Germany’s “traffic light” coalition government is preparing for a massive overhaul of the current unemployment benefit system, replacing the long-term unemployment benefit Hartz IV with a new “citizen’s allowance” (Burgergeld). Here is what has been announced about the reform so far.
Germany’s unemployment benefit system to be overhauled
Last week, Federal Labor Minister Hubertus Heil presented his plans to restructure unemployment benefits from January 1 next year. The change will see the controversial Hartz IV unemployment benefit (Arbeitslosengeld II) – which was introduced by the SPD in 2002 – replaced by a new allowance called Burgergeld (citizen’s allowance).
The reform is centered on the idea that the unemployment support system should be fair and encourage people who have lost their jobs to return to work, rather than treating them harshly or even punishing them by reducing their benefits – a practice known as “penalties” under the current system. Factions within the SPD have long worried about this hardline approach, seen by many as contrary to the party’s philosophy of a benevolent welfare state.
“We are replacing basic security with a new citizen income, so that the dignity of the individual is respected and social participation is better promoted,” said the Burgergeld the bill states.
Job seekers will be better treated under the new system
From 1 January 2023, the approximately 3.5 million Hartz IV applicants in Germany will therefore be transferred to the new Burgerld system. Heil’s vision is to create a fairer system where job seekers are treated with more compassion and generosity, allowing them to focus on getting back to work as quickly as possible.
Housing and assets can be excluded from calculations for the first two years
In practical terms, this will entail certain changes in the way a claimant’s assets are treated for the calculation of benefits. For the first 24 months, housing and up to €60,000 in assets will be excluded from the calculations, meaning people won’t have to worry about being asked to use their savings or move house to receive benefits. According to Heil, this should eliminate additional concerns and allow claimants to focus on finding a job.
Students, trainees and school children will also be able to earn up to 520 euros per month in addition to the basic income, without this affecting their eligibility.
Sanctions remain but ‘period of confidence’ applies
On top of that, Heil wants to reform the controversial sanctions system. Currently, anyone who fails to live up to expectations set by the Job Center – for example by attending appointments or applying for recommended jobs – can have their benefits reduced by up to 30% .
The new system will allow beneficiaries to benefit from a six-month “confidence period” when they start receiving Bürgergeld. During this time, payments cannot be cut. After the end of this grace period, sanctions will exist, but the culture around them will be different: appointments at Pôle Emploi will still be compulsory – and sanctions will exist for people who repeatedly miss them – but they should be made more flexible and informal, and therefore easier to attend.
Other changes to the system include creating more opportunities and incentives to pursue education and training. Basic benefit rates are also expected to be increased from 1 January 2023, to reflect the high rate of inflation in Germany.
The bill still needs to be approved by the Bundestag and the Bundesrat
The changes have been welcomed by social organizations in Germany, who say the time has come to overhaul the country’s unfair and outdated unemployment support system.
However, questions and problems still remain open among the partners in the coalition government: the Greens have long called for the total removal of sanctions, while the FDP insists that the principle of solidarity is an essential element of the system. There are also question marks over how the whole system will be funded.
The bill will be submitted to the cabinet in September, before being submitted to the Bundestag and the Bundesrat for final approval. Pending possible modifications, it should come into force from January 2023.