Wage subsidies against in-work poverty: Why the U.S. is more successful than Germany

Abstract

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Poverty: More Than Just a Lack of Material Resources?

“…This benefit followed after unemployment benefits had ceased, and the amount was based on prior wages. Although unemployment agencies administered this benefit, it was paid through general taxes (Berthold et al, 2000). The second system subsumed all other people who were not eligible for unemployment-assistance benefits but who fell below the poverty line.…”

“…Separating the poor into two systems-the unemployed poor on the one hand and the poor due to other reasons on the other hand-seemed reasonable in the 1950s and 1960s. However, beginning with the onset ofand increase in-mass unemployment in the 1980s, the boundaries between the two systems became blurred (Berthold et al, 2000). Criticism was directed at the dual structure of the system, at injustices between the people in both systems, and at the low incentives that both systems offered for gaining employment, which eventually led to the merger of the two systems (Knuth, 2006;Seeleib-Kaiser & Fleckenstein, 2007).…”