Taking Stock of Basic Security

In order to realistically assess the potential of a basic income, we must also have a close look at the current system of means-tested basic income support (‘Hartz IV’). This requires a detailed, scientific and differentiated assessment that serves as the basis for an evidence-based discussion on the necessary further development of basic income support. This is precisely what we have commissioned the ifo Institute (Leibniz Institute for Economic Research at the University of Munich) to do. 

The assessment is now available: in the study ‘The effects of means-tested basic income support on household behaviour – an overview’, conducted under the scientific direction of Prof. Dr Andreas Peichl, the authors from the ifo Institute analyse the elements of the current basic income support system. Among other things, they look at sanctions, incentives and non-take-up – and clearly identify the weaknesses of the current system.

Basic social security in Germany is too complicated and bureaucratic. It accepts a high level of non-take-up and thus fails to achieve its goal of combating poverty. The high taxation of additional income (the so-called ‘transfer withdrawal rate’) means that there are no financial incentives to take up work. These missing incentives are compensated for with sanctions. However, these rarely promote sustainable and well-paid employment and are therefore only effective to a limited extent. Finally, the system also proves to be impermeable: the path to normal employment remains difficult. 

We are therefore convinced that a reform of basic social security is urgently needed! It is precisely the core elements of a basic income that could remedy many of the weaknesses: automatic payment, less stigmatisation of recipients, no sanctions and, depending on the model, greater incentives to earn additional income. As a society, we must ask ourselves how we can further develop our social security system – and whether the core elements of a basic income should not play a key role in this. 

Summary