Germany: Hartz IV benefit to be replaced by citizens’ allowance

Following the German cabinet’s adoption of a bill to create a citizens’ income on Wednesday 14 September, the “Hartz IV” benefit (see article n°12743) is to disappear on 1 January 2023. This controversial system, which combines welfare and long-term unemployment benefits, was created in 2005 by the Schröder government to “put the unemployed to work”. It will be replaced by the so-called “Bürgergeld“, a larger allowance with far less stringent conditions for receiving it. This change, which affects around five million recipients, is also highly symbolic, with the term “Hartz IV” having become synonymous with poverty and social coldness over the years. The basic allowance for one person will be increased from €449 to €502, as will the amounts received for dependent children. In addition, inflation will be taken into account more quickly. At present, the inflation adjustment to the Hartz IV benefit is made with a delay of 1.5 years (inflation in the first half of 2021 is accounted for by the end of 2022). In addition, the upper limits and rules that obliged the recipient to spend their savings first but also to take smaller accommodation are relaxed, with increased ceilings and a two-year time limit. Each member of the household will be able to keep €15,000 of savings (compared to €150 per year of life previously). No penalties will be applied for the first six months in the event of missed appointments or job refusals. This has attracted strong criticism from the right of German politics as well as employers. After that initial period, the recipient’s benefit may be cut by up to 30%. The obligation to accept any job is abolished. Access to training will also be improved. The bill, which is set to be voted on in the next few weeks, will result in approximately €4.8 billion per year in additional expenditure.