Successor to Hartz IV: What is still controversial when it comes to citizen income

Citizens’ allowance is intended to replace unemployment benefit II – and focus more on qualifications, cooperation and trust. But there is criticism of the plans of Labor Minister Heil. What is planned – and where are the problems?

Why does the traffic light want to reform unemployment benefit II?

During the election campaign, all three parties in the traffic light coalition had already reported a need for revision: Unemployment benefit II (Hartz IV), introduced under Chancellor Gerhard Schröder (SPD) in 2005, is not only getting on in years – it has long been considered in need of reform. Not only because the Federal Constitutional Court called for corrections in 2019, for example to treat young people more harshly in sanctions than older age groups. And: There may be sanctions, but in moderation. Because it is about the subsistence level protected by the Basic Law, i.e. a question of human dignity, the sanctions must not go too far.

But there is more to it: Labor market research showed that even the Hartz IV system with the principle of “support and challenge” was not able to significantly reduce the group of long-term unemployed. That is around one million unemployed despite favorable labor market developments. As early as 2015, the Institute for Labor Market and Occupational Research (IAB) of the Federal Employment Agency warned of the need for reform in the promotion of the long-term unemployed.

How does citizen income differ from Hartz IV?

In the future, the job centers should be more generous with the living situation of benefit recipients so that they can focus on getting back on the job market as quickly as possible.

In concrete terms, this means: In the first two years of receiving citizen’s income, beneficiaries should be allowed to stay in their apartments in any case, these are not included in the calculations. After that, as before, it should also be checked whether, for example, the housing situation is appropriate. In addition, assets of up to 60,000 euros should not be touched.

Heil’s proposal to reform the basic security system also includes more opportunities and incentives for further training. Among other things, people should be given more time to acquire a professional qualification if necessary: ​​three years instead of the previous two. The further training bonus is to be given an unlimited period of time, and coaching is to become a new “regulatory instrument for holistic care”.

Minister of Labor Heil speaks of a system change – why?

Heil relies more on the principle of trust, qualification and further training than the Hartz system has done so far. A six-month “trust period” should apply from the time the citizen’s allowance is received, during which reduced benefits are excluded. Only those who do not cooperate with the job center at all have to fear negative consequences. Even after this period, there should be a period of trust without a fixed minimum duration – job centers can only set binding obligations to cooperate in the event of “breaches of trust”.

And: The previous “placement priority” when dealing with the long-term unemployed should be abolished. This means that training and professional qualification-related further training are possible before a temporary job. Citizens’ income recipients should not have to take the first job that comes along for which they are overqualified and prefer to gain further qualifications. For this purpose, for example, the further training bonus should be given an unlimited period of time. “People get the time they need to learn,” says the key issues paper from the Department of Labor.

What will happen to the controversial sanctions?

In the past, there had always been great criticism of the sanctions that Hartz IV recipients had to fear if, for example, they did not comply with agreements with the job center. With the votes of the traffic light factions, the Bundestag had already suspended the previous practice of sanctions from mid-May – in anticipation of the citizens’ income reform. In the last federal election campaign, the Greens called for the sanctions to be completely abolished. That shouldn’t happen now.

But the sanction options are reduced in the Labor Minister’s draft: young people no longer have to fear greater reductions in performance than people over 25 years of age. The principle of “promoting and demanding” is not completely abolished. However, Hubertus Heil’s proposal provides for a reduction in the previous sanction options. But: “For people who chronically don’t keep appointments, it can still have legal consequences,” said the SPD Labor Minister. The FDP considers the instrument very important to be able to continue threatening sanctions. “It is a question of respect that it must continue to make a difference if a small minority does not follow the rules,” wrote FDP Vice Johannes Vogel in a guest article for the “FAZ”.

Although the citizen money is in the coalition agreement, there is a dispute about it – why?

In view of the current shortage of workers and skilled workers, the FDP supports Heil’s “clear focus on training and further education” as well as more accommodating additional income rules. But there is dissent between the SPD, the Greens on the one hand, and the FDP, both on the future scope of the sanctions and on the recalculation of the standard rates, as proposed by the Minister of Labor. The coalition agreement does not contain any agreements on the calculation.

So far, there are completely incompatible positions between the SPD and FDP on the question of whether the Hartz IV successor will receive a new calculation basis, which would lead to a significant increase: that would be an increase of around 40 to 50 euros compared to the current Hartz -IV standard rate of 449 euros per month. Heil is thus responding to the demands of the social associations. They criticize that the subsistence level is already too tight without the war-related price increases in the cost of living and does not compensate for inflation. Heil argues that the previously applicable standard adjustment of the standard rate always lags behind the current price increases and cannot compensate for them.

The FDP is against putting additional money into a flat-rate increase in the standard rate for all recipients of citizen income. After presenting Heil’s key points last week, the FDP immediately made it clear that they would not agree to his new calculation method. She points out that the standard rates would in any case be adjusted annually to reflect wage and price developments. The future citizens’ allowance should be “an activation and not an unconditional basic income,” said FDP leader Christian Lindner.

What do the opposition and social organizations say?

CDU party and parliamentary group leader Friedrich Merz is skeptical: He is “very curious whether there are any incentives to return to the labor market”. CDU Vice Carsten Linnemann already sees a complete departure from the principle of “support and challenge” in the key points presented. The traffic light coalition is making work even more unattractive despite two million vacancies – the citizens’ allowance proposed by Heil is misunderstood social justice.

Left parliamentary group leader Dietmar Bartsch called on the traffic light coalition to stand behind Labor Minister Heil’s concept and not to give in to the FDP’s demands for standard rates. AfD deputy parliamentary group leader Norbert Kleinwaechter considers the basic income concept to be anti-social and advocates an activating basic security with an incentive to work: “The basic income makes fun of those who work, ignores the needs of the needy and only serves the interests of those who are not taken care of by the welfare state should.”

The social organizations do not consider the reform to be a big hit, at most “a step in the right direction”. They welcome the fact that the long-term unemployed are better supported by eliminating priority placement and no longer being forced to take any job. The accompanying outreach coaching for job seekers is also useful.

But they are calling for a clearer increase in the standard rates: “Without an increase, people will find themselves in existential emergencies, says Diakonie Deutschland, for example. The federal government urgently needs to make improvements here.

What is the timetable for introducing citizen income?

The goal of the Minister of Labor and Social Affairs is the introduction of the new citizen’s income on January 1, 2023. This is also supported by Federal Chancellor Olaf Scholz. Heil considers his basic income concept to be largely unified within the traffic light coalition. Details are now being clarified in the cabinet and departmental vote – and probably also in the next coalition committee. The recalculation of the standard rates planned by Heil must be discussed in parliament in the autumn, after which the new federal budget will also be finalized in parliamentary deliberations.

The law is subject to approval – and must therefore also be supported by the majority of the Bundesrat. So Heil will still have to campaign for his reform in the Union and the federal states.