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Hartz IV The German Word of the Year 2004 and the Country s Hope to overcome its Problem of Unemployment

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  • Lohse, Tim

Abstract

When the centre-left government came into power in Germany in 1998, a core promise of the new Chancellor, Schroeder, was to reduce the lack of jobs and to increase welfare. Facing persistently increasing unemployment rates from then on, the government finally launched Hartz IV in 2004; the largest social reform project in the history of the Federal Republic. This reform, that took effect at the beginning of 2005, aims to increase employment in Europe's biggest but slowest growing economy, whilst avoiding the financial collapse of its social systems. Its main aim is to strengthen individual responsibility whilst lowering transfers for those unemployed individuals that are capable of work. Therefore, it is also the most disputed reform of the German social welfare system. By characterising effects and defects of the German welfare system, we identify some of the most important obstacles facing higher employment. We provide an outline of the government's endeavours to handle the problem of unemployment and of the main changes in the country's laws of social contributions. Particular focus is given to the newly established unemployment benefit II and to the reasonableness of work, which reflects a new social valuation of labour. To conclude, potential welfare and employment effects under the new system are discussed.

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Bibliographic Info

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover with number dp-311.

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Length: 17 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:han:dpaper:dp-311

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Keywords: Welfare; Unemployment; Poverty.;

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  1. Breyer, Friedrich & Franz, Wolfgang & Homburg, Stefan & Schnabel, Reinhold & Wille, Eberhard, 2004. "Reform der sozialen Sicherung," EconStor Books, ZBW - German National Library of Economics, number 92399, May.
  2. Bruce Bradbury, 2004. "Targeting social assistance," Fiscal Studies, Institute for Fiscal Studies, vol. 25(3), pages 305-324, September.
  3. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  4. William A. Darity & Arthur H. Goldsmith, 1996. "Social Psychology, Unemployment and Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 121-140, Winter.
  5. Friedrich Breyer, 2003. "Lohnabstandsgebot und Anspruchslohn: zu den Vorschlägen einer Sozialhilfereform," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(1), pages 83-93.
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