Germany’s Working Poor

Germany’s Working Poor

The Germans now face the highest number of impoverished workers in a decade, thanks to the draconian Hartz IV unemployment law.


More than a dozen people were lining up in anxious silence at the reception counter of the JobCenter in Berlin’s Pankow district, though it was 8 am and the place had only just opened. In response to a question, a middle-aged man said, “Why am I here? Because if you don’t come when they summon you, they take away what little they give you.” He thought the JobCenter would have little to offer him, except perhaps a job that had nothing to do with his skills. An unemployed teacher had recently received a letter inviting her to apply for a job as a sales assistant in a sex shop—or be sanctioned. In response, she posted online: “I’ve put up with all sorts from my JobCenter, but this is too much,” adding that she intended to file a complaint against the agency for abuse of authority.

The mobile-advice unit of the Berlin Center for the Unemployed had set up a minibus in the parking lot. Team member Nora Freitag put a pile of brochures titled “How to defend your rights against the JobCenter” on a folding table. “This initiative was launched in 2007 by the Protestant Church,” she said. “People are distressed and feel powerless against this bureaucratic monster, which the unemployed rightly see as a threat.”

A pensioner approached. She seemed embarrassed to discuss her problems in front of strangers. Her pension was less than €500 a month—not enough to live on—so she was receiving additional benefits from her JobCenter. But even then she couldn’t make ends meet, so she had started a precarious part-time job as a cleaner, earning €340 a month net. “I’ve had a letter from the JobCenter that says I haven’t declared my income, and I have to pay back €250,” she said. “But I haven’t got the money. And I declared my income on the first day, so they must have made a mistake.” A team member took her aside to explain where to appeal and also where to file a complaint if the appeal wasn’t successful. Sometimes the team uses the minibus to discuss a problem in privacy. “That’s one of the effects of Hartz IV,” Freitag said. “Stigmatization of the unemployed is so strong that many are ashamed even to talk about their situation in front of other people.”

Hartz IV is the fourth and final part of a wide-ranging deregulation of the labor market known as Agenda 2010, which was implemented in Germany between 2003 and 2005 by the ruling Social Democratic Party–Greens coalition under Chancellor Gerhard Schröder. The law is named after its architect, Peter Hartz, a former personnel director at Volkswagen, and merges social-welfare benefits and benefits for those unemployed longer than a year into a single package, paid by the JobCenters. The low rate—€409 a month in 2017 for a single person—is supposed to encourage the recipients, or “customers,” to find a job as quickly as possible, no matter how badly paid or poorly matched it is to their expectations or skills. Even worse, payment of the benefits is linked to one of the most coercive monitoring systems in the European Union.

“Honest People First”

As of 2016, Hartz IV applied to nearly 6 million people, including 2.6 million officially unemployed, 1.7 million unofficially unemployed—squeezed out of the statistics by “activation measures” (training schemes, “coaching” jobs paying €1 an hour, mini-jobs, etc.)—and 1.6 million children of recipients. In a society that worships work, the recipients are often despised as lazy, or worse. In 2005, the federal economic-affairs ministry published a brochure titled “Honest People First: Fighting Abuse, Fraud and Selfishness in the Welfare State,” with a preface by the minister, Wolfgang Clement, a member of the SPD. “Biologists,” it read, “use the term ‘parasite’ to refer to an organism that obtains its nutritional needs by feeding off other living things…it would be inappropriate to apply concepts from the animal world to human beings.” The popular press, led by Bild, took up the expression “Hartz IV parasite.”

Since the benefit package won’t cover rent, the JobCenters pay it, up to a maximum for the region determined by the government. “A third of the people who come to see us have housing problems,” Freitag said. “Most often because the huge rise in rent levels in major cities—especially Berlin—has forced them to break JobCenter rules. They have to move, though they don’t know where because the rental market is saturated, or cover the difference themselves by cutting back on their food budget.” Of the 500,000 Hartz IV recipients in Berlin, 40 percent are thought to pay more than the regulation maximum rent.

JobCenters may also pay a small emergency allowance, which gives the centers extensive supervisory rights. No area—bank accounts, purchases, travel, family, even a recipient’s love life—escapes their humiliating scrutiny. The country’s 408 JobCenters are given great latitude to use their own initiative, and they can be rather too inventive: Last year, the JobCenter in Stade, Lower Saxony, sent a questionnaire to an unemployed, pregnant single woman, asking her to fill in the names and dates of birth of her sexual partners.

The roots of this system go back to the 1999 manifesto “Europe: The Third Way/Die Neue Mitte,” signed by Schröder and his British counterpart, Tony Blair. In it, these “modern social democrats” proclaimed the need to “transform the safety net of entitlements into a springboard to personal responsibility,” claiming that “part-time work and low-paid work are better than no work because they ease the transition from unemployment to jobs.” In their view, a poor person working hard was better than a poor person out of work. This barroom philosophy was the ideological matrix for “what is probably the most important break in the history of the German welfare state since Bismarck,” according to Christoph Butterwegge, a political scientist at the University of Cologne.

