Germany Debates Sanctioning the Unemployed

Despite a two month decline, the German Federal Labor Office announced that unemployment figures were once again on the rise. At 4.352 million, they are the second-highest since reunification.

That represents an increase of 94,500, up from 10.2 to 10.4 percent since last month and 305,000 more than at the same time last year. Though the July increase can partly be attributed to seasonal factors, including large numbers of recent school graduates who register as unemployed until they find their first job, the news, is still not good.

Slow economic recovery makes things worse

Florian Gerster, head of the Federal Labor Office, tried to put a positive spin on things, stating that, given the economic situation, the figures are relatively good and would have been much worse without the latest reforms introduced following the Harz Commission. They include the introduction of the so-called "Ich AG" ("Me Incorporated"), which gives financial incentives to unemployed people to start their own business.

Yet, Gerster had to concede that the economic situation in Germany -- the economy grew by less than 0.2 percent last year -- was exacerbating the situation. There simply aren't enough jobs to go around, and unless the economy improves, so say many experts, neither will the unemployment numbers. However, Gerster stated that the worst is over, and he made a "careful prediction" that the economy would grow by 1.3 to 1.8 percent in 2004, when things are likely to improve.

But the unemployment situation is so bad, the current government is not inclined to wait for an economic upswing to help turn things around. The governing SPD party is hoping to take what measures it can, through policy decisions, to get people back to work.

Active labor market policies, German style

The SPD party is introducing a bill on August 13, which, if passed, will introduce a more stringent version of active labor market policies in Germany. Such policies, which impose sanctions to compel unemployed people to work and, in some cases, offer additional funding for training, have become popular in the United States, England, Denmark, and the Netherlands.

Now a version is up for debate in Germany, which would combine social assistance and unemployment benefits as of July of 2004.

Garnering the most attention are the punitive measures of the draft bill, which will sanction able-bodied long-term benefit recipients who don't take the jobs offered to them by the federally funded employment agency. Until now, an engineer, for example, could decline a lower paying job outside his field and he wouldn't face sanctions.

That could soon change. According to the legislation, benefit recipients will face decreased benefits -- as a sanction -- by 30 percent for up to three months if they don't take the jobs offered them. Particularly effected will be the unemployed under the age of 25, who may have their benefits cut entirely for up to three months. The new legislation will effect 2.1 households and 4.3 individuals.

Not enough jobs to go around

The proposals will face a tough debate as the critics have already voiced their dissatisfaction.

Many point to the fact that the chance of finding a suitable position through the employment agency are considerably low. In this weak economy, there aren't enough jobs. Currently, there are 367,00 registered job openings. That's just a drop in the bucket, considering that there are more than 4.35 million on the hunt for a new job.

According to Heinz Putzhammer, a member of the board of the Federation of German Labor Unions, "There are not millions of layabouts in Germany, there's just not millions of jobs."

Isolde Kunkel-Weber, a board member of Verdi, another German labor organization, concurs: "The proposal gives the impression that if enough pressure is applied to the unemployed to work, then the problem of unemployment will be solved."

To those arguing from this point-of-view, sanctions only make sense if there's an excess of jobs available and the unemployed make little effort to find work. The right prescription for what ails Germany -- in the unemployment arena -- will once again steal the headlines the next few months, as the pros and cons of this new policy are the subject of debate.