Reforms: How social is the citizen's income?

In principle, yes: With rising standard rates, fewer people transition from citizen's income to work, as labor market expert Enzo Weber explains. However, the effects of higher payments on job entry are limited; he believes economic developments are far more decisive. Weber heads the research department for forecasts and macroeconomic analyses at the Institute for Employment Research (IAB) of the Federal Employment Agency, teaches empirical economic research at the University of Regensburg, and has studied the consequences of the introduction of citizen's income on job searches.

According to the Federal Employment Agency, an average of 5.64 percent of unemployed people deregistered from unemployment each month from September 2024 to August 2025 because they had started a job in the primary labor market or an apprenticeship. This was one of the lowest figures since the indicator was first calculated. Furthermore, switching from unemployment benefits is far more common than switching from citizen's income.

During the coronavirus pandemic, the chances of transitioning from unemployment to work fell to a similarly low level, after which the rate somewhat normalized. "Then, however, the energy crisis and the transformation crisis intervened, with a sharp collapse of industry," Weber explains to ntv.de. In February 2022, Russia invaded Ukraine, after which fewer people transitioned from unemployment to employment. In mid-2022, the so-called sanctions moratorium temporarily suspended benefit cuts for the unemployed, and in early 2023, the citizen's allowance was introduced – replacing "Hartz IV."

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The suspended sanctions and the citizen's income reform are not the main reasons why fewer people are moving from unemployment to employment, says Weber. "This is primarily due to the poor economic situation," his Study . The researcher examined the consequences for employment based on extensive administrative data and a control group approach.

The transition from employment or training subject to social insurance contributions to unemployment has also increased again. On average, 0.58 percent of previously employed persons subject to social insurance contributions reported themselves unemployed each month through August. This significantly exceeded the lowest figure of 0.50 percent in late summer 2022. However, compared to long-term averages, the current figure remains low: "Before the coronavirus pandemic, it had never been below 0.6 percent," writes the Federal Employment Agency.

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According to Weber, layoffs to "rest" on the citizen's income instead of working are not the main driver of unemployment. "The statistics don't support this." The increase in unemployment since the introduction of the citizen's income is due to layoffs due to the recession. Those affected are not slipping into the citizen's income, but rather into unemployment benefits.

The negative employment effects of the citizen's allowance were factored in: The reform of the previous Hartz IV system was intended to place the unemployed in jobs more sustainably, meaning less quickly in some cases, but more permanently. "We are creating the opportunity for people to not have to be placed in unskilled jobs, but rather to obtain a vocational qualification in order to be permanently employed," said then-Labor Minister Hubertus Heil of the SPD. "This also contributes to the recruitment of skilled workers and labor."

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Labor market researcher Weber continues to believe this goal of improving the qualifications of the unemployed is the right one. After all, two-thirds of unemployed citizens' allowance recipients lack a vocational qualification, as the researcher emphasized in an interview with Deutschlandfunk. However, this hasn't been achieved so far – qualifications haven't increased. "Budgets were tight. The number of unemployed has increased significantly since 2022, but budgets haven't increased in real terms," ​​Weber explains to ntv.de. "The citizens' allowance bonus, which was intended to provide incentives for qualifications, was quickly abolished for cost-cutting reasons. And in many cases, individual support is also essential for successfully implementing the right qualification. But the opportunities for this haven't improved either."

In addition to better training and counseling, the IAB researchers advocate bundling the various social benefits – such as housing benefits and child benefit allowances – into basic social security. Social benefits are often structured in such a way that higher earned income hardly leads to higher total net income – thus, it is supposedly not worth working more. "We propose integrating these benefits into a system in which social benefits are then phased out evenly, but in such a way that working more is always worthwhile. Those who earn 100 euros more may lose 70 euros in social benefits, but they will definitely have 30 euros more at their disposal," Weber explained to "Spiegel." Furthermore, consistent active support is possible in an integrated system.

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According to calculations by the IAB, such a 30 percent deductible would lead to additional employment equivalent to a six-figure number of full-time positions. Weber also calls for a clear economic policy on the basis of which companies can plan to generate higher economic growth again. The number of newly reported job vacancies is dramatically low. Long-term unemployed people, in particular, need this information to be able to apply. "The job prospects of the unemployed have declined dramatically for years. This is critical because unemployment eventually becomes entrenched. People simply can't get out of it. The majority of this can be attributed to the current economic downturn."

“If the state wants to save money, it has to get people into work,” Weber said in In a conversation with ntv.de . Not only will social spending be reduced, but the state will also receive additional taxes and levies. "If 100,000 unemployed people enter the workforce in one year, that will bring the state a total of three billion euros in savings and new revenue – then we will reach relevant dimensions," Weber calculated. Chancellor Friedrich Merz is demanding that Labor Minister Bärbel Bas take action on the citizen's income. saves five billion euros .

Stricter sanctions save significantly less money, because only a few sanctions are imposed. According to Weber, the effect is greater because recipients of the citizen's allowance adjust their behavior in advance to avoid sanctions. For example, the citizen's allowance is reduced if they miss appointments or refuse reasonable jobs.

On the other hand, severe sanctions also lead to "people being pushed into the first jobs they can find, from which they may quickly return, where there are few prospects and where wages are poor," Weber said on Deutschlandfunk. "This also depresses wage levels, as we saw after the Hartz reforms." It could also happen, he said, "that people simply feel punished, lose trust, and perhaps stop applying to job centers altogether" – thus suffering the maximum loss.

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The IAB summarizes it this way: "Research results show: sanctions work, but they are not a panacea." Weber therefore advocates a comprehensive approach: "We need both more training and more commitment, both more support and more work incentives," he told "Der Spiegel." The CDU-SPD coalition should "really pull out all the stops."

The labor market researcher also proposes changing the adjustment of the standard rates. In 2023 and 2024, there were significant increases in the citizen's allowance of around twelve percent each. "This affected all wage earners during this time, and there was great excitement," Weber told Deutschlandfunk radio. "Then follow in 2025 and Two freezes in 2026 , simply to reduce this excessive increase. The anger about this is also high again." The calculation should therefore be linked to current inflation as quickly as possible, but continuously – "so there's no back and forth." The purchasing power of the citizen's allowance recipients must be maintained at all times, emphasizes the labor market expert. "Because this is about the minimum subsistence level."

This article originally appeared on ntv.de. The news portal, like Capital, is part of RTL Deutschland.