Reform of the income exemption rules for the working poor: What's left at the end of the day

Abstract

"The German government is planning to alter the amount of earned income that benefit recipients are allowed to retain. Under present conditions, the benefits of the working poor are reduced by 80 per cent of earned income above a basic allowance of 100 EUR. If employed welfare recipients earn more than 800 EUR, benefits will be reduced by 90 per cent in the margin up to 1,200 EUR, or 1,500 EUR for families with children. The reform proposal, which still has to pass both the Bundestag and the Bundesrat, provides for a slightly more generous benefit reduction rule from 1 July 2011 onwards: the 80 per cent income bracket will be extended from 800 to 1,000 EUR.<br> Based on a microsimulation analysis, IAB expects this marginal adjustment to have no significant effects on either labour supply or on the number of people who are eligible for so-called 'Hartz IV' payments. At the same time it will not cause any significant extra strain on public budgets." (Author's abstract, IAB-Doku) ((en))

Cite article

Bruckmeier, K., Feil, M., Walwei, U. & Wiemers, J. (2010): Reform der Hinzuverdienstmöglichkeiten im SGB II: Was am Ende übrig bleibt. (IAB-Kurzbericht 24/2010), Nürnberg, 8 p.