Paradigm shift as supreme court caps job center penalties, effectively removing the legal requirement to seek employment.

German supreme court judges, making history.

Germany just got itself a universal basic income through the back door.

We’ll never know if the judges at the German supreme court in Karlsruhe were fully aware of the enormous consequences of their recent verdict. Probably not, because what they ruled on, at least officially, was not the question: Should there be a universal basic income, yes or no?

What they had to decide, on that fateful rainy November Wednesday, was simply the legality of an administrative regulation, concerning possible penalties Hartz-IV benefit recipients can incur, for failing to comply with their legal obligations to do everything (within reason) to end or reduce their dependency.

Nota bene: the German Hartz-IV benefit system is designed as a catch-all safety net — not just for the unemployed, but also for the sick, and for those only able to work a few hours per week; like single parents, or people who care for an elderly relative.

The status quo ante

According to the law under scrutiny, beneficiaries deemed fit to work had to present evidence of their efforts to end their financial dependency. Even though job center agents had considerable discretion as to what to count towards that, the refusal to show any effort whatsoever usually resulted in cancellation of the benefits.

For example, missing a job center appointment (without a valid excuse) resulted in a 10% penalty for the duration of 3 months. Cumulative penalties could, according to the regulations now under judicial scrutiny, reach 100%, in which case all support, including health insurance, would be withheld.

The legal reasons

But this was now declared unconstitutional by the German supreme court.

According to the opinion of the judges, the defendant (the federal government) had failed to prove to the satisfaction of the court, that the provision permitting up to 100% penalties was not only conducive to, but could reasonably be held to be a compelling necessity, i.e. a conditio-sine-qua-non in view of the law’s purpose, which is to nudge beneficiaries back into paid employment.

Absent that proof, a 100% penalty would constitute an undue hardship,

(i.e. a hardship not in service of a legitimate goal) and thus a violation of human dignity (‘Menschenwürde’), which is the primary constitutional principle all German legislation has to comply with.*

Thus, even though the judges assumed some efficacy of the penalties to be self-evident, and accordingly did not declare them per se unconstitutional, the verdict imposes a hard limit of 30% of the basic allowance (excluding rent), beyond which no further cuts may now be made, no matter what.

It is important to get the legal subtleties right. The court did not say that the principle of human dignity compels the state to support its citizens with a UBI. It rather declared unconstitutional the total withdrawing of support, for lack of proof of efficacy – the judicial equivalent of a Jiu-Jitsu move.

And that makes it sound not like that big of a thing. Which is likely the reason why the public, despite taking note of the verdict, has so far failed to realize its profound implications: To go from, essentially, ‘The Hunger Games’ to ‘As you like it.’ can, I believe, rightly be called a paradigm shift.

Because in practice, the verdict means: even if the beneficiary fails to apply for jobs, misses appointments, or, during a job interview, poops on the table while singing La Cucaracha — s/he will under all circumstances retain 70% of the food allowance, plus housing allowance, plus health insurance.

For life.

How much? Around 1120 EUR/month

Although this calculation has some caveats, it gives a good idea about the standard of living under the UBI. And what’s more, it is within the range of what past UBI proposals envisioned. The final sum is made up of several components:

Food allowance: 300 Euros

The standard allowance for food and other daily necessities is set at 424 Euros, which, assuming a 30% deduction, would be reduced to around 300 Euros per month. A young, healthy person will find it possible, with some careful planning, to fill their plate for that amount.

Housing costs: ≈ 500 Euros

It is not really possible to give an exact sum here, mostly because the cost (usually: rent+heating) of what counts as ‘adequate housing’ varies from place to place. For a single person, ‘adequate housing’ is defined as any place up to 50 square meters in the low-to-medium price range quarters of town. For Berlin, that is around 500 Euros, for Munich up to 700 Euros, but in some rural areas, 300 Euros would not be an unusual sum, either.

Health insurance: ≈ 320 Euros

This is the hardest to calculate. The monetary value of having health insurance is clearly bigger than zero, but the exact value varies, obviously, with the state of your health. At least in a system without universal healthcare. But in a public health care system, people pay not according to the state of their health, but according to their ability to pay, i.e. the rich more than the poor. Because there exists no genuine ‘market price’ for that kind of health insurance, we have to calculate with a proxy: the minimum employee contribution for regular membership in a public health insurance, which is exactly 323 Euros.

So, for an estimate of how much such a UBI would amount to in your own country, you’d have to add the rent of a medium to small place, whatever you’d have to pay for regular health insurance with full coverage, plus the equivalent of 300 Euros.

Is that a ‘real’ UBI?

That depends, of course, on what you mean by ‘real’. There are many different UBI proposals around: With or without a comprehensive tax reform, as substitute for all other welfare payments (or not), as a negative income tax, as payable from birth, as payable upon maturity, funded by VAT etc. etc. If you insist on your particular model to be implemented to the letter, then (surprise!) this is not a ‘real’ UBI — or rather, not your real UBI. However, all of the UBI proposals I’ve seen share some core features:

- every adult

- receives a monthly payment,

- that covers the basic needs and

- has no conditions attached.

Which is precisely what is now reality in Germany. And of course, one can argue what ‘enough to modestly live on’ means, or should mean, but I’m not going into that. I take it for granted that not starving, not homeless, not dying for lack of medical treatment is a good working definition without any obvious flaws.

(Edit: Something that came up in the comments time and again: can it still be rightfully called a UBI, if it gets reduced upon taking up employment? I’d say that question misses the central point: that each and every UBI proposal is predicated on taxing the relatively richer more, than the relatively less rich.

So, when someone takes up employment, they will naturally have to contribute a bigger share towards the support of the commonwealth than someone who is out of work. How the state decides to collect that money, whether by reducing someone’s benefits or increasing someone’s taxes, is of no real consequence to that person.)

Predicting the Effects of a Universal Basic Income