Germany’s welfare reforms in 2005 were supposed to help the economy, but instead they’ve helped create a jobless underclass
IT MIGHT seem obvious that Germany, the country that gave us Martin Luther and Protestantism, should be an authority on austerity.
But even by frugal German standards the radical welfare reforms in 2005 took that principle to a new extreme by setting unemployment benefit at the equivalent of €90 a week.
It was a rude awakening for Germans used to prosperity and a high standard of living. Even five years on, the welfare reforms remain the subject of heated public debate that borders on national obsession.
Defenders say the welfare measures, combined with labour-market reform, paved the way to Germany’s current economic recovery. Opponents say the welfare reform has created an underclass the likes of which Germany has never seen, twice Ireland’s population.
For three years Sandra from Frankfurt has survived on the single-person welfare allowance that now stands at €364 a month. After graduating from journalism school the 29-year-old worked in a series of unpaid internships while building up an impressive collection of rejection letters from prospective employers.
After burning through her modest savings she overcame her shame and applied for social welfare. On top of the monthly allowance, the welfare office pays her rent as well as heating and some other bills.
With €90 in her pocket each week, she’s become an expert on money-saving tips, like cutting open the tube to extract the last of the toothpaste.
“I get ill when I think of the job centre. I put off going there for months at the start, because most people think of welfare recipients as dullards lying at home on the sofa in tracksuit bottoms,” she says.
The aim of the 2005 welfare austerity drive was to reduce the country’s welfare bill by merging dole and social-welfare payments into a two-tier “unemployment allowance”. A new range of policing and sanction measures were introduced to clamp down on fraud and long-term welfare dependency.
The idealistic theory has given way to the Kafkaesque practice where each welfare recipient is entitled to a tailor-made welfare allowance based on their personal circumstances.
Endlessly complex welfare tables have been generated to assess the state contribution to everything from doctor’s fees to school excursions. The right to an existential minimum income is enshrined in German law, but the battle to define that minimum has landed before the constitutional court.
“It’s so German to have tables trying to measure everything and yet to somehow miss the wood for the trees,” says Claudia Petersen, an unemployed social worker, speaking at a job centre in Berlin, around the corner from Checkpoint Charlie. “The problem is not to define how much money people need to survive but the huge number of young people now going straight to welfare. They will never enter the labour market without greater spending on education and training. This new system is creating welfare dynasties, entire families where nobody has ever worked.”
It’s hard to shake the feeling that any savings made by the new system are being squandered on bureaucracy. Nowhere is that more apparent than in Berlin, Germany’s social-welfare capital, where one in five lives on welfare. Nowhere are there more disputes over social payments than here. These complaints end up in the welfare court, a pretty yellow Jugendstil building opposite Berlin’s sleek new central train station.
On average, a Berlin social- welfare recipient files a challenge to a stopped welfare payment every 16 minutes. The number of such challenges in Berlin alone has quadrupled in the past five years to nearly 2,700 a month, and the court now employs 134 judges, twice as many as before the reform. About 60 per cent of their caseload is social-welfare disputes, weighing competing claims and interpreting poorly defined legislation.
“The reforms have been one big job-creation scheme for jurists; many of my colleagues owe their jobs solely to the welfare reform,” says a court spokesman, Dr Markus Howe. Five years on, there is no sign of the welfare regime settling down, he says, thanks to a high rate of incorrect welfare assessments and the lingering feeling that the reform violates deep-seated German principles of equality.
“There’s a huge problem of psychological acceptance,” he says. “It’s created a huge feeling of angst and insecurity.”
The new welfare rules entitle job seekers to up to 69 per cent of their last salary, but only for a year. After six months, job seekers are expected to take any work offered to them – even if that job is at the other end of the country – or face a suspension of payments.
Jobseekers are entitled to welfare payments only after using up personal savings and if there is no earner in the household. After a year on the dole, payments are cut to the existential minimum of €364 a month.
“You feel the pressure building every week, and I lay awake at night worrying that, if I slipped down there, I’d never get out again,” says Frank Pützschel, a 45-year-old trained bank employee who was out of work for six months before taking a job in a call centre. He agrees with cracking down on indefinite welfare payments to people who don’t want to work. “The state can’t afford that, but the problem is that the new system doesn’t differentiate between welfare freeloaders and people who have worked all their life and are suddenly unemployed. All are lumped into the category ‘don’t want to work’.”
Germany’s new welfare system allows endless permutations of allowances, including full rental allowance and up to €287 a month per child. That has had unintended conseuences in a country where, after a decade of pay restraint, it’s not unusual for a supermarket cashier to have a monthly take-home pay of €900.
A family with several children that claims its full welfare entitlements often has a higher monthly income than low-earning families.
“Wages have dropped in real terms in the last decade despite the boom; that is the new German model,” says Sahra Wagenknecht, MP for the Left Party, who has called for the welfare reform to be rescinded. A regular visitor to Co Clare, she says welfare recipients in Ireland are in many cases now better off than their German counterparts.
“So far in the euro-zone crisis we haven’t seen the same propaganda on the welfare front that we did with Greece,” she adds. “But the tabloids here could easily start a campaign asking why welfare recipients have it better in Ireland.”
