Taxpayers' funds should be used to increase wages for more employees
In a bid to address the increasing number of "Aufstocker" - employed individuals who receive additional unemployment benefits - the German government is proposing reforms to its unemployment benefits system.
According to recent data, the number of Aufstocker in Germany has increased by approximately 30,000 people last year, with foreign employees accounting for a significant portion of this rise, amounting to around 21,000 employed unemployment benefit recipients from November 2023 to November 2024.
Holger Schäfer, a labor market researcher at IW, views this phenomenon as a "partial success," as some needy people are able to partially cover their needs through their own work. However, Schäfer also sees a need for reform, particularly due to insufficient transition from part-time or low-income employment to full-time employment.
The Institute of the German Economy (IW Cologne) attributes the increase in foreign employees to their ability to find jobs, even if they do not meet the household's needs. The IW also notes that the need for 80,000 employed individuals to top up their benefits is largely due to a high number of people in their respective households, particularly in cases of single parents or households with children.
The federal government's coalition agreement includes the transformation of unemployment benefit into a "new basic security for job seekers," focusing on job placement, support for job seekers, and tightening obligations and sanctions. The intention is to tighten controls on benefit recipients to incentivize full-time employment and limit misuse of the system amid rising welfare costs.
Chancellor Friedrich Merz described the current unemployment benefit, known as Bürgergeld, as needing to be called "basic security" (Grundsicherung) again, reflecting a tougher stance. Federal Labor Minister Bärbel Bas indicated reforms will likely involve sanctions for those not actively engaging with job center requirements. Lawmakers from the ruling coalition also emphasize preventing fraud and ensuring benefits go to those genuinely seeking work.
Kai Whittaker, from the Union, criticizes the current unemployment benefits system, stating that those who work more are punished financially. Whittaker demands a reform of the income limits and transfer deduction rates in basic security to make work more attractive.
In response to these criticisms, Dirk Wiese, parliamentary manager of the SPD's parliamentary group, calls for a higher minimum wage, stating that anyone who works full-time should be able to live from it.
These proposed reforms aim to cut funding for Bürgergeld and reintroduce sanctions to encourage full-time employment and reduce dependence on welfare. The CDU/CSU-SPD government has announced plans to reduce unemployment benefit spending by one to two billion euros, shift the framing of Bürgergeld back to basic security rather than a citizen’s right, and reinstate stricter conditions.
The debate surrounding the need for reform in unemployment benefits in Germany is gaining traction, with scholars and politicians alike calling for changes to incentivize full-time employment and limit welfare dependence. The government’s plan is part of broader attempts to contain rising unemployment benefit expenditures, which reached nearly €47 billion in 2024, with continued scrutiny expected.
- The increase in foreign employees receiving employment benefits in Germany has caught the attention of both scholars and politicians, with many calling for reforms in the finance and politics sectors to incentivize full-time employment and limit welfare dependence, particularly in light of rising general-news reports of welfare costs.
- The proposed reforms to Germany's unemployment benefits system, such as reducing funding for Bürgergeld and reintroducing sanctions, are aimed at businesses as they may impact the labor market, by encouraging full-time employment and reducing dependence on welfare, thus potentially lowering general-news reports of rising welfare costs.
