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December 2004

Change of Hartz

Why Germany is so worked up about Schröder's latest Reforms

Hartz IV is part of a package of government reforms that are due to be implemented on January 1, 2005, and are currently causing not a little political furore. In this month’s Red Tape we look at what this package is all about.

On February 22, 2002, German Chancellor Gerhard Schröder founded a commission to look at ways of reducing unemployment (Arbeitslosigkeit), modernizing the Federal Employment Agency (Bundesagentur für Arbeit, formerly the Bundesanstalt für Arbeit) and speeding up the process of finding work for the unemployed. Chairman of the commission was Dr. Peter Hartz, a member of the management board of Volkswagen AG. The report submitted by Hartz and his 14 fellow commissioners was called “Modern Services in the Labor Market” (Moderne Dienstleistungen am Arbeitsmarkt), though it is more generally known by the name of the chief commissioner, “Hartz.”

The Hartz reforms have been divided into four main sections. Hartz I and II, which came into effect on January 1, 2003, deal with ways of creating new jobs. They involved the creation of Personal Service Agenturen—agencies that would act as middlemen between potential employees and employers. Another part of the package was the creation of so-called mini jobs—low-paid jobs with improved tax conditions for both employees and employers, which the government hopes will discourage illicit employment (Schwarzarbeit). Hartz III was implemented in Janaury 2004 and concentrated on reforms to the Federal Employment Agency, the idea being, that instead of simply administering the unemployed, the office should move away from bureaucracy to a customer-service approach for the unemployed.

And now Hartz IV has arrived. January 1, 2005, sees the launch of the final and most controversial part of the reforms. One of the most contentious issues is the money paid to the unemployed (Arbeitslose). Until now unemployment benefits (Arbeitslosenhilfe) and social security (Sozialhilfe) were paid out separately. These have now been pooled and named Unemployment Money II (Arbeitslosengeld II). This can be paid to anyone between the ages of 15 and 65 if they are fit to work (arbeitsfähig) and needy (bedürftig). The application for this new payment is, in many cases, 17 pages long and in a small typeface—the expression “needy” on the form has also been criticized for being demeaning. Most obviously disadvantaged by this new arrangement are those who previously received unemployment benefits. Under the old system they would be paid around half their net income (Nettolohn) in benefits. Now, however, they will receive a lump sum of € 345 if they live in the west of Germany and € 331 in the east. The German unions (Deutscher Gewerkschaftsbund) reckon that half of these people will receive less money than before and a quarter no money at all.

The concept of which work can reasonably be assigned (Zumutbarkeit) to an unemployed person has also been sharpened up in Hartz IV. Now the job-seeker (Arbeitssuchender) must name valid reasons for not taking on a job. If these are not forthcoming, the payment of unemployment money will cease. Hartz IV also introduces a host of other, smaller changes. Rent, for example, will be paid by the Employment Agency to those receiving Unemployment Money II only if they are deemed to be living in an appropriate (angemessen) apartment or house. So, for a three-person household, 75 square meters is considered appropriate. This type of very exact individual financial assessment is key to the Hartz IV reforms and one reason why the package is so unpopular.

Most newspapers have covered the Hartz reforms extensively. If you are sufficiently fluent in German the Süddeutsche Zeitung ( 931/36895) has an excellent series of articles explaining the reforms. <<<

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