Federal Minister of Labor Hubertus Heil (SPD) calls it the “biggest labor market reform in 20 years”: The basic security for job seekers, known as Hartz IV since 2005, is to be replaced by a new system with new rules called “Bürgergeld” at the turn of the year.

Dietrich Creutzburg

Business correspondent in Berlin.

  • Follow I follow

A central goal of the project is to make the help for the long-term unemployed in the job centers more individual and thus to do more for a permanently successful integration into the labor market.

In addition, there should be more scope and incentives to catch up on training while receiving a transfer.

Whether an unscheduled increase in cash benefits is also part of this is disputed in the traffic light coalition.

On Wednesday, Heil presented the eagerly awaited cornerstones of a draft law that, according to his plans, is to be passed by the cabinet in September and passed by the Bundestag and Bundesrat before the end of the year.

Regarding the development of the Hartz sentences, Heil’s key issues paper initially only says: “The regulations for increasing the standard requirements as of January 1, 2023 will be supplemented in the Citizens’ Income Act as soon as the calculations required for this have been completed.”

Heil aims to compensate for inflation in the standard rates

Orally, however, he added: "It is important to me that we get an appropriate increase in the standard rates on January 1 that does not lag behind inflation." For him, this means that "it is not about updating the current system, but about an appropriate reassessment of the rule rates”.

Initially, he did not give any further information on possible financing – it would trigger additional expenditure in the billions.

Behind this lies a tangible conflict between the SPD and the Greens on the one hand and the FDP on the other.

Jens Teutrine, the FDP’s expert on citizen benefits, made it clear in response to Heil: “Instead of having a debate about calculation methods, although the standard rates of basic security are adjusted at the beginning of the year anyway, the goal of sustainable integration into the labor market must be pushed more will."

In addition, the FDP refers to the fact that a number of changes to the Hartz IV system were agreed in the coalition agreement, which are primarily intended to improve integration into the labor market.

A new calculation method with the aim of higher cash benefits is not one of them.

How is the rule set composed?

Currently, the standard rate for single adults is 449 euros per month. In addition, a suitable apartment, including heating costs, is financed by the job center.

So far, the calculation of the annual increase has been based on 30 percent of the wage increase and 70 percent on the price increase in the respective period under consideration.

More recently, criticism has increased because this method only led to an increase of three euros per month as of January 1, 2022: the calculation was based on the period from July 2020 to June 2021, in accordance with the statutory provisions, as wages and prices barely climbed.

In order to cushion the burden of rising prices in the short term, the coalition has decided on unscheduled one-off payments and surcharges for transfer recipients.