Social reform: Citizens’ income is coming – what’s in it?

Sanctions, protective assets, grace periods – the political dispute over citizen income has been settled. Social reform encompasses much more than increasing standard rates. What’s in it – and what’s left of the old Hartz IV system?

the initial situation

The tough political dispute over citizen income has been settled, and the social reform can come into force on January 1st. This means that all people who are currently receiving unemployment benefit II can expect to have around 50 euros more in their account each month. But the citizens’ income is more than an increase in the standard rate. It’s a system change, says the SPD – and also celebrates a little overcoming its own trauma: the end of Hartz IV. The Union, on the other hand, praises itself for having prevented the system change and speaks of an “update” of Hartz IV.

The bottom line is that if, after the mediation committee, the Bundestag and Bundesrat also agree to the amended draft law on citizen income on Friday, the way will be clear. Citizens’ money is coming – why does it need the reform and what’s in it?

Why should citizen income replace the Hartz IV regulations?

The introduction of a citizens’ allowance is one of the largest social reforms in the coalition agreement of the traffic light government. It is intended to replace the Hartz IV regulations that came into force 18 years ago and were initiated by the then Chancellor Gerhard Schröder (SPD). In the new regulation, the focus is more on “supporting” people than on “demanding”. The reform affects almost five million benefit recipients and 405 job centers with almost 75,000 employees.

Who receives the citizen money?

Citizens’ income is a basic security benefit for job seekers. It is intended to ensure that the necessities of life can be guaranteed. Anyone who was previously entitled to unemployment benefit II or social benefit will also be entitled to citizen benefit in the future. New applications do not have to be submitted.

What are the new rule rates?

The standard rate should be raised, that was undisputed between the parties. As of January 1, the standard rate for single adults is to rise by EUR 53 from the current EUR 449 to EUR 502 per month as planned. For adults under 25 who still live with their parents, the amount will increase to 402 euros, for young people between the ages of 14 and 18 it will be 420 euros in future, and for children between the ages of six and 14 it will be 348 euros. For children under the age of six it is 318 euros.

What about sanctions as leverage?

The original plans of Federal Minister of Labor Hubertus Heil envisaged that, unlike with Hartz IV, there should be a six-month “trust period” at the beginning of receiving citizen benefits. In it, those affected only threatened limited benefit cuts by the employment agencies. The Union saw this as undermining the principle of “promoting and demanding”. The “trust period” is now gone. Comprehensive sanctions should be possible from day one if those affected do not take up a reasonable position. Benefits can then be reduced by ten percent the first time – by 20 percent in the event of a further breach of duty within a year and by 30 percent in the event of a repeated breach. That is also the maximum: According to a Karlsruhe judgment from 2019, performance reductions of up to 30 percent are only permissible. At that time, it still prohibited possible reductions in remuneration of 60 percent for the second breach of duty per year as unreasonable.

How high are the savings?

There are also significant changes to the original traffic light plans in terms of the planned protective assets, which are not affected when the basic income is received in the early days. It is reduced from 60,000 euros to 40,000 euros for the actual benefit recipient. It is now 15,000 euros for each additional household member, Minister of Labor Heil had planned 30,000 euros. The deadlines have also been shortened: the financial reserves of the recipients are only spared in the first year. Two years of grace period were planned from the traffic light. The same applies to the appropriateness of the apartment: In the first year, the job centers do not check whether an apartment is appropriate. The reasoning is that people who are unemployed and have to look for a new job should not also have to worry about their apartment. After that year, the accommodation must be adequate.

Does it stick to the principle: the main thing is a job?

No, the so-called placement priority is no longer applicable. This is also one of the reasons why the traffic light parties see the core of the citizen income reform saved despite the many cutbacks. Unlike Hartz IV, the citizen’s allowance is intended to focus on long-term employment opportunities instead of quick mediation in temporary jobs. This applies in particular to the time when further training is being carried out. In addition, an additional 150 euros are paid for participation in qualification-related further training courses. And for measures that provide particular support in finding your way back to work in the long term, there is a citizen’s income bonus of 75 euros per month. In addition, if necessary, a vocational qualification can be obtained in three instead of two years.

What about additional income opportunities?

Here, too, everything has remained as originally planned: Those who earn between 520 and 1000 euros should be able to keep more of their income in the future: the allowances in this area will be raised from 20 percent to 30 percent. For people under 25, there is an allowance of 520 euros for three months between leaving school and starting training – just like with the Federal Volunteer Service.

What is the next step?

The Bundestag and Bundesrat will vote on the amended draft law on Friday. Broad agreement is expected here. Then it’s the job center’s turn. You have to get the payment of the higher benefits up and running technically so that everyone affected really has the additional 50 euros in their accounts by January 1st. The second and far more comprehensive part of the reform will not start until July – more intensive support for the long-term unemployed. In the future, it should be individually explored which qualifications or retraining those affected need to do so that they can get back on their own two feet. The priority of placement in work is to be abolished – and with it the much-criticized “revolving door effect” from the job center to the helper job and back.