Labor reforms Work in Progress

Germany's infamous Hartz IV reforms, introduced ten years ago to get people back to work, have helped to slash unemployment but left many long-term jobless trapped.
Another happy customer.

At the Federal Employment Agency, the staff call them “founding members.”

They are referring to the people who have received so-called Hartz IV payments since this type of unemployment welfare benefit was introduced ten years ago. They number 980,000.

Hartz IV was a part of Germany’s most exhaustive social system reform. The initiative slashed benefits for those out of a job for more than 12 months and aimed to entice the unemployed to take any work, even if it did not pay well or they were overqualified.

The reform has since divided Germany, with one side claiming that stricter monitoring and lower benefits greatly reduce joblessness, and the other fearing a rise in temporary and low-paid work, creating a new low-wage sector.

Ten years on, the reforms are generally considered a success. Abroad, Germany is hailed for the restructuring. Experts say the reforms are partially responsible for the country’s recent “job miracle.” And yet, the problem of persistent and extreme long-term unemployment – the core target of the Hartz IV reforms – remains unsolved.

Experts say the Hartz IV reforms are partially responsible for the country’s recent “job miracle.”

Katrin Rutten has been in the Hartz IV system since its inception. She isn’t the stereotypical unemployment benefits recipient. The 33-year-old has nothing in common with the clichés of the unemployed, i.e. someone sitting in front of the television in sweat pants, with a beer bottle.

Dressed in her light blue shirt, Ms. Rutten scrubs dirty plates or cuts up fruit every day. She works at a firm that provides school catering in the eastern German state of Brandenburg.

Ms. Rutten does not consider the job beneath her. Yet her salary isn’t enough to cover the cost of living. That is why Ms. Rutten is a recipient of top-up payments, one of the 1.3 million people who receive Hartz IV benefits in addition to their normal salary.

Even Germany's new minimum wage of €8.50 ($10) per hour, introduced on 1 January, won’t change that. Ms. Rutten’s hourly rate is already €8.50. Even if she made twice that money, it wouldn’t be enough. Ms. Rutten’s problem is the fact that she only works an average of 3.5 hours per day. That way, her wage amounts to €595 per month.

Most top-up-recipients only work a few hours per week. According to the Institute for Employment Research, 95 percent of them will still require state support after the introduction of the minimum wage.

One of the reasons why Katrin Rutten doesn’t work longer hours are her four children. About 40 percent of all single parents depend on Hartz IV. Often they lack proper childcare options.

But that is not the only problem. Ms. Rutten, for example, has passed up an offer to take an apprenticeship at a DIY store. “They work until 11p.m. there, I wouldn’t get to see my kids at all,” she says.

About 40 percent of all single parents depend on Hartz IV.

Single parents often require government assistance for long stretches of time. About 110,000 of all aid recipients fall into this category. In addition, one third of the long-term beneficiaries are over 50 years of age. Women are overrepresented at 55 percent of all recipients.

Studies have found that certain factors make a person more prone to being long-term unemployed. Having no degree or vocational training is one of them, being over 50 another. Health problems, language deficits or family obligations are others.

Many long-term unemployed have several of these traits. Researchers say that every additional factor slashes a person’s chances of getting off benefits by 50 percent.

Manfred Dietel (not his real name) is plagued by several of these factors. Just like Ms. Rutten, the 52-year-old has been on Hartz IV assistance for ten years.

In 2004, he had a car accident on his way to work. For three months, the security guard was unable to work, and this period was followed by a winter break common in his occupation. He had to fall back on unemployment benefits. But in the spring, his former employer closed down. Mr. Dietel has never found another job.

Maybe that was because the unemployment rate where he lives close to the Czech border was at 15 percent back then. Maybe it was because Mr. Dietel has a degree but has never worked in his profession.

Today, the unemployment rate in his city is only 6 percent. But by now, Mr. Dietel is over 50, long-term unemployed and a bit difficult.

Hartz IV is not a dead end for everyone.

He feels “forced” into training programs that the authorities say are supposed to increase his chances of finding work. He complains about job offers that pay too little. He calculates that a so-called “mini job” paying €450 brings in too little money and taking a job that pays more than €1,000 isn’t worth it either, as it would trigger repayments on debt he still owes from his car accident.

Yet Hartz IV is not a dead end for everyone. Since its introduction in 2005, 15 million people have received payments. Most of them were only paid benefits for short periods of time, half of them for less than a year. But a considerable number of people have depended on it for many years.

Some blame the so-called job centers that were created as part of the Hartz reforms, where advisors are supposed to help the unemployed find training and suitable jobs.

Originally, 80 percent of all staff at the new job centers were supposed to concentrate on finding people work, but today half of the 60,000 job center employees are instead busy with paperwork.

And those who actually deal with the unemployed tend to focus on the easy cases. Alexander Spermann of the Institute for the Study of Labor says that the job centers “reward placements above all. Smaller improvements hardly count.” He adds that a focus should be on “acknowledging and rewarding activities” to open up prospects, especially in the case of the long-term unemployed.

Mr. Dietel ensures he stays busy. He created and supervises an online self-help group for Hartz IV recipients, and he volunteers at a primary school three times a week.

As compensation, he receives €200 per month, which cannot be deducted from his Hartz IV payments because of the volunteer nature of the activities. For the school, Mr. Dietel is a cheap and committed helper. In this weird way, he is giving back to society.


This article was originally published in the weekly newspaper Die Zeit. To contact the author: [email protected]