More work does not always mean more money

2024-03-21 09:34:00, Kosova & Bota CNA

When talking about social benefits or the so-called Bürgergeld in Germany, the question is often asked whether it is worth working or not? Until now, this topic has been addressed mainly by populists, who accuse the current government of raising support for the unemployed to an excessively high level.

But now even economists have come to the conclusion in a study that there are indeed situations in which high social benefits make extra work unattractive.

The Christian Democratic Union (CDU) has stated that if it wins the elections, it will modify the aid system, especially by toughening the sanctions against those who refuse to accept the jobs offered. But there is a discussion here that is deeper than social assistance. It is about the question of what are the consequences of the combination of different social benefits that are reduced if someone who receives these benefits works and increases his income.

Unclear rules

The answer to this question is given by a study conducted under the leadership of the Ifo Institute from Munich, in which the economist from Berlin Ronnie Schöb also participated. The result of the study does not differ from many other studies before: the one who works, has more than the one who does not work. But there are also situations, in which if someone who works more does not necessarily have a better income. "More work is not always worth and does not necessarily mean more money."

This can be seen, for example, in the case of a special category, when someone works, but due to the amount of money earned, they also need additional benefits or housing support as well as additional child benefits. These are usually people who do low-wage jobs and do not work full-time. Here there are also problems in the coordination between different aid offices, explains Schöb.

The biggest problem - excessively high payroll taxes

The big problem is the rent payments, but another big problem is the extremely high contributions that have to be paid from the salary, which has serious consequences, explains Schöb: "Why would anyone work more if they end up with no more benefits a lot or just a little more money?" There is also the absurdity that in the event of an increase in wages, people in some income groups are even advised to work less, because the contributions are too high. While with less work, the profit is the same, while you have more free time.

Employers are also witnesses of this phenomenon. "Employees react by reducing working hours due to high contributions. Although the opposite would be more important from a social point of view, emphasizes Pascal Kober, from the liberal party (FDP).

Kober cites as an example a single mother who currently earns 1,000 euros and is considering working 50 percent more. But because of the contributions, she would only have 84 euros more. This is disastrous given the labor shortage and lack of specialists in Germany.

He and others sympathize with those who say, "I work more hours, why shouldn't I have more money in my account at the end of the month?"

Necessary reform

Economists suggest that social benefits be paid over a longer period of time, so that at least 30 cents of every extra euro earned remains for people who have the right to work despite receiving benefits. "At first glance, this would only lead to higher social costs," says Schöb of the Free University of Berlin. But in the end, such a reform would benefit the state as well. "If we create incentives for people to work more again, this means that they pay higher social security contributions, pay income tax and lower costs for those who have to guarantee a minimum income."

But the Ministry of Labor is reluctant to implement the study's conclusions. The ministry announced that these results "are being analyzed in various ministries". The FDP politician Kober insists that they be implemented: "The principle that it is worth working for must also have support in the SPD." Even Kober's colleague, Klose , thinks: "A situation must be created when the work is worth it, so I will certainly support this path"./ DW