Hartz concept

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The Hartz concept is the name given to the recommendations resulting from a commission on reforms to the German labour market in 2002. Named after the head of the commission, Peter Hartz, it went on to become part of the German government's Agenda 2010 series of reforms, known as Hartz I - Hartz IV. The reforms of Hartz I - III took place between January 1, 2003 and 2004; Hartz IV began on January 1, 2005.

On February 22 2002, the "Hartz Commission" was founded; its real name was die Kommission für moderne Dienstleistungen am Arbeitsmarkt - the Commission for Modern Services on the Labour Market. Its 15 members were led by Peter Hartz, then Volkswagen's personnel director.

The commission came up with thirteen "innovation modules" suggesting changes to the German labour market system. These were then put into practice as Hartz I - IV as follows:

1 Hartz I, II and III
2 Hartz IV
3 Legal considerations
4 See also
5 External links

[edit] Hartz I, II and III

Hartz I and II both came into effect on January 1, 2003, aiming at making new types of jobs easier to create, and covered, for example:

(Hartz I)

The foundation of "Staff Services agencies" (Personal-Service-Agenturen or PSAs)
Support for vocational further education from the Job Agency (Arbeitsagentur)
Subsistence payments by the Job Agency

(Hartz II)

The news types of employment, "Minijob" and "Midijob", with lower or gradually rising taxes and insurance payments
A grant for entrepreneurs, known as the "Ich-AG" (Me, Inc.)
A rise in the number of job centres

Hartz III came into effects on 1 January 2004. It aimed at restructuring and reforming the Job Centre, changing its name from the Bundesanstalt für Arbeit or Arbeitsamt (Federal Labour Institution) to the Bundesagentur für Arbeit or Agentur für Arbeit (Federal Labour Agency).

[edit] Hartz IV

The Hartz IV reform was voted in by the Bundestag on December 16 2003 and by the Bundesrat on July 9 2004. This part of the reform brought together unemployment benefits and social security benefits, leaving them both at approximately the lower level social security claimants received (up to 345 euros per month plus cost of "adequate" housing).

Prior to 2005, 12 up to 32 months (depending upon the claimant's age and work history) of full unemployment pay (60 to 67% of the previous net salary) were followed by Arbeitslosenhilfe (unemployment benefits, 53 to 57% of the last net salary). Since 2005, reception of the full unemployment pay (renamed to Arbeitslosengeld I) has been restricted to 12 months in general and 18 months for over-55-year-olds. This is now followed by the (usually much lower) Arbeitslosengeld II if the claimant fits the requirements (see next paragraph).

Whether or not a claimant is eligible for Arbeitslosengeld II now depends on his or her savings, life insurance and the income of husband or wife: only when these reserves are used up will a claimant get money from the state. The government believes this will mean that half a million claimants (out of 2.1 million today) will no longer be eligible for any benefits at all. The Institute for Economic Research in Halle estimated that the average long-term unemployed person would receive approximately 350 euro per month compared to 530 before the reform.

In order to receive even the diminished payments, unemployed persons can now be forced to accept any legal job, even if the pay does not provide subsistence and no matter how advanced their (previous) professional training.

The job agencies have also undergone some reforms: it was planned to have more agents help unemployed people find work, the figures changing from 400 unemployed people per worker to fewer than 75 for 25-year-olds and 150 for people over that age. (In 2005, those numbers still hovered at around 1:300.) Nonetheless, it is unclear how these measures could help in a labour market with over 5 million unemployed compared with less than 300,000 job offers (as of January 2005).

In January 2005, the number of people who count as unemployed rose in January 2005 by about 222,000 due to the new statistics introduced with Hartz IV and by about 300,000 because of seasonal reasons (unemployment is much higher in the winter). This is what finally brought the total official figure over the psychologically important 5 million mark to 5,037,000, the highest mark since January 1933 (just before Hitler came to power). Unofficially it was admitted that, also counting underemployed people and people employed in state work creation schemes, the number is closer to 6.5 million. That number alone was expected to stifle domestic demand further, and to lead to another marked drop in consumer spending after 3 already dismal years in the retail industry. The Hartz IV law remained under heavy criticism in Germany throughout 2005.

[edit] Legal considerations

Several constitutional lawyers dispute the legality of the Hartz IV law; up to 10 paragraphs of Germany's constitution (Grundgesetz) may be violated. The gravest problems seem to lie in the level of aid; 345 euros per month; though this more or less covers the most basic needs, some doubt whether the constitutionally requirement for "life in dignity" is met, given the high costs of living in Germany. Another problem is the gross disproportion between the employees' social insurance payments and the benefits (e.g., 30 years of unemployment insurance premiums equate some five full years of Arbeitslosengeld, not the 12 months conceded by Hartz IV). Other doubts arise from the so-called "1-Euro-jobs". A couple of constitutional complaints were announced for 2005.

On February 16, 2005, the Hartz IV law was ruled partially unconstitutional by a Düsseldorf Social Court as it violates the "equality before the law" guaranteed by Article 3 of the Grundgesetz. The German government is appealing the verdict.