Germany is set to overhaul its unemployment system... again

Will 'Basic Income Support' continue helping the people who currently receive 'Bürgergeld'?

Signing a job contract. Photo by Scott Graham on Unsplash

Dear Reader,

Two years ago, Germany’s then-‘traffic light’ coalition introduced Bürgergeld, an unemployment benefit meant to soften the hard edges of its predecessor, Hartz IV.

But conservatives quickly pushed back, arguing that the system was too generous and risked lulling recipients into long-term dependence. The centre-right Christian Democrats (CDU) made rolling it back a key plank of their federal election campaign earlier this year.

Now the CDU looks set to claim a victory. After weeks of tense negotiations with its centre-left coalition partner, the Social Democrats (SPD), Chancellor Friedrich Merz’s government agreed last Thursday on a draft law to scrap Bürgergeld in its current form and replace it with a Grundsicherung (Basic Income Support).

Merz said the new system would “significantly strengthen the requirements to cooperate” with Jobcenters, and estimated it could save up to €5 billion annually by nudging more people back into employment.

If passed by the Bundestag, the law would mark the second major shake-up of Germany’s unemployment benefits in just a few years. Bürgergeld had been billed as a more humane successor to Hartz IV, which had long been criticised on the left for meagre payments and harsh sanctions that punished recipients for missed appointments or rejected jobs.

Conservatives argued Bürgergeld swung too far in the other direction, softening penalties, protecting savings, and providing benefits that some said dampened incentives to work. Supporters, however, hailed it as a step toward restoring dignity, offering recipients more flexibility in job choice alongside training and career counselling.

Grundsicherung, in contrast, signals a return to stricter oversight, requiring recipients to attend appointments, accept “reasonable job offers”, and actively seek work — with benefits, including housing support, reduced or suspended for non-compliance.

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What’s the reaction been?

The SPD, which fervently backed Bürgergeld, has expressed a mix of support and concern for the reform. While the SPD parliamentary group gave “overwhelming approval” to the agreement, according to its leader Matthias Miersch, some members have voiced strong criticism.

Jusos, the SPD youth wing, raised concerns about the potential negative impacts on welfare recipients and the risk of marginalising vulnerable individuals, such as people with chronic illness or single parents who might find it difficult to meet every requirement.

Jusos chairman Phillip Türmer warned that the coalition risks a direct clash with the Constitutional Court, arguing that the government can’t simply yank full benefits from welfare recipients who can’t comply with the demands.

He was backed by Linke (Left) leader Heidi Reichinnek, who described the plans as “inhumane and legally highly questionable.”

Reichinnek argued that the tougher rules targeted not only those receiving benefits but also working people in general. “The message is clear — don’t demand better working conditions, accept every unpaid overtime hour, don’t ask for higher wages — because falling into unemployment will be even worse.”

SPD Chair and Labour Minister Bärbel Bas defended the reform, emphasising that its core aim is to strengthen the obligations of unemployed individuals, enabling Jobcenters to provide support more effectively.

Merz has continued to defend the sanctions, stating that: “No one in Germany will become homeless… But those who don’t cooperate at all, who don’t even respond to a Jobcenter — we must assume they don’t need the help.”

What comes next?

If passed by the Bundestag, the reform will have a significant impact on the 5.5 million people currently receiving Bürgergeld. Set to come into effect by the spring, its monthly standard payment rate would remain unaltered: single adults will continue receiving €563 per month, with an extra €357 to €471 per child depending on their age.

However recipients would face harsher sanctions if they miss Jobcenter appointments or turn down a “reasonable job offer”. A second “violation” would trigger up to a 30 percent reduction in monthly payments; a third “violation” would lead to a complete suspension of benefits, including money for housing and heating.

Photo by John Vid on Unsplash

Recipients’ savings and assets would also be less protected. Under the Bürgergeld system, recipients have been able to keep a certain amount of personal savings (Schonvermögen) for up to 12 months without it affecting their benefits. In the new system, the unemployed will automatically have their assets taken into consideration — with money saved from their own earned income to be favoured.

The new rules are meant to enforce the CDU’s core principle of “Fördern und Fordern” (support and demand) to try to ensure that public funds are linked to active efforts to participate in the labour market.

The German Review’s take

Grundsicherung is a mostly reasonable approach to encouraging jobless people to return to work — especially at a time when Germany is seeing rising unemployment while experiencing record labour shortages.

Another positive aspect of the reform: assessing someone’s personal savings before giving them benefits is fair - particularly because Grundsicherung is not the first line of support for the unemployed. If you suffer the misfortune of losing your job, you initially receive Arbeitslosengeld I, a contributory benefit paid for up to 12 months that does not take assets into account.

Grundsicherung, by contrast, is intended as a means-tested safety net, and factoring in savings helps target support to those who need it most.

Nonetheless, several of its new rules really need greater clarity. For example, the draft law is vague on what counts as a “reasonable job offer.” Key factors such as distance, pay, type of work, and working hours should be clearly defined to prevent situations where, say, a single parent is expected to take a night shift, or travel far from home.

Similarly, Jobcenter procedures need to be be more flexible. Recipients should be allowed to attend meetings by video or phone when necessary. And they should have the option to reschedule appointments a limited number of times without it being counted as a missed meeting.

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Sincerely,

Rachel Stern