More social benefits do not automatically lead to less work. Citizens’ benefit was only introduced a year ago; at that time there were great fears that more and more people might decide against regular employment due to the increased standard rates. Since January 2024, people who rely on social assistance or citizens’ benefit have now received more money. Single adults get 61 euros more – so they have 563 euros per month.
But these worries turn out to be unfounded: data from the… Federal Statistical Officethat employment will reach a new high in 2023. Around 45.9 million people were working in Germany in 2023.
Those who work have more net income than those who do not work
The increase in citizens’ money is not without controversy: voices from the CSU, CDU and FDP warn that the wage gap is too low. The argument goes that the incentive to work at all could disappear. Professor Andreas Peichl, head of the Ifo Center for Macroeconomics and Surveys, told the Berliner Zeitung that the debate is “partly quite populist.” It is always true that “those who work have more net money than someone who doesn’t work”. Different situations would be compared in the debate. It makes no sense to compare a non-working citizen’s benefit recipient with someone who is entitled to transfers such as citizen’s benefit but does not use them. That is like “comparing apples with oranges”.
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Only those who apply for the additional benefits can benefit from them
This is also confirmed by a spokeswoman for the Federal Employment Agency. When asked by the Berliner Zeitung, she said that after raising the standard rates, a significant wage gap to the basic security level would remain. She added that households with increased needs due to children or high housing costs could receive “supplementary means-tested social benefits”. “The regulations for crediting earned income in these benefit systems ensure that the available household income is generally always above the basic security level,” the spokeswoman continued. However, the prerequisite is that these claims are actually asserted. This means: Only those who apply for them can benefit from the additional benefits.
Also the Calculations by the Ifo Institute have recently shown that “despite the significant increase in the standard rates for citizens’ benefit, there is still a noticeable wage gap”. The Ifo researcher Maximilian Blömer said that the claim that people who only receive social benefits receive more net than low earners is wrong. There are “free allowances for employed people when calculating income against social benefits” that would prevent something like this.
According to the study, the wage gap remains
In the study, the scientists calculated the available income for different household constellations. For this purpose, they considered four typical household constellations: 1. Single without children, 2. Single with two children, 3. Single-earner couple with two children, 4. Dual-earner couple (splitting gross income 50:50) with two children . The wage gap will remain the same in all constellations examined after the adjustments to the German tax and transfer system planned for 2024.
The difference is several hundred euros for all households considered. For example, a single person with a gross income of 1,000 euros in a city with medium rent levels gets 891 euros after deducting taxes and social security contributions and adding social benefits. However, if this person does not apply for all the social benefits to which they are entitled, they will end up with 257 euros net, according to Manuel Pannier from the Center of Economic Studies (CES) in Munich.
Reforms so that overtime is always clearly worthwhile
According to the experts, significant differences in additional disposable income through work compared to unemployment arise from different rent levels. The household constellation also has an influence on how large or small the wage gap can be. Peichl added to the Berliner Zeitung that the study did not analyze whether this gap was large enough.
A little more net income doesn’t necessarily mean that work is really worth it, since in return you have to get up early and commute and have to bear the costs yourself. This could be a problem for some people, said the expert. In addition, there are also constellations in which you work more and therefore earn more gross, but have hardly any more available net. This is where politics must start. That’s why his recommendation is to reform the tax allowances for employed people and the rules for calculating housing benefit and child benefit so that overtime is always clearly worthwhile.
2024-01-17 23:43:17
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