Reform concepts for increasing employment in the low-income sector: an overview

After the Ifo Institute introduced its study on Activating Social Welfare in May 2002, a discussion was launched in Germany, which has constantly widened, on how a welfare-to-work policy could assist the low-wage sector. At the beginning of the discussion in 2002, reactions came from the Hartz Commission, the Academic Advisory Council of the Federal Ministry of Economics and Technology, and the German Council of Economic Advisors. The Magdeburg alternative was developed; attention has returned to the old concepts of a negative income tax or guaranteed minimum income (which had been discussed in the 1990s especially by sociologists); the IZA proposed a general work obligation for social welfare recipients (workfare); and economists in Kiel presented the idea of a hiring voucher. The alternative reform concepts for increasing employment in the low-wage sector display a number of common characteristics. In addition to these basic common characteristics, the models also display considerable differences, however. In order to display these differences, an overview of the individual reform concepts was prepared. It shows the various income and incentive effects that the alternative models would have on the low-wage sector.