Hartz IV
The Hartz IV reform was voted in by the Bundestag on December 16, 2003 and by the Bundesrat on July 9, 2004; taking effect by January 1, 2005. This part of the reform brought together the former unemployment benefits for long term unemployed ('Arbeitslosenhilfe') and the welfare benefits ('Sozialhilfe'), leaving them both at approximately the lower level of the former 'Sozialhilfe'. The current (September 2009) level for a single person is €374 per month (known as the Regelsatz, raised to €382 per month beginning 2013) plus the cost of 'adequate' housing and health care. Couples can receive benefits for each partner including their children.
Prior to 2005, between 12 and 36 months (depending upon the claimant's age and work history) of their full unemployment benefit (60 to 67% of the previous net salary) were followed by Arbeitslosenhilfe (unemployment assistance, 53 to 57% of the last net salary). Since 2005, reception of full unemployment benefit (renamed Arbeitslosengeld I), has been restricted to 12 months in general and 18 months for over 55 year-olds. This is now followed by (usually much lower) Arbeitslosengeld II if the claimant fits the requirements (see next paragraph).
Whether or not a claimant is eligible for Arbeitslosengeld II depends on his or her savings, life insurance and the income of spouse or partner. If these assets are below a threshold level, a claimant can get money from the state. The current (July 2008) threshold level is €150 for free assets (at least €3,100) and €250 for fixed retirement assets, both calculated per capita and lifetime year. Additionally, every employable individual in a communal household (persons living in and depending on the resources of the claimant), can have one car worth about €7,500 and a self-used house of 130 square meters living space (more if there are other people in the common household).
To receive payments, a claimant must agree to a contract subject to public law. This contract outlines what they are obliged to do to improve their job situation, and when the state is obliged to help. An unemployed person may be required to accept any kind of legal job. This compulsion is restricted by constitutional rights, like freedom of movement, freedom of family, marriage and human dignity. If taking on a specific placement is deemed reasonable by the responsible agency, not applying will result in a reduction or even complete suspension of the appropriate payment.
Within the Arbeitslosengeld II schemen, the state covers the health insurance of the unemployed. Until the end of 2010, payments towards the pension scheme of the claimant were also made.
It is possible to earn income from a job and receive Arbeitslosengeld II benefits at the same time. Job income is debited from Arbeitslosengeld II payments according to a formula that leaves a certain amount of the additional revenue untouched. These revenues are: a certain amount of savings (which increases with age); €100 plus 20 percent of the wage up to €800 plus 10% of the wage up to €1200 (up to €1500 if there are children). Through this mechanism Arbeitslosengeld II can be regarded as a sort of minimum wage floor for employees without assets, where the minimum wage is not fully paid by the employer but assured by the state. There are criticisms that this defies competition and leads to a downward spiral in wages and the loss of fulltime jobs.
The Hartz IV reform merged the federal level unemployment agency with the local level welfare administration. This facilitated a better, case-oriented approach to helping unemployed people find work and improve their situations. The plan's objective is to reduce caseloads from 400 unemployed persons per agent to not more than 75 (aged 25 or less), or not more than 150 persons over the age of 25. For difficult cases, dedicated case managers may be deployed. Legally, however, the agencies remain separate.
The Hartz IV reforms continue to attract criticism in Germany, despite a considerable reduction in short and long term unemployment. This reduction has led to some claims of success for the Hartz reforms. Others say the actual unemployment figures are not comparable because many people work part time or are not included in the statistics for other reasons, such as the number of children that live in Hartz IV households, which has risen to record numbers.
Read more about this topic: Hartz Concept