Basic Income Reform in Germany: Better Gradualism than Cold Turkey

Alexander Spermann

No 2398, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper advocates the cautious and constitutional evolution of existing basic income schemes (“unemployment benefit II”) and Targeted Negative Income Tax (TNIT = "Einstiegsgeld") into a means-tested combi-wage model for the future long-term unemployed (gradualism strategy). The paper argues that, with regard to existing unemployment benefit II claimants, stronger financial incentives should be offered on a time restricted basis by largely disregarding (up to the relative poverty line) earnings from "mini", "midi" and part-time jobs – with the aim of providing current unemployment II claimants with a powerful incentive to work at least 15 hours a week and thus to relinquish their unemployed status. Bearing in mind the uncertain employment impact and the related fiscal risks, the paper advises against additional financial incentives by reducing support levels from one day to the next (cold turkey strategy).

Keywords: long-term unemployment; labor market reform; employee subsidy; workfare (search for similar items in EconPapers)
JEL-codes: I38 J22 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006-10
New Economics Papers: this item is included in nep-cwa and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: Applied Economics Quarterly Supplement, 2006, 57, 113-130

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