Berlin Chancellor Olaf Scholz (SPD) put his finger in the wound in the Bundestag: With the citizen’s allowance, the traffic light coalition is making sure “that work is worth more than at any time in a CDU-led federal government,” he said on Thursday in the general debate.
In doing so, Scholz was targeting criticism from the Union that recipients of citizen income payments would have it easier in the future than many low-income workers. The traffic light had softened, the originally very high protective assets were to be lowered and the sanction options tightened so that the Union countries still agreed to the law in the Bundesrat on Friday.
In fact, through a reform of the additional earnings limits, the traffic light also ensures that recipients of citizen benefit will be able to keep more of their own income in the future than current recipients of unemployment benefit II. The question of whether work is really worthwhile compared to basic security is not really answered.
And it depends heavily on the individual case, as new calculations by the Kiel Institute for the World Economy (IfW) show. In many cases, households in which a single wage earner works full-time for the minimum wage can only achieve a higher income than recipients of citizen benefits with top-up social benefits. But even then, the wage gap is sometimes so small that there is no effective incentive for a full-time job.
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Using the example of various household types in Hamburg, the researchers have calculated which benefits the unemployed are entitled to with the new basic income. A comparison is then made with households in which an employee works 38.2 hours a week for a minimum wage of twelve euros per hour.
Compared to an earlier version of the study, which was reported by the Handelsblatt and which had methodological criticism, the IfW now takes into account the increases in child and housing benefits planned for 2023.
No wage gap in households with several children
The calculations show that single households – regardless of whether they have children or not – always have more money at their disposal with their wages and housing benefit than comparable households on basic income. Depending on the number and age of the children, the difference in wages is between EUR 49 and EUR 373 for families and EUR 364 for those without children. Without taking into account the housing benefit reform planned for the turn of the year, some of these employee households would be in a worse position.
Even in households with married partners and no more than one child, the net wage plus child and housing allowance is higher than the citizen’s allowance. However, calculated on the working hour, there is an advantage of a maximum of around 90 cents. However, the situation is different in households with at least two children. Here, the basic income – depending on the age of the children – is 54 to 369 euros higher.
The lack of a wage gap does not mean that the working household is in reality worse off than those receiving basic security, writes the IfW. Because the employee households can apply for additional social transfers such as top-up citizen benefit or the child allowance. Experience shows, however, that the complex application procedures deter many workers.
With the new additional earnings limit for basic income, households without children with one person working full-time have an income that is at least EUR 348 higher than a corresponding unemployed household. For families with children it is up to 378 euros. Compared to the current legal situation, the incentive to work increases because the additional earnings limit for unemployment benefit II is only 300 or 330 euros, the IfW states.
Researchers doubt that there are enough incentives to work
Calculated per hour worked, the net gain that can be achieved with a full-time job is still only EUR 2.10 to EUR 2.28. The authors doubt that this really offers a sufficient incentive to take up a full-time position. Especially since almost half of the income gain can be achieved with a mini job.
However, the consideration of the wage gap is also interesting because many employees, despite working full-time, have to accept the stigmatization associated with the application for basic income or child allowance in order to be able to cover the needs of their families.
So it’s not just about the amount, but also about the design of supplementary social benefits. In order to ensure a larger wage gap and thus create work incentives, the researchers propose higher child benefits, especially for older children, and better tax allowance for a non-working spouse.
In the coalition agreement, the traffic light government has set itself the task of coordinating social benefits and adjusting the additional earnings limits so that work will be even more worthwhile in the future. An independent commission is to develop proposals for this.
More: The way for citizen income reform is clear – compromises on central issues