German government plans major overhaul of Hartz IV unemployment benefits

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From July this year, the German government will remove controversial penalties sometimes imposed on unemployment benefit recipients, before abandoning Hartz IV altogether in 2023, as part of a major overhaul of the system. Here’s what you need to know.

German government votes to suspend Hartz IV sanctions

From July 1, 2022, until at least July 2023, people receiving basic subsistence allowance in Germany – a kind of income replacement allowance usually granted to the long-term unemployed and often colloquially referred to as Hartz IV – will no longer have to worry about sanctions interrupting the payment of their benefits.

Currently, the principle that people should actively seek a return to work is enshrined in the German social security system. Therefore, anyone receiving benefits must demonstrate their efforts to seek employment and apply for positions recommended by the employment office. .

If these obligations are not met, they can be punished with sanctions – reductions in their social benefits. Sanctions can also be imposed if the unemployed do not maintain regular contact with Pôle Emploi, go on vacation without warning or are late for an appointment.

New rules on sanctions apply until mid-2023

Proponents of the system believe it encourages people to seek work and makes it harder to cheat the system, but the penalties have always been controversial, with critics saying they make life even harder for people who are already in difficulty.

In the context of a growing cost-of-living crisis, it was this more compassionate approach that prevailed. The Bundesrat recently approved an amendment to the Social Code which will impose a one-year pause on most types of sanctions. From July 2022 to at least July 2023, people who refuse a job offer or do not apply for positions will no longer be sanctioned.

Those who miss appointments at the job center without a valid reason can still have their monthly allowance canceled – but instead of the 30% that was previously allowed, the maximum reduction will in future be 10%.

Citizen’s allowance (Burgergeld) to replace Hartz IV

The 2023 date was put in place because the government is actually considering completely overhauling Unemployment Benefit II, replacing it with a new benefit called the Burgergeld (Citizen’s Allowance).

This overhaul is the government’s response to a number of criticisms that have been leveled at the current Hartz IV system, in particular a 2019 Constitutional Court ruling which found that cutting people’s benefits by more than 30% was contrary to the German basic law. They further judged that, while it was fair to apply for unemployment benefits to fulfill certain obligations, many of the penalties to which they were subjected were unfair and disproportionate.

The federal government has said the new system will balance fairer penalties with an appropriate level of accountability for those who receive them. They will take into account scientific evidence and lessons learned during the coronavirus pandemic, when sanctions were temporarily suspended.

According to the coalition, future job seekers will still be asked to sign a “participation agreement” which will specify what is expected of them as recipients of unemployment benefits. Penalties of up to 30% will still be possible under the new system, but there will be exceptions for people in real financial hardship.

Mixed reaction to the planned redesign

Responses to the planned system overhaul have – predictably – been mixed. More conservative figures from the CDU and CSU parties have accused the coalition government of running the risk of destroying trust in the welfare state by giving people a “free pass” to receive benefits without making any effort to find work.

However, experts have argued that removing the penalties will make no difference to whether people go out to look for work. Karsten Paul, specialist in occupational psychology, underlined focus online that there are many benefits to working that don’t include money, all of which are clear to the unemployed, who in most cases are eager to get back to work.

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