In the debate over Hartz IV, the Ifo Institute proposes a reform of the additional earnings rules: more work should be worthwhile, especially for parents, and the lifetime performance of the beneficiary should be taken into account.
The citizens‘ money concept of the SPD, the proposals of the Federal Employment Agency (BA), the cornerstones of the CDU social politician Kai Whittaker – in recent weeks, the debate on a reform of Hartz IV has clearly gained momentum again. However, one aspect of the basic security system is only marginally discussed, even though it is actually of central importance: How much can a Hartz IV beneficiary keep from the money he earns through his own work?
The Munich Ifo Institute has now presented a reform proposal that focuses largely on these so-called Zuverdienstregeln. The aim is to remedy a malady of the current rules: Although there is only a way out of basic security through gainful employment, the system provides little incentive. Of every euro earned, over a 100 Euro allowance, recipients must pay 80 or even 90 cents.
„The signal is: you are allowed to work as marginally as possible, and the more you work, the more we punish you,“ Ifo economist Andreas Peichl once described the effect of this regulation. Peichl and his Ifo colleagues Clemens Fuest and Maximilian Blömer therefore want to significantly change the Zuverdienstregeln. At the same time, households with children – and especially single parents – should always be better off than in the past. Singles, on the other hand, would only benefit from the reform at relatively high incomes, otherwise they would suffer real losses:
For singles , the previous allowance of € 100 is to be dropped – and the income up to a limit of € 630 per month will be credited in full to the basic security. In return, of every euro of income above that limit, only 60 cents would be counted.
For households with children the allowance of 100 Euro remains. Then they are allowed to keep up to the limit of 630 euros from each euro 20 cents – as before. From each euro over the border of 630 euro, however, they may keep 40 cents – more than before.
These changes would not increase the overall cost of Hartz IV, the researchers write, and: „Of course, variants are also possible, which cause additional expenses.“ In other words, the relatively tough rule, singles all income to 630 euros fully credited, can be mitigated – but that costs just then.
In addition, the Ifo concept envisages merging various social benefits for families into one single one – specifically the Hartz rules, the housing allowance and the child allowance. Above all, this would serve to eliminate the currently sometimes harmful interactions between these services.
Because these benefits are not matched, it is currently possible for a lone parent to be financially punished if he works more hours than before – in certain circumstances, one of the benefits will be completely eliminated and the disposable income of the lone parent drops, though the gross income has increased.
According to the Ifo economists, these reforms would create considerable incentives for Hartz IV recipients to work more than before. For this reason, the amount of the protective capacity should also depend on the employment biography – the more someone has worked before, the more may also be kept. This should also lead to work being rewarded.
In addition, existing disincentives would be eliminated – the current allowance of € 100 actually leads to combining a negligible employment with undeclared work. The researchers expect that their employment in Germany could increase by 216,000 full-time jobs and would reduce income inequality.
