A new plan by the German Minister for Economic Affairs, Mr. Glos, aimed at regulating the German low wage sector seems to meet with approval on the part of economists. A study by the Forschungsinstituts zur Zukunft der Arbeit (IZA) examined the effects which this plan would have. The positive finding is that it would generate about 1.4 million new jobs and save public money amounting to about 25 billion Euros each year.
Even in the short run the new plan by Mr. Glos is said to enable public authorities to save up to 2.7 billion Euros per year. Therefore, it is much more effective than other concepts currently discussed as for instance that presented by the German Minister for Labour, Mr. Franz Müntefering. According to a prior study his combined wages concept which was developped by economists Peter Bofinger and Ulrich Walwei would generate only about 146.000 new jobs.
The new plan by Mr. Glos requires welfare recipients who are able to work to provide return services in the form of doing jobs provided by the state or training to the extent of 39 weekly hours. Whoever refuses will lose welfare benefits. If the wage earned from the decreed activities falls short of unemployment benefits, they will receive the balance from the state.
The study was conducted by order of the Federal Ministry for Economy and Technology and a full version is available for download. 