For about 15 years, Germany offered a social assistance benefit that was widely considered the opposite of basic income.
Any single, adult German resident who could not make ends meet based on their income and personal assets (or with assistance from relatives) was eligible to receive around 424 euros ($470) per month to cover food and basic necessities.
But if someone was unemployed, they had to be actively working to find a job to get those benefits. If they missed an interview or turned down a job offer without a valid excuse, their monthly payments could get docked. If a resident incurred enough of those penalties, their payments and health insurance could be suspended for three months.
Around 710,000 unemployed recipients were penalized at least once under the program, known as Hartz IV, in 2018, according to the German news site DW Akademie.
A basic-income policy, by contrast, would guarantee payments to citizens on a regular basis without any strings attached.
But last month, the German supreme court ruled that the terms of the Hartz IV policy were unconstitutional.
The new ruling prevents the government from slashing more than 30% of an unemployed person’s benefits under the program. That guarantees unemployed residents at least 300 euros ($333) per month. Even then, the punishment can be waived if it threatens to cause extreme hardship. The three-month suspension can also be shortened if an individual works with their government-appointed adviser to seek employment or enroll in a training program.
Housing and healthcare assistance will continue to be provided under the new policy.
The decision followed a complaint from a resident who turned down a warehouse job because he wanted to work in sales. He claims he lost around 235 euros ($260) per month as a result – almost half of the average monthly payment.
The change takes Germany a significant step closer to offering a basic income, especially since the payments continue indefinitely – unlike unemployment benefits in the US.
The old program seemed to reduce unemployment, but not poverty
The concept of a system that pays someone simply for being alive dates back to the 16th century, but it’s still considered radical.
In 2017, Finland became the first European country to test a government-backed unconditional basic income, which gave people a regular stipend with no strings attached. The trial was widely considered a failure, since many of the recipients remained jobless at the end.
The idea has also garnered national attention in the US thanks to presidential candidate Andrew Yang, who has promised to deliver payments of $1,000 per month to all US citizens over 18. In California, meanwhile, the city of Stockton is conducting a basic income trial that delivers $500 monthly stipends to 125 residents living at or below the median income line (around $46,000 annually).
Germany’s prior policy was designed to address a concern that critics of basic income often raise: that regular payments can reduce the incentive for people to find work. But the policy also drew heat among local politicians for forcing people to accept low-paid, low-skill work that might keep them in poverty.
Dietmar Bartsch, a member of the German parliament from the democratic socialist policy, has criticized the Hartz IV program for “plunging people and their families into the abyss” and instilling fear about the payments being taken away.
So far, Germany’s system does seem to have reduced unemployment, though. The unemployment rate in Germany was just 3% in October – the lowest rate in 39 years. The country has about 1.3 million unemployed residents (compared to 5.2 million in 2005).
But more than 12.5 million German residents are still estimated to be living in poverty. The nation’s poverty rate, 15.7%, has remained relatively unchanged since 2005 when you factor in the arrival of new residents.
A dramatic reduction in benefits for people who aren’t looking for work, Germany’s supreme court said, “seriously encroaches upon the minimum standard of living guaranteed by fundamental rights.”