Macron Embraces the German Model

In France, the Hartz laws have delighted employers, the media, and politicians for the last 12 years. Worship of the German model has strengthened since the election of President Emmanuel Macron, who believes “Germany has achieved wonderful reforms.” His opinion is rarely contested by the media. The day after his election, the editorial director of Le Monde wrote: “German Chancellor Gerhard Schröder forced through the reforms that make his country prosperous,” urging Macron—who wants to turn France into a “start-up nation”—to be ruthless in implementing his own reforms. The economist Pierre Cahuc, who with Marc Ferracci and Philippe Aghion inspired Macron’s vision for overhauling the French labor market, also hails “the exceptional success of the German economy.” He believes Hartz IV is not only “better for employment” but that it spreads happiness and contentment, since “an increasing number of Germans, especially those on lower incomes, say they are satisfied with their situation, whereas satisfaction among the French is stagnant.”

Macron’s plans are directly inspired by the German model, especially the hollowing-out of France’s labor code and the imposition of tighter controls on the unemployed. Macron summed up the spirit of Hartz IV when he told the French Parliament that “protecting the weakest members of society should not mean making them dependent on the state forever,” but rather giving them the means—and eventually requiring them—to “take proper responsibility for their own futures.” He added: “We must replace the concept of social aid…with a genuine policy of inclusion for all.” Schröder’s maxim for the poor was even pithier: fördern und fordern (“encourage and demand”).

These days, Peter Hartz’s own reputation is tarnished: Germans have not forgotten that in 2007, he was given a two-year suspended sentence and fined €500,000 for “buying social peace” at Volkswagen by bribing members of the workers’ council with cash, tropical holidays, and prostitutes. But he still finds an audience in France, where he has taken refuge. The French employers’ federation Medef regularly invites him to speak, and former president François Hollande apparently considered making him an official adviser. Today, he offers his advice to Macron via the press.

Yet Hartz played only a supporting role in Schröder’s reforms. He chaired the commission whose work served as their basis, but the Bertelsmann Foundation, Germany’s most influential media group, was the main director of operations. Its “philanthropic” work was central to the development of Agenda 2010: It financed expert assessments, distributed press packages, and networked to promote “goodwill.” Helga Spindler, a professor of public law at the University of Duisburg-Essen, wrote: “Without the Bertelsmann Foundation’s preparation, support and after-sales work at every level, the Hartz commission’s proposals and their transformation into law could never have happened.” The foundation even took the 15 members of the commission on study trips to countries considered to have an avant-garde approach to repurposing the unemployed: Denmark, Switzerland, the Netherlands, Austria, and the United Kingdom.

On August 16, 2002, Hartz presented his conclusions to Schröder under the dome of the French church of Friedrichstadt in Berlin. Schröder announced that it was “a great day for the unemployed,” promising to get 2 million people back to work within two years. The 344-page report included 13 “innovation modules” written in management-speak and peppered with “Denglish” (German-English) and expressions like “controlling,” “change management,” “bridge system for older workers,” and “new exploitation and voluntary work.” The JobCenters were described as an “improved customer service.”

The Unemployed Become Paupers

The Hartz IV system went into effect on January 1, 2005. Getting the unemployed into jobs required the creation of a wide range of incentives for employers: the exemption of low wages from taxes; the launch of mini-jobs paying €400, then €450, a month; the removal of restrictions on the use of temporary labor; and subsidies for employment agencies recruiting among the long-term unemployed. Employers, especially in the service industries, got greedy: With a fresh supply of low-wage labor from the JobCenters, they converted regular jobs into precarious ones; those who took them could join the queue at the JobCenters to supplement their earnings. The number of people in temporary employment climbed from 300,000 in 2000 to nearly 1 million in 2016; the ratio of the working poor—those earning less than €979 a month—rose from 18 to 22 percent. The introduction of a minimum wage of €8.50 an hour in 2015, raised to €8.84 this year, hasn’t affected the trend: 4.7 million workers survive on a mini-job paying a maximum of €450 a month. As a result, Germany has converted its unemployed into paupers.

Hartz IV is essentially a compulsory precarious-employment service. “Customers” are in permanent danger of falling into the sanctions trap. Berlin resident Jürgen Köhler, 63, is a self-employed graphic designer. Competition from the big firms has forced prices down, and he doesn’t get enough work to make ends meet, so he registered with the JobCenters. “One day I got a letter telling me to report to the employment agency at 4 am the following Monday and Tuesday for a construction job,” Köhler recalled. “It said that I would be paid the same evening, and that I needed to bring a pair of safety boots. Obviously, I don’t have that kind of equipment, and I’ve never worked in construction. I didn’t think it would be a good idea to start at my age.”

