In Germany, the citizen's allowance must soften the compensation scheme for long-term unemployment

German Labor Minister Hubertus Heil in Berlin on September 14, 2022.

It is one of the biggest social reforms of the decade in Germany, one of the most emblematic for Chancellor Olaf Scholz. Citizen's allowance (Burgergeld) must make us forget a great trauma of its political formation, the Social Democratic Party (SPD): the labor market reforms adopted between 2002 and 2005 by the last SPD chancellor, Gerhard Schröder. This is a major overhaul of the aid and compensation system for the long-term unemployed. The text was adopted by the government coalition on Wednesday, September 14, and should, in principle, after passing through Parliament, come into force in early 2023.

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The new law definitively buries the so-called “Hartz IV” system, the most famous and hated of the Schröder reforms. It was she who had deeply divided the SPD from 2005, by reducing the duration of unemployment benefit to twelve months, after which the unemployed person only receives a flat-rate social minimum, disconnected from his previous income, regardless of the length of his career.

Today, Hartz IV amounts to 449 euros per month for a single adult or a single parent without activity. “Reasonable” rent and heating costs are also covered, as well as health insurance. But the allowance can be reduced if the household has savings or receives additional income.

“Encourage and demand”

It is the finicky examination of the household's resources, and especially the financial sanctions in the event of non-respect of the obligations vis-à-vis the employment agency - such as that of accepting all jobs deemed "reasonable". » or having to move in the event of overpriced accommodation – which are widely considered to be humiliating for recipients. The term “Hartz IV” has come into common parlance as a synonym for sanctioned poverty. It is this aspect of the system that the new reform is attacking. In addition to a revaluation of the allowance to 502 euros per month for a single adult and a faster adjustment to inflation, the system of sanctions will be lightened.

The question of whether to sanction the unemployed in the event of non-cooperation with the employment agency is one of the most discussed points of the reform, in recent months, within the tripartite government coalition (Social Democrats, Greens and Liberal Democrats of the FDP). The Greens defended the principle of the complete abolition of sanctions, which would have made the citizens' allowance a quasi-equivalent to the universal income. This point was ultimately not retained, the Liberals having refused this "pass through the back door" to a universal income paid without job search conditions, at a time when one in two companies is struggling to recruit in Germany.

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