Governance and Global Affairs Blog

The Hartz Reforms Revised: How Determining was the Hartz Commission’s Report?

The Hartz Reforms Revised: How Determining was the Hartz Commission’s Report? The Policy Process of the Hartz II law

More than one decade ago the Hartz laws reformed the German labour market. To what extent can the Hartz II law still be traced back to its underlying expert report?

A long period of uncertainty followed the latest German elections in 2017, until the recent vote of the Social Democratic Party (SPD) members finally ended the dispute over a new grand coalition. The government formation has been preceded by a heated election campaign in which SPD chancellor candidate Schulz reopened the controversial debate over the Hartz reforms. The report underlying these reforms was developed by the Commission for Modern Services on the Labour Market (2002), the so-called Hartz Commission, named after the head of the Commission, Peter Hartz. While the Hartz IV law is certainly the most well-known law, other laws also provide deep insight into the influence of experts on German politics. How influential has, for example, the Hartz report been on the policy process of the second law on modern services in the labour market (Hartz II)?  As the figure below shows, the report lost a big part of its influence throughout the legislative process leading to Hartz II.

It had all started with a political scandal: In January 2002, the Federal Court of Audit noted that only one third of the unemployed being counted as having found a job by the former employment agency had actually found a job according to the legal definition. High public attention caused the government to task the Hartz Commission, consisting of fifteen members 

from the public and private sphere, to design a new employment agency. The members of the panel were selected by the Office of the Federal Chancellor, former employment minister Walter Riester from the SPD and Peter Hartz, which is a good reflection of how politicians and experts cooperate in Germany. Public policy scholars call this a coordinated knowledge regime. The Commission then independently extended its mission to the development of an overall labour market concept.

 

High unemployment rates before the 2002 federal elections forced former chancellor Schröder to welcome the Commission’s advice on labour market reform. He promised a full implementation in his election campaign, putting it at the top of the political agenda. Hartz II incorporated two modules of the report: the creation of job centres and new incentives to formalize work. These were divided into the creation of Me-incorporated (Ich-AG) which refers to sole proprietorships founded by an unemployed and a new regulation concerning mini-jobs. But Schröder couldn’t keep his promise to fully implement the report. Having a look at the final law, we see some major differences compared to the original report:

  • There was no specification of the internal organisation of job centres.
  • The benefit scheme for Ich-AGs was calculated differently.
  • A lower ceiling and sharper taper rate for mini-jobs was introduced.
  • Workers having mini-jobs pay almost no social security contributions.

The evaluation process further challenged the implementation of the original proposal, leading to the decision to abolish Ich-AGs in 2006 by the grand coalition due to financial reasons. The coalition of the Christian Democrats and the Liberals further raised the minijob ceiling in 2013 as inflation compensation. Concluding, the commission managed to put the issue on the agenda and to form the basis of the Hartz II law, but the expert report was politicized throughout the legislative process, missing its original point. In the end, it had only a limited influence on the law that is currently still in place. The Social Democrats might have given up on reforming the Hartz laws by joining another grand coalition. Nonetheless, the designated health minister, Jens Spahn, has just been criticised as “cold and aloof” by the Greens and the Left Party for his recent comments about Hartz IV. The debate on the Hartz laws is therefore likely to continue in the upcoming years.

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