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Basic Income Reform in Germany: Better Gradualism than Cold Turkey

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Author Info
Alexander Spermann () (ZEW Mannheim, University of Freiburg and IZA Bonn)

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Abstract

This paper advocates the cautious and constitutional evolution of existing basic income schemes ("unemployment benefit II") and Targeted Negative Income Tax (TNIT = "Einstiegsgeld") into a means-tested combi-wage model for the future long-term unemployed (gradualism strategy). The paper argues that, with regard to existing unemployment benefit II claimants, stronger financial incentives should be offered on a time restricted basis by largely disregarding (up to the relative poverty line) earnings from "mini", "midi" and part-time jobs – with the aim of providing current unemployment II claimants with a powerful incentive to work at least 15 hours a week and thus to relinquish their unemployed status. Bearing in mind the uncertain employment impact and the related fiscal risks, the paper advises against additional financial incentives by reducing support levels from one day to the next (cold turkey strategy).

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2398.

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Length: 34 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2398

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Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
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Web page: http://www.iza.org

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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
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Related research
Keywords: labor market reform; employee subsidy; workfare; long-term unemployment;

Other versions of this item:

Find related papers by JEL classification:
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alexander Spermann & Harald Strotmann, 2006. "The Targeted Negative Income Tax (TNIT) in Germany: Evidence from a Quasi Experiment," IZA Discussion Papers 2067, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2006. "Aktivierende Sozialhilfe 2006 - das Kombilohn-Modell des ifo Instituts," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 59(02), pages 06-27, October. [Downloadable!]
  3. Stefan Boeters & Reinhold Schnabel & Nicole Gürtzgen, 2006. "Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis," German Economic Review, Blackwell Publishing, vol. 7, pages 363-388, November. [Downloadable!] (restricted)
    Other versions:
  4. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2002. "Aktivierende Sozialhilfe - Ein Weg zu mehr Beschäftigung und Wachstum," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 55(09), pages 03-52, 04. [Downloadable!]
  5. Koch, Susanne & Stephan, Gesine & Walwei, Ulrich, 2005. "Workfare: Möglichkeiten und Grenzen," IAB Discussion Paper 200517, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
  6. Viktor Steiner & Katharina Wrohlich, 2004. "Work Incentives and Labor Supply Effects of the 'Mini-Jobs Reform' in Germany," Discussion Papers of DIW Berlin 438, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  7. Michalopoulos, Charles & Robins, Philip K. & Card, David, 2005. "When financial work incentives pay for themselves: evidence from a randomized social experiment for welfare recipients," Journal of Public Economics, Elsevier, vol. 89(1), pages 5-29, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jochen Michaelis & Alexander Spermann, 2009. "Geringqualifizierte Arbeit, Marktlöhne und Sozialpolitik: Konzepte für Deutschland," MAGKS Papers on Economics 200920, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
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