Germany: Ten years on, the labour market’s “miracle reform” still splits the country
16 August 2012
When Volkswagen chief Peter Hartz brought a blue CD-Rom into the German Chancellery on August 16, 2002, no one suspected that it contained the outline of the reform that would divide Germany for a decade; support its transformation from the “sick man of Europe” into an economic colossus; become the symbolic measure of Gerhard Schröder's mandate and mark his fall; or that it would finally become the most talked about reform of a Europe in crisis.
"Ten years of Hartz IV: work of the devil, or successful bail-out?” began the Frankfurter Rundschau, which attempts an impossible weighing-up of this four-part reform that was intended to bring flexibility to the labour market and that, “like a religion, split Germans into believers and unbelievers."
From an economic standpoint, increased pressure [on the unemployed] had a positive effect: Hartz IV, the merging of unemployment benefits and welfare at a lower level, and the proliferation of mini-jobs – up to a maximum of €400, these were exempt from social security deductions – saw even older men and women forced to take jobs well below their qualifications. The low-wage sector has expanded, paying wages no one can live on. [...] The Hartz reform has not only failed at all levels, but has contributed to the Americanisation of the German labour market and to a deeply divided society.
In 2005, when Hartz IV began, Germany had 4.86 million unemployed while in 2012, the forecast is 2.85 million. This change is attributed to three factors: global economic conditions, the low cost of production, and the labour market reform.