Exactly 10 years ago today, Germany's labour market was subjected to the first of the so-called Hartz IV reforms. Brought about by the smooth centre-left chancellor Gerhard Schröder, it was a watershed moment that changed the way the German government deals with poverty.

The changes were riddled with the kind of Anglicisms that German officialdom likes to deploy for any modernisation. In the past decade, unemployed Germans have been bewildered with a kaleidoscope of new "Denglish" terms, from "Jobcenter" to "Personal Service Agentur" to "Mini-Job" to "BridgeSystem". But the measures recommended by the Hartz commission – named after its chairman, former Volkswagen executive Peter Hartz – boiled to down to this: the bundling of unemployment benefits and social welfare benefits into one neat package.

The immediate effect was to leave those living on benefits worse off (as of 2013, the standard rate for a single person is €382 a month, plus the cost of "adequate housing" and healthcare). But the new element that brought the most profound change was the contract, drawn up between the "jobseeker" and the "Jobcenter", which defined what each party promised to do to get the jobseeker back on somebody's payroll. This was coupled with "sanctions" – in other words, benefit cuts – if the jobseeker failed to keep up his or her side of the bargain. With those two measures, Germany came to accept the modern interpretation of the word "incentive" in the job market: the doctrine that poor people will only work if they are they are not given money.

There are myriad debates about the net results or benefits of the Hartz reforms. Unemployment, both long-term and short-term, has certainly dropped considerably in Germany since 1 January 2003, but critics say that's only because most jobless people are forced to accept the next job they can find – and often they end up in one so low-paid and part-time that they were still dependent on some sort of state welfare anyway. Then again, the flexibility that allows employers – especially major industrial companies – to take on and lay off part-time shift workers depending on the state of the export market has certainly helped Germany to ride out the global economic crisis in the past three years.

But what is hard to overlook is that the Hartz reforms have had two social effects. First, they have helped to accelerate inequality in Germany. According to an April 2012 OECD report, "Germany is the only [EU] country that has seen an increase in labour earnings inequality from the mid 1990s to the end 2000s driven by increasing inequality in the bottom half of the distribution." The report goes on to point to "a set of reforms in 2003 meant to increase the flexibility of the labour market" which help to explain the "wage moderation".

Second, the Hartz concept has created new support for an old idea that is its ideological opposite – the basic income guarantee, or the bedingungsloses Grundeinkommen. This proposes that every citizen should simply be handed an unconditional income, without means-testing or any pressure to work, and thus be allowed to do more or less what they want with their lives. The German website of the income guarantee movement dates the explosion of interest to the fourth and final phase of the Hartz reforms, which came into effect in 2005.

Hartz IV, which still stirred enough anger last autumn to drive one activist to go on hunger strike, has intensified the debate around this radical alternative. And while none of the major parties have adopted it as policy, every one of them – including Angela Merkel's Christian Democratic Union – has raised the notion in their internal party debates.

On top of this, the basic income advocates have even been handed some ammunition by Germany's consititution, the Basic Law. Over the years, certain elements of the Hartz reforms have fallen foul of the constitution and its celebrated opening line "human dignity is inviolable". The German state is obliged to guarantee its citizens a life compatible with "human dignity," a principle that resulted in a 2010 court ruling that said the standard Hartz IV payment is not calculated in a way that ensures that. In April 2012, a Berlin court decided that the monthly Hartz IV payment was exactly €36 too little (or €100 for a family) to comply with constitutional requirements. That is not yet, and probably won't ever be, enough to overthrow the entire Hartz concept, but the conflict with the "pressure to work" ideology is growing more apparent.