Citizens’ money, the successor to Hatz IV, has been in existence since January 2023. And so has the debate about whether the looser rules of the reform will lead to more unemployment. Now there is the first study that examines the consequences of citizen’s money.
Since January 1, 2023, German unemployed people no longer receive Hartz IV, but instead receive citizen’s benefit. For the traffic light coalition, this marked the biggest social reform of its term in office. However, the introduction was highly controversial. Critics, especially in the CDU/CSU, warned that citizen’s money could reduce Germans’ motivation to work and increase the incentive for immigration into the welfare system.
The criticism is mainly based on the relaxed conditions compared to Hartz IV: the sanctions have been weakened, the standard rates have been increased, and the state even covers the housing costs in the first year of receipt. In addition, recipients of citizen’s money are allowed to have higher personal assets.
Until now, it has been difficult to substantiate the assumption that citizen’s benefit ultimately leads to higher unemployment rates due to a lack of reliable scientific evidence. Now, however, the Institute for Labor Market and Occupational Research (IAB) has carried out a study that examines exactly this connection.
5.7 percent fewer job starts from basic security
The core finding of the study carried out by IAB economist Enzo Weber: Since the introduction of citizens’ money, 5.7 percent fewer people with basic security have taken up a job. Overall, however, job openings fell by 20 percent. This shows that other reasons such as the economic downturn played a larger role, said Weber.
Compared to the star says the researcher: “The work requirements are overall too weak.” The idea of reform is correct in itself. Now you have to make sure that you bring them together with more commitment and work.
“The standard rate increase was basically okay. It is defined as the basic minimum and you have to stick to it.” The problem is the adjustment mechanism to inflation. As a result, services increased by around 12 percent last year. This year they will fall again due to lower inflation. “This back and forth is unfortunate and irritating.” Weber suggests adapting the mechanism.
Regarding the sanctions, Weber says: “The sanctions have already become very weak.” Research has shown that sanctions primarily have a deterrent character. This means they can influence behavior in advance. However, if the pressure on an unemployed person is increased too much, this poses risks: he takes on a bad job, which he soon loses, and in the end becomes completely alienated from the labor market. Weber therefore advocates for longer, moderately severe sanctions that can be lifted if the unemployed person cooperates again.
Long-term unemployment is explosive
Weber particularly emphasizes the problem of long-term unemployment. “If the trend continues over the years, the number of those who remain in basic security will add up. Unemployment will become established.” The right size is required, especially when dismantling them. If sanctions are imposed, they should be imposed over longer periods of time rather than being overly harsh. It also makes no sense to allow a contradiction between placement and further training to arise. “Reducing long-term unemployment requires perseverance,” said Weber.
Long-term unemployment is currently one of the major problems in the German labor market. Although there are a large number of vacancies available and many companies complain about a shortage of workers, on the other hand, almost a million people are without a job for more than a year – and are therefore considered long-term unemployed. Many of them are older, and poor or outdated qualifications are often an obstacle to taking up work. The CEO of the Federal Employment Agency, Andrea Nahles, recently spoke of entrenching tendencies in this area of unemployment.
Source: Stern
I have been working in the news industry for over 6 years, first as a reporter and now as an editor. I have covered politics extensively, and my work has appeared in major newspapers and online news outlets around the world. In addition to my writing, I also contribute regularly to 24 Hours World.
