent on help and those who actually make this help possible through their work and their taxes,” Westerwelle told daily Bild.

The centre-left opposition Social Democrats are vowing to examine the plan carefully to see whether it is constitutional.

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The head of the Christian Democrats’ employers association, Karl-Josef Laumann, said he was certain that the new payment rates conformed to the constitution.

“I believe the calculations of the Federal Statistics Office,” he told the Frankfurter Rundschau.

When the Constitutional Court ordered the government to review Hartz IV, its concern was not with the size of the payments per se, rather with the way in which they were calculated. Payments must be transparently calculated based on need, the court said.

The Local/DAPD/dw

The Local (news@thelocal.de)

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Your comments about this article

12:01 September 28, 2010 by pepsionice
My old neighbor in Germany....was a married guy with three kids. Around nine years ago, he had a slight injury and took almost six months of sick leave. When the doctor refused to sign off on anymore....he went back to work, and got injured again on the second day of work. This episode last six weeks, until the doctor refused to grant anymore sick leave. When he returned....the boss fired him on the first day back at work.

This started a period where my neighbor claimed he had mental stress from the harsh work environment of garbage collection (his occupation as a driver). They sent him off to a 3-star resort for two weeks to chill out (gov't cost). When he came back, he sat around for three months. They then tried to hand him various job opportunities, and he just couldn't make the appointments. So they tried a retraining class for about one week (it was supposed to be several months but he just wouldn't show up).

Since that period, about every six weeks, they hand him a job offer. He'll show up and usually work one day, then launch into an injury. The boss fires him as soon as he walks out of the door.

As part of the Hartz IV crowd, The gov't pays for the apartment (they tell him the size he can have and he's limited to that). He gets enough to pay for food and very basic essentials. His wife collects disability of around $1,200 a month and that's his real pocket money for internet and his cellphones (he had three at one time).

As each kid turned 17, they packed up and left. He has one daughter left. When she leaves....he'll be forced into a very small one-room apartment. He's satisfied with that strategy entirely. He's 50 years old this year, and intends to spend the rest of his life in this fashion.

A guy I worked with....had a brother-in-law that ran the same scheme at age 35. His wife packed up and left after two years when she figured out his intentions. There are tens of thousands of folks in Germany like this. The government won't touch them or send them to forced labor. Go into any pub and the locals will point out the cases in the local area. This is why there's such hostility over welfare in Germany.
14:31 September 28, 2010 by DanielAl
The wrongest thing in this case is that the people who realy need help cann't receive it.
15:19 September 28, 2010 by freechoice
Tell it to the 1 billion people going hungry everyday...
17:35 September 28, 2010 by goody
They should do what they do in some states in north america work for your check instead of letting them do nothing they feel better mentally also .And in some cases you will always have those who do not want to do anything but sit on there butts what can you do.
05:27 September 29, 2010 by Talonx
I'll believe this crap when there is a systemic permanent jobs surplus, until then the OECD and all 4 of you don't seem to grasp the concept that there are actually not enough jobs for people. You also don't seem to grasp that any actual research that has been done shows the exact opposite.
09:41 September 29, 2010 by DoubleDTown
At Talonx, liberalism is an ideology not a commonsense baseline that any sane and decent person should accept. That's why lots of sane and decent people who don't share your ideology aren't excited that their tax money supports beer, cigarettes, cell phones, soccer tickets, etc. for people that don't have jobs. I'd rather that money was spent on other public-interest items like infrastructure and schools.

Further, I certainly would have enjoyed my youth more if I spent less time studying and more time drinking beer, chasing girls, and hanging out in front of a Getrankemarkt, but fortunately I made something of myself. When people fail to apply themselves enough to get a Hauptschule diploma it's no surprise they don't find an apprenticeship.
12:10 September 29, 2010 by Talonx
@ DoubleDTown

My statements have nothing to do with ideology. Sociological and psychological research has shown time and again (I can provide plenty of articles to you if you would like) that most people act in good faith (in all realms of society) and that most people do not want to be poor no matter how good the perks are. These are just facts, the only people that argue these facts are microeconomists and libertarians with an agenda.

What part of this do you people not get.

The current economic system has built in unemployment, there are not jobs for everyone. This is a novel situation for human beings throughout most of our history everyone was 'employed' in useful activities, but now people are literally forced to be idle. They do not want to be idle, but they have no choice, what's worse, they are villified for being idle.

I've provided proven facts if you want some research to back it up by all means ask and I can email many articles. The real problem is that people at the OECD and in governments around the world like to surround themselves with yes-men instead of actual scientists and researchers that have done heaps of work on these issues. What's even more rediculous is that you people unquestioningly take them at their word.
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