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Global Economy

What the new citizen money should look like

The term Hartz IV has long since become a red rag for large parts of the SPD. Many people associate the reforms passed in 2005 under Chancellor Gerhard Schröder with social indifference and the farewell to a caring welfare state.

Now, however, the Hartz IV system could soon be a thing of the past. As a new basic security, the traffic light coalition wants to introduce the so-called citizen money. Federal Minister of Labor Hubertus Heil (SPD) presented the cornerstones of his draft law.

More fairness

"We want to create a greater sense of togetherness", this sentence was repeated again and again during the presentation. In the future, the job centers should be more generous with the living situation of benefit recipients so that they can primarily focus on getting back on the job market as quickly as possible.

In concrete terms, this means: In the first two years of receiving citizen's income, beneficiaries should be allowed to stay in their apartments in any case, these are not included in the calculations. In addition, assets of up to 60,000 euros should not be touched.

The concern of many people that they would have to give up their homes or use up their savings if they were unemployed for a long time could thus go away – at least for the first two years. After that, as before, it should also be checked whether, for example, the housing situation is appropriate.

reorganization of sanctions

In the past, there had always been great criticism of the sanctions that Hartz IV recipients had to fear if, for example, they did not comply with agreements with the job center.

In the last federal election campaign, the Greens called for the sanctions to be completely abolished. That shouldn't happen now. The principle of promoting and demanding is not abolished. However, Hubertus Heil's proposal provides for a new regulation of the sanction options.

For example, a six-month period of trust should apply from the time the citizen's allowance is received, during which reduced benefits are excluded. Only those who do not cooperate with the job center at all have to fear negative consequences: "For people who chronically do not keep appointments, there can still be legal consequences," said Heil.

Heil's proposal to reform the basic security system also includes more opportunities and incentives for further training. Among other things, people should be given more time to acquire a professional qualification if necessary: three years instead of the previous two.

Higher rule rates – but how high?

In addition to better cooperation between the state and citizens, the Minister of Labor promised that the standard rates for basic security should "rise appropriately" from January 1, 2023. However, he did not say what exactly is meant by “appropriate”. Heil first wants to wait for calculations by the Federal Statistical Office. On this basis, the standard rates should then be recalculated in September in coordination with the coalition partners of the Greens and the FDP.

The only thing that is clear so far is that the previous principle, according to which the standard rates are calculated on the basis of wage and price developments in the two previous years, is to be reformed. The previous mechanism leads to a large time delay, especially in times of rising inflation, said Heil. This initiative by the minister had recently been criticized by the FDP.

Need for discussion in the coalition

The minister remained quite vague with regard to the financing of the new citizens' income. To what extent, for example, the reserves of the Federal Finance Minister are sufficient for substantially higher standard rates remains at least questionable. The coalition could face intensive debates on this in the coming weeks. After all, after the numerous special expenses as a result of the war against Ukraine, the financial leeway is limited.

The Labor Minister's draft law is now being voted on by the individual ministries. The cabinet is due to adopt him in September. The Bundestag and Bundesrat could decide on citizen income this fall, and it could come into force on January 1, 2023.

Could. Because there are still a few open questions to be clarified before the unloved term Hartz IV really becomes citizen income – and the SPD can overcome one of its greatest traumas.

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