Olaf Scholz, the German chancellor, came into power in 2021 with a straightforward pledge to uphold the rights and dignity of the conventional blue-collar supporters that formed the voter base of his Social Democratic Party. Scholz’s newly formed government swiftly fulfilled its obligations for welfare – a pay raise for the lowest earners and accommodating retirement plans for veteran workers. However, it soon faced resistance over its attempt to reform the unemployment benefits system.
A couple of years earlier, the coalition government led by SPD had eliminated the past unemployment benefits system, also called the dole system. The controversial system, implemented by Scholz during his tenure as the federal labour minister in 2005, was largely unappreciated due to its uncompassionate strategy towards the unemployed – punishing job seekers who rejected work by withholding benefits. The new system was so detested, that it played a considerable role in bringing an abrupt end to the SPD-led government just nine months after its initial introduction in January 2005.
Fast forward to July 2022, a replacement program coined as the ‘Bürgergeld’ or Citizens’ Allowance, was launched to provide a “humane living minimum”. However, as the two-year mark approaches, criticism of the new scheme is intensifying. Its relaxed regulation on jobcentre attendance, weak penalties and escalating costs are the main points of contention. Currently serving 5.5 million beneficiaries, the scheme is sucking nearly €46 billion from the national purse every year, equivalent to almost 6% of Germany’s total federal budget. In response to inflation, the basic allowance has increased by 26% over the previous three years reaching €564 each month.
Fears are growing as the difference between the benefits and initial job earnings lessen, or have already equalled, due to the 12% average wage increment since 2021. There is added weight on the scheme due to the entitlement of more than 700,000 Ukrainians in Germany to the full unemployment benefits without having previously contributed to the system. Despite the burdensome cost and influx of new beneficiaries, critics take particular issue with the system’s passive way of dealing with those capable of employment but refusing work, especially the estimated 260,000 chronic unemployment beneficiaries aged from 25 to 45.
Frank Jürgen Weise, the previous chief of the federal employment agency in Germany, has disclosed to Der Spiegel magazine that using the current benchmarks for fruitful employment, the situation cannot be sustained. The Social Democratic Party (SPD), recognising this, is struggling once again to set suitable conditions for the unemployed, two years after successfully overcoming its long-standing social welfare challenges.
A top-ranking member of the SPD argued that the term ‘Bürgergeld’ or citizen’s allowance is misleading, making it seem like universal basic income. Therefore, a name change is considered essential. The German chancellor maintains that a recent shift in the nation’s benefit system is manageable, notwithstanding Chancellor Scholz’s past job loss due to similar welfare modifications 20 years prior.
Given the present paucity of skilled labourers in Germany, the chancellor has declared that rules will be reformed to encourage welfare recipients to re-join the workforce. However, there is a narrow window of opportunity for this change, particularly with the SPD’s projected poor performance in the three upcoming state elections in September, followed by federal elections in another year.
Last month, the SPD saw its poorest result in the European elections, capturing only 13.9% of the votes. Only 27% of voters perceive the SPD as the most socially just party in Germany. As a result, the rival Christian Democratic Party hopes to capitalise on this frustration over unemployment benefits, just as it did in 2005, and regain the chancellorship next year.
Carsten Linneman, the CDU’s general secretary, pointed out that the statistics reveal a significant number of individuals who are unwilling to work. He argued that if someone fundamentally refuses to work, the state should consider them as not needy.