When Not Working Is the Best Option | Business| Economy and finance news from a German perspective | DW | 09.01.2006
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When Not Working Is the Best Option

How do you make low-paying jobs more attractive than the public dole? Government politicians say they have the answer. Economists wonder how they’ll pay for it.


A little more money to take on low-paying work

Of Germany's 4.6 million unemployed, more than 3 million have it tougher than most.

They have no formal training or education, qualifying themselves for little more than service sector jobs that pay less than what they would be getting on Germany's still-generous public dole.

Now they have the ear of Germany’s political elite. Spurred on by President Horst Köhler, members of Chancellor Angela Merkel's Christian Democrat Union began calling for a wage subsidy model that would entice those with little to no job training to trade the couch for the workplace.

The Union's parliamentary economic expert, Laurenz Meyer, said the government is considering introducing such a model nationally at the beginning of 2007. The goal is to bring down unemployment -- hovering at around 11 percent -- and save billions of euros in benefits those people currently receive.

Re-heating a decades-old idea

"Almost three million unemployed people have no formal job training. But there still needs to be work for them," said Köhler in a pre-New Year’s interview with newsmagazine Stern. "They can’t live from a low wage, so we need to increase their income. That’s the job of the state."

Horst Köhler in der Knesset

Köhler: Helping the unqualified is the job of the state

Since Köhler re-heated the idea of a wage subsidy model --something that’s been tested regionally in various forms for more than a decade -- the criticism has come quickly. Puzzled economic analysts say that a version of the wage subsidy already exists, while others question why the government would introduce a model that has yet to prove itself.

"We've already had this discussion," said Karl Brenke, economist at the German Institute for Economic Research in Berlin. In 2001, a wage subsidy model was tested out in Mainz. It ultimately failed because it was too complicated and not attractive enough to get people off of welfare and into low-paying work, say experts.

Economic black holes

But the debate won't go away. Providing German citizens with some form of basic financial support is the government’s constitutional mandate.

At the moment, a modified version is in place nationally. Around 650,000 people in low-paying jobs receive additional government support of around 350 euros ($425) a month, said Alexander Spermann of the economic research institute ZEW in Mannheim.

Laurenz Meyer Galerie deutsche Politiker

Laurenz Meyer wants a wage subsidy as soon as early 2007

Additional subsidies could entice people to accept low-paying jobs, said Spermann, but they also have the potential to become "economic black holes."

Conservative estimates by the German Economic Research Institute reported a wage subsidy model benefiting 100,000 unemployed people costing 4 billion euros.

Sorting out a confusing discussion

"According to our analysis, the government couldn't afford something like this," said Brencke.

Wage subsidy advocates like Spermann say there is financial playing room for such a plan if the government forces people to accept low-paying jobs before qualifying for full welfare benefits.

Kellner in Freiburg

Is there enough room in the budget to finance low-paying jobs?

But the current debate is almost as confusing as the Byzantine models tested by various German states in the past, say experts, adding that the government -- although on the right track -- needs to get its facts straight.

"We've had a few models from which we've learned," Spermann said. "But it doesn't seem like the politicians are aware of them at the moment."

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