Mon, Jan 20, 2025 page7

• Germany’s lazy debate about the foreigners who are on welfare

  • By Chris Bryant / Bloomberg Opinion
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  Listen to German politicians vying to win next month’s federal elections and you might mistakenly conclude work-shy welfare recipients are a primary cause of the country’s economic and budgetary woes. That depressing discourse risks distracting from Germany’s real challenges, while stigmatizing migrants and fueling support for the far-right. Germans understandably fret about the rising cost of living and the integration of millions of newly arrived refugees, at a time when public spending is hamstrung by overly stringent rules on borrowing.

  That context explains why means-tested income support for the long-term unemployed — known as Burgergeld, or citizen’s benefit, and costing about 50 billion euros (US$51.36 billion) annually — has become a popular talking point (and political scapegoat) during the campaign. Almost half of the 5.5 million people covered by that financial safety net are foreigners, many of them fleeing war-torn countries such as Ukraine and Syria. (For context, Germany’s overall population is about 83 million.)

  Friedrich Merz, the conservative Christian Democratic Union (CDU) candidate leading the race to become Germany’s next chancellor, said one of his first actions would be to replace the Burgergeld with a more stringent basic social security, or Grundsicherung, thereby freeing up fiscal space to cut taxes for companies and workers. New arrivals from Ukraine would have to make do with less, while anyone unwilling to work would lose benefits entirely.

  Like the CDU, the pro-business Free Democratic Party has proposed forcing benefit claimants to undertake public works, such as cleaning parks and train stations or helping out in kindergartens and schools. Even the Social Democratic Party (SPD) — who in 2023 led a reform of long-term unemployment benefits (previously known as Hartz IV) to prioritize vocational training rather than force the jobless to take the first available position — are trying to sound tough on claimants who refuse work.

  Germany’s constitution guarantees the right to a basic subsistence level and prevents excessively severe financial sanctions for those who do not cooperate. However, mainstream parties fear that if they sound too much like pushovers, they would lose support to the far-right Alternative for Germany (AfD). Along with championing the forced deportation of immigrants (aka “remigration”), the AfD says foreigners should not be entitled to Burgergeld until they have been employed for 10 years.

  I am not saying politicians should ignore the topic — silence would only aid the AfD. Rather, my plea is for a more nuanced discussion. Unfortunately, the debate risks becoming divorced from the facts.

  There were roughly 46 million people in employment in Germany last year, a record high. While the jobless rate has rebounded to about 6 percent, it is still much lower than when SPD former German chancellor Gerhard Schroeder passed the so-called Hartz labor market reforms two decades ago and declared there is “no right to laziness in our society.” (Among other things, those reforms shortened the period that jobless benefits are linked to previous earnings and introduced a lower flat rate for the long-term unemployed.)

  The number of Burgergeld or Hartz IV recipients has declined during the past couple of decades, but their identity has also changed: Some 47 percent are foreigners, compared with just 20 percent in 2010.

  However, the 5.5 million total sounds more dramatic than the reality: Among them are about 1.8 million children, plus roughly 2 million individuals who are either unable to work, because they are caring for children or older relatives, are in further education, are sick or are employed, but earn too little to support themselves. That leaves about 1.7 million job seekers who in theory could work, but are not (yet), notwithstanding many of them have health problems or lack qualifications.

  Although those benefits increased 12 percent last year to reflect the increased cost of living, there would be no increase this year and payments are hardly lavish; an adult living alone receives 563 euros a month, families get more, and there are supplements for rent and heating.

  Claiming benefits is not more lucrative than working, in part because the minimum wage has also increased, academics said. Recipients are often ashamed of relying on state handouts and only a minority fail to comply with the rules. About 128,000 people (2.6 percent of total recipients) were sanctioned in 2023 for infractions such as missing a job center appointment, while about 22,000 had their benefits cut for turning down a job in the 12 months to August last year.

  “One can’t make the sweeping statement that Burgergeld recipients are lazy,” SPD coleader Lars Klingbeil said last week.

  Germany’s working age population is set to shrink in the coming years as the large baby boom generation retires, and there are more than a million unfilled job vacancies. So helping the long-term unemployed find work is essential; doing so would also reassure taxpayers they are not getting a rough deal, while reinforcing support for immigration, which Germany needs more of.

  Although it might sound reasonable to require those getting taxpayer support to undertake public works — as the northeastern city of Schwerin is planning — such programs might require additional spending and manpower to administer, and could distract job-seekers from acquiring the skills they need.

  It has been slow going at times, but overall, Germany has done a decent job of integrating new arrivals into the workforce. For example, of the cohort of refugees who arrived in 2015, about 64 percent had found employment by 2022. It is likely that many of the more than 1 million Ukrainians who showed up in 2022 would also find work once their qualifications are recognized, they have learned German and found childcare (which is not always straightforward.)

  The defunct three-party coalition constantly squabbled about spending priorities, including Burgergeld, due to a constitutional restriction on new borrowing. Merz is not ruling out reforming the so-called debt brake, providing Germany first gets a grip on social spending. However, long-term unemployment benefits (and the administration thereof) comprise less than 10 percent of the federal budget and are dwarfed by pension spending.

  Germany has a pay-as-you-go retirement system, whereby current workers pay for current retirees, requiring massive top-up payments from the budget. Policies to help retirement savers to invest tax efficiently in equities and thus reduce pressure on the state pension are essential. Germany should also focus on helping part-time workers (often women) and those nearing retirement to work longer, as well as measures to reduce the rocketing number of sick days.

  It might be too much to expect politicians to talk more about those issues rather than engage in populist bashing of migrants and the poor. However, Germany’s next government would have to face reality soon enough.

  Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.
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