As is often the case, there was no time to appeal, so Köhler’s only option was to go to court and hope for a ruling before he was sanctioned, which could have cut his benefits by anywhere from 10 to 100 percent. No worker is safe from these sanctions, not even young people ages 15–17: In return for a monthly allowance paid to the household, the JobCenters can call them in at any time—even if they’re still at school—to “advise” them to look for work in a particular sector with a shortage of labor, and can stop the allowance if they miss an appointment.

As an unemployed member of the service-industries trade union Ver.di, Köhler had access to free legal representation and was lucky enough to get a favorable ruling in time. Sanctions were applied to nearly 1 million people in 2016, with penalties averaging €108—a considerable savings for Germany’s federal labor agency, to which the JobCenters report. In 2016, some 121,000 complaints were filed against the JobCenters, though 60 percent were dismissed. “You get hit with sanctions for such absurd reasons that there’s a good chance of winning if you go about it right,” Köhler said. “But a majority of the unemployed don’t know their rights and can’t defend themselves well. Most don’t even try.”

It wasn’t always like this. In 2003 and 2004, tens of thousands of people, both workers and the unemployed, joined spontaneous marches every Monday in German cities to protest Schröder’s “reforms.” The movement was especially strong in the east of the country, where slogans openly compared them to the anti-government “Monday demonstrations” of 1989. It spread rapidly to the west, where trade unions, reluctant to support the demonstrations, were taken unawares.

Ralf Krämer, Ver.di’s federal secretary in charge of economic issues, admitted: “The unions prevaricated for a long time. Their position was all the more ambiguous because two of their representatives had been on the Hartz Commission, one from the DGB [German Trade Union Confederation], the other from Ver.di.” The commission also included two politicians, two academics, a senior civil servant, and seven senior managers, including members of Deutsche Bank, the chemicals group BASF, and the consulting firm McKinsey. “The trade-union movement in Germany traditionally has close links to the SPD,” Krämer said. “All the evidence suggests the Schröder reforms only passed because we had a Social Democratic government—otherwise, the opposition to them would have been far stronger.”

“We Could Have Won”

In November 2003, there was amazement when a demonstration in Berlin not organized by trade unions attracted 100,000 people. “Many union members were there, including me,” Krämer said, “because the Ver.di grassroots could see that the reforms were only aimed at promoting the low-wage market. But the DGB leadership dragged their feet.” Five months later, protests in Berlin, Stuttgart, and Cologne attracted half a million people, something not seen in Germany since the Second World War. This time, union leaders led the marches. “We could have won if they had kept it up,” Krämer said. “But the DGB were scared of losing control and didn’t call for more demos. The Monday demonstrators found themselves alone, and the movement faded away. We missed a historic opportunity. Of course, confrontation is not a part of German union culture. We don’t normally challenge decisions made by a democratically elected government, though personally I regret that.”

This failure did not lead the unions to consider a change of strategy. Neither the leadership of Ver.di, nor that of the DGB—dominated by metal and chemical workers, though Ver.di is also a member—thought there was any point in opening a debate on the illegality of “political” strikes, a peculiarity of German law that forbids unions from calling on their members to strike over legislation they consider to be against the interests of workers. Mehrdad Payandeh, a member of the DGB’s federal executive committee in charge of economic issues, raised his eyebrows at the mention of general strikes: “To us, a strike only makes sense if we fail to negotiate a pay raise in sectors where we have representation. That’s rare. Our legitimacy comes from our membership, not from the street. We’re not like countries in the south, where people walk out over nothing.”

Payandeh is a good example of the union culture Krämer describes: He pays more attention to the employers he knows, whose “ability to work with the unions” he praises, than to the Hartz IV unemployed or the slaves of precarious employment, whom he views as being outside his brief. “Of course I’m against the Hartz IV sanctions and precarious employment,” Payandeh insisted. “But legislation passed by the Bundestag is not our business. Our job is to defend our members through sectoral agreements.” There are very few such agreements outside the metal and chemical sectors; as a result, the all-powerful service sector is able to draw on a pool of workers who are easily exploited and ever less protected.

The struggle against the Hartz laws has left its mark on Germany. It has considerably weakened the SPD, which is reeling from the loss of around 200,000 members since 2003. It has also reshaped the political landscape by driving SPD dissidents to merge in 2005 with the neocommunist Party of Democratic Socialism to form Die Linke (“The Left”), the only party in the Bundestag that is still campaigning for the Hartz laws’ repeal. It has also created a huge network of groups of the unemployed determined to make their voices heard through high-profile acts of mutual aid and self-defense, like the Basta collective, based in the working-class Wedding district of Berlin, which often protests at JobCenters.

As people in France ask themselves whether it will be possible to oppose Macron’s determination to gut French labor law, many German trade unionists are holding their breath. “Macron’s reforms worry us a lot, because there’s a risk they will drag wages down and there will be a knock-on effect in Germany,” said Dierk Hirschel, a senior Ver.di official. Krämer added: “We used to see France as a great example in many ways. The way things are going now is tragic. We hope the French unions won’t make the same mistakes we did, and will be more aggressive than we were.”

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