More money for participating and less for opting out – that is the key idea behind the activating social assistance proposal. Developed in 2002 by the Ifo Institute, it has influenced the Hartz Commission and subsequent associated legislation.
The German welfare state is based on the idea of wage replacement, penalising those taking up a job with withdrawal of benefits. Wage replacement, provided through the former unemployment benefits and social assistance, constituted a de facto minimum wage, and as such was a significant factor in turning Germany into the world champion in unemployment among the low-skilled. The Agenda 2010 and the Hartz IV system introduced key reforms that led away from wage replacement, turning instead toward wage support. While headed in the right direction, these reforms did not go far enough. This is where the Ifo Institute’s Activating Social Assistance proposal comes in. In order to further reinforce wage support, the current minimum wage safeguarding system should be replaced by effective safeguarding of minimum income. This reduces both wage demands and wage costs, making it possible for companies to create new jobs.
The elements of the Ifo Institute’s Activating Social Assistance are:
Notwendige Reformen auf dem Arbeitsmarkt Conference "Arbeitsmarktreformen im Niedriglohnbereich" (28 March 2003 in Frankfurt) and current studies (in German)
Social protection in an international comparison OECD study "Wie generös ist Hartz IV im internationalen Vergleich?", published on 18.02.2010
Internationally comparative information on social protection: - Social Policy > Basic Protection > Guaranteeing Sufficient Resources - Labour Market and Migration > Labour Market > Unemplyoment Benefit Systems.
Ifo publications and media coverage
A complete list of Ifo Policy Issues
This discussion forum is open to comments on Hans-Werner Sinn’s publications and press statements.
Introduction and current discussion topics
Forum Welfare to Work / Minimum Wage
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