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Do Germany’s unemployment benefit proposals go far enough?

Germany is debating the proposed reforms to the unemployment system, known as Bürgergeld. But with the cost of living spiralling upwards, some argue that they don’t go far enough, while others say it could encourage some people not to get a job.

A hand holds various euro cent coins.
A hand holds various euro cent coins. Photo: picture-alliance/ dpa | Karl-Josef Hildenbrand

On January 1st next year, Germany will launch its shake-up of the unemployment benefits system, replacing unemployment benefit II (commonly known as Hartz IV) with Bürgergeld – citizens’ income or allowance.

The new scheme proposed by Labour Minister Hubertus Heil (SPD) is considered the biggest social reform in almost two decades. And he was given the green light from the German cabinet on his draft bill on Wednesday, moving the plans forward. 

Social welfare associations, business experts and industry associations have been voicing their options on the proposals too. For some, the plans go far too far, for others not far enough.

What are the key proposals?

The core concept of the benefits shake-up is to make the system fairer and to move away from the harsh approach that the previous Hartz IV system was associated with.

To this end, claimants who don’t cooperate with the job centre will face fewer sanctions than in the current system and the options for reducing benefits will be severely restricted. In future, for example, only limited reductions in benefits will be possible in the first six months if someone misses appointments at the job centre. Recipients will also not have to worry about having to move to smaller accommodation or having assets below €60,000 being touched by the state.

READ ALSO: Bürgergeld: What to know about Germany’s unemployment benefits shake-up

According to the new plans, the monthly standard rate for single adult claimants will also increase from €449 to €502. The Labour Minister also wants to change the method by which the citizens’ income will be adjusted to inflation in the future: so that the rates would be based on the upcoming rate of inflation, rather than the current system whereby the adjustment happens retrospectively.

Why are people criticising the proposals?

When the Labour Minister announced the new plans for the unemployment benefit changes back in July, the reaction from social welfare organisations was largely positive.

But now, with a recession on the horizon and energy costs going through the roof, the plans are seen by some as not going far enough.

In particular, the news that the monthly rates will be increased by only €50 a month has been met with criticism by social welfare associations.

The managing director of the Joint Parity Association, Ulrich Schneider, called the increase a “bad joke”. Referring to a study on the effects of the Hartz IV system – according to which almost half of the households surveyed don’t manage to get by on the benefits payments, he said: “People are being driven into debt because Hartz IV is definitely not enough.”

READ ALSO: ‘It’s going to be a bleak winter’: How people in Germany are coping with the energy crisis

Chairwoman of the Social Association of Germany (SoVD), Michaela Engelmeier, told the Berliner Morgenpost that she was “disappointed” by the proposed monthly rate. She demanded that the rate be increased to €650 from January 1st and that recipients get an extra €100 immediately.

“Those affected are already suffering from exploding prices and ever-increasing inflation,” she said.

Meanwhile, deputy leader of the Die Linke (The Left party), Susanne Ferschl, called the citizens’ income “poverty by law”. She told the Augsburger Allgemeine that the planned increase only compensates for inflation-related additional costs and that the standard rate should be increased by €200 plus electricity costs.

What does the business community say about the Bürgergeld plans?

On the other side of the fence, some business leaders have been slamming the reforms, saying that the changes will reduce the incentive for claimants to find work.

The most prominent of these is the president of the Skilled Trades Association, Hans Peter Wollseifer. He told the Rheinische Post: “The improvements for recipients in terms of the sheltered assets, the elimination of sanctions, the significant increase in the standard rate, the complete assumption of the sharp rise in heating costs – all of this will mean that for more people than before, not working will be more worthwhile than working.”

This opinion has been widely mocked online, with commentators pointing out that €502 is hardly a desirable monthly income.

Meanwhile, the social policy spokesman for the CDU/CSU parliamentary group, Stephan Stracke has also claimed that the changes will disincentivise workers, telling the Rheinische Post: “With Bürgergeld, not working becomes significantly more attractive.”

“This leads to the fact that some recipients of Bürgergeld are better off than some people who work and thus finance this social benefit with their tax money. This is a justice issue,” he said.

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6.6 million people ‘set to benefit from €12 minimum wage’ in Germany

According to a new study, Germany's new €12 minimum wage will benefit more than 6.6 million people when it comes into force on October 1st.

6.6 million people 'set to benefit from €12 minimum wage' in Germany

Currently, around 6.64 million workers in Germany earn less than €12 gross per hour, according to new statistics published by the Hans Böckler Foundation’ Institute of Economic and Social Research (WSI), a trade union-linked research foundation. 

Among those now benefiting from the increase, 2.55 million are in full-time employment, according to the WSI. Nationwide, just under one in ten full-time workers and around 20 percent of part-time workers earn less than €12 per hour. Among mini-jobbers, the figure is as high as 80 percent.

Under a flagship policy of the Social Democrats (SPD), Germany’s national minimum wage is set to increase from €10.45 to €12 per hour on October 1st. The last increase was on July 1st this year. 

READ ALSO: ‘Biggest pay rise of their lives’: Germany hikes minimum wage to €12

The move is “a ray of hope in these difficult times” that will help low-paid workers handle the rising cost of living, Stefan Körzell, an executive board member of the German Trade Unions Federation (DGB), said on Tuesday. 

However, the DGB said more controls were needed to ensure that workers actually receive the statutory minimum wage. According the trade unions, employees across numerous sectors are currently earning less than the legal minimum. 

“The federal government must significantly increase the staffing of the responsible authority, Finanzkontrolle Schwarzarbeit,” Körzell said.

In addition to the wage hike, unions are also calling for more relief from the government to help cushion the impact of the rising cost of living. 

In particular, they are advocating for energy price flat rate and an energy price cap that could be paid for by skimming off the “excess profits of the large energy and mineral oil companies”, Körzell explained. 

From Wednesday, the DGB will run information campaigns on the minimum wage increase at more than 230 railway stations and market places throughout Germany.

READ ALSO: EXPLAINED: Will Germany set a gas price cap and how would it work?