Hartz concept
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The Hartz concept is the name given to the recommendations resulting from a commission on reforms to the German labour market in 2002. Named after the head of the commission, Peter Hartz, it went on to become part of the German government's Agenda 2010 series of reforms, known as Hartz I - Hartz IV. The reforms of Hartz I - III took place between January 1, 2003 and 2004; Hartz IV began on January 1, 2005.

On February 22, 2002, the "Hartz Commission" was founded; its real name was die Kommission für moderne Dienstleistungen am Arbeitsmarkt - the Commission for Modern Services on the Labour Market. Its 15 members were led by Peter Hartz, then Volkswagen's personnel director.

The commission came up with thirteen "innovation modules" suggesting changes to the German labour market system. These were then put into practice as Hartz I - IV as follows:

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Hartz I, II and III

Hartz I and II both came into effect on January 1, 2003, aiming at making new types of jobs easier to create, and covered, for example:

(Hartz I)

  • The foundation of "Staff Services agencies" (Personal-Service-Agenturen or PSAs)
  • Support for vocational further education from the Job Agency (Arbeitsagentur)
  • Subsistence payments by the Job Agency

(Hartz II)

  • The news types of employment, "Minijob" and "Midijob", with lower or gradually rising taxes and insurance payments
  • A grant for entrepreneurs, known as the "Ich-AG" (Me, Inc.)
  • A rise in the number of job centres

Hartz III came into effect on 1 January 2004. It aimed at restructuring and reforming the Job Centre, changing its name from the Bundesanstalt für Arbeit or Arbeitsamt (Federal Labour Institution) to the Bundesagentur für Arbeit or Agentur für Arbeit (Federal Labour Agency).

Hartz IV

The Hartz IV reform was voted in by the Bundestag on December 16, 2003 and by the Bundesrat on July 9, 2004 and to 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 (July 2008) level for a single person is 350 euro per month plus cost of "adequate" housing. 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 full unemployment pay (60 to 67% of the previous net salary) were followed by Arbeitslosenhilfe (unemployment benefits, 53 to 57% of the last net salary). Since 2005, reception of the full unemployment pay (renamed to Arbeitslosengeld I) has been restricted to 12 months in general and 18 months for over-55-year-olds. This is now followed by the (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. Only if these assets are below a threshold level will a claimant get money from the state. The current (July 2008) threshold level is 150 euro for free assets and 250 euro for fixed retirement assets, both calculated per capita and lifetime year.

In order to receive payments, claimants have to agree to a kind of contract that outlines what they are specifically obliged to do in order to improve their job situation. Unemployed persons can be forced to accept any legal job.

However, it is possible to gain revenues from a job and receive Hartz IV benefits in the same time. The job income will we debited from the "Arbeitslosengeld II" according to a formula that leaves a certain amount of the additional revenues untouched. These revenues are: a certain amount of savings, increasing with age; of any income, 100 euro plus 20 percent of the wage up to 800 Euro plus 10 % of the wage up to 1200 euro. Through this mechanism Hartz IV can be regarded as sort of a minimum wage barrier for employees without assets, where the minimum wage is not paid by the employer but by the state. There are criticisms that this defies competition and leads to a downward spiral in wages and the loss of fulltime jobs.

Another aspect of the Hartz IV reform was the combination of the formerly separated federal level unemployment agency on the local level welfare administration in order to do a better case-orientated job in helping unemployed people to find work as well to improve their personal situation. The goal is to reduce the figures from 400 unemployed people per agent to fewer than 75 for 25-year-olds and 150 for people over that age. For difficult cases dedicated case mangers can be deployed. However, legally the agencies still remain separate.

In January 2005, the number of people who count as unemployed rose by about 222,000 due to the new statistics introduced with Hartz IV and by about 300,000 because of seasonal reasons (unemployment is much higher in the winter). This is what finally brought the total official figure over the psychologically important 5 million mark to 5,037,000, the highest mark since January 1933. The Hartz IV reform remains under heavy criticism in Germany. But as unemployment numbers have subsequently dropped considerably not only for short term unemployed but also for long term unemployed, some claim the Hartz reforms have been a success. Others say that the actual unemployment figures are not comparable because many people work part time now or are not included in the statistic for other reasons. Namely the number of children that live in Hartz IV households has risen to records numbers ever since.

Legal considerations

Several constitutional lawyers dispute the legality of the Hartz IV law; up to 10 paragraphs of Germany's constitution (Grundgesetz) may be violated. The gravest problems seem to lie in the level of aid; 345 euros per month; though this more or less covers the most basic needs, some doubt whether the constitutional requirement for "life in dignity" is met, given the high costs of living in Germany. Another problem is the potential for gross disproportion between the employees' social insurance payments already paid and the benefits (e.g., 30 years of unemployment insurance premiums equate some five full years of Arbeitslosengeld, not the 12 months conceded by Hartz IV). Other doubts arise from the so-called "1-Euro-jobs". A couple of constitutional complaints were announced for 2005.

On February 16, 2005, the Hartz IV law was ruled partially unconstitutional by a Düsseldorf Social Court as it violates the "equality before the law" guaranteed by Article 3 of the Grundgesetz. The German government is appealing the verdict.

See also

External links
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