Welfare state: Zero increase: What is in store for citizen’s income

The citizen's allowance rose sharply at the beginning of this year – and now it is set to stagnate. Is this disappointing news for millions of people the result of the recent debates about basic social security?

In August, consumer prices rose at a slower rate than they have in more than three years. The inflation rate was 1.9 percent compared to the same month last year. Energy was cheaper than a year ago – prices for services rose above average. Price pressure is easing after years of high inflation rates. However, economists fear that inflation rates will rise again towards the end of the year.

On January 1, the citizen's allowance – known colloquially as Hartz IV before the reform – rose sharply, by twelve percent. Since then, single people have received 563 euros a month. Adults who live with a partner receive 506 euros. For children and young people, the rates are between 357 and 471 euros. The Union also supported the traffic light coalition's social policy prestige project after it was able to push through tightening measures in a mediation process between the Bundestag and Bundesrat.

But the citizen's allowance soon fell into disrepute among many. There was also criticism within the traffic light coalition. As a result of this debate, the FDP is now claiming the move to a zero-round increase for itself. “Those who go to work must always have significantly more in their pockets than those who live off taxpayers' money,” says FDP General Secretary Bijan Djir-Sarai. “The fact that the Minister of Labor is now complying with our request not to increase salaries next year is a first important step in this direction.”

Heil: Debates have nothing to do with past months

Heil countered the claim that the freeze has something to do with the debates of the past few months. “It is not a case of rolling dice every year to decide how the standard rates will increase, but there is a constitution and an adjustment mechanism that the German Bundestag has passed with great force – with the votes of the CDU, CSU, FDP, SPD and Greens, by the way.” In fact, experts such as Enzo Weber from the Institute for Employment Research (IAB) had already determined in January that there would probably be a freeze in 2025.

The reason is the adjustment mechanism. Inflation is calculated in two steps, first from the previous year and then from the most recent recorded quarter, into the new standard rates. Labor market researcher Holger Schäfer from the German Economic Institute (IW) told the dpa: “This is based solely on the application of the applicable rules for adjustment and is not the result of current political decisions.”

CDU wants to tighten citizen’s allowance rules

If the CDU wins the election, it will significantly tighten the rules on citizens' benefits. In an interview this summer, Secretary General Carsten Linnemann is aiming for greater benefit cuts for those who refuse to work or keep appointments than the current maximum of 30 percent. Linnemann: “Then basic benefits will have to be cut completely.” The FDP will also introduce further work incentives and stricter sanctions for those who refuse to work, says Djir-Sarai.

IAB labor market researcher Weber proposes a potentially decisive rule change. In just one step, current inflation could be included in the calculation of the citizen's allowance – such an adjustment proportional and timely to the inflation trend would save those affected and politicians the back and forth between a stronger increase and lean years. In reference to the recent debates about the citizen's allowance, Weber told the dpa: “Proportional and timely would mean that such discussions about the standard rate would no longer arise in the first place.”

5.4 million people affected

According to Heil, 5.4 million people are affected, as said in the “Frühstart” program by RTL and ntv. Among them are many children or sick people who are not available for the labor market. 20 percent would need additional benefits despite being in work. 1.7 million people would need to be brought into work, two thirds of whom would be long-term unemployed without completed vocational training. Many Ukrainians also still need to be brought into work despite successes.

Heil confirmed that the traffic light coalition wants to tighten up the sanctions. In the future, anyone who works illegally despite receiving benefits will be severely sanctioned. “It is a learning system.” The further development should not be discussed ideologically. According to the government, the planned changes to the citizen's allowance could come to the cabinet in October, as could more work incentives for refugees.

The German Trade Union Confederation criticized the planned freeze. As long as rents are often barely affordable and the minimum wage is only increased by a few cents, in addition to more collective bargaining, a higher minimum wage and rent caps, there is also a need for a citizen's allowance that really guarantees the minimum subsistence level, said DGB board member Anja Piel on RTL/ntv. Labor market researcher Schäfer from the employer-friendly IW pointed out that the citizen's allowance might even fall under the current adjustment mechanism. “But this is currently not legally possible.” According to calculations by the comparison portal Verivox, the share for electricity, for example, remains too low with the freeze. The shortfall for a single person: 74 euros per year.