Making Work Pay: U.S. American models for a German context?

This paper examines efforts to make work pay, concentrating on U.S. American and German policies and experiments. We are specifically interested in fleshing out the relevance of U.S. American models for a German context as well as the special characteristics of the German situation which do not allow a mere „copying“ of the models. There is no established negative income tax in Germany, but current experiments are being conducted, in order to assess how successful incentives could be in lowering the high levels of welfare caseloads and easing the transition from welfare to work. High unemployment rates and guaranteed social assistance (and unemployment insurance) have caused a German version of the poverty trap, where few incentives exist for people to find work. This paper examines the normative, political and economic situation of each country with specific experiments and studies of tax credits. The U.S. American early negative income tax (NIT) experiments in the 1970s, the present day Earned Income Tax Credit (EITC), and two recent experiments to make work pay are discussed. The historical, political and economic context of Germany is evaluated for a possible earned income tax credit, and fledgling tax credit experiments that are currently being conducted in Germany are discussed. A negative income tax is defined in this paper as a cash payment to individuals and families from respective governments that acts to subsidize personal income up to a predetermined level. There is a minimum benefit level, a marginal tax rate and a break-even point. The higher the benefit level and the break-even point, the more a negative income tax will cost the government (Zimmerman 1995). Before describing specific tax programs, we first outline the country's welfare state developments with respect to financial incentives for work. The following is a closer consideration of the U.S.-American and German public assistance and tax systems. The U.S. and Germany have very different welfare regimes and negative income taxes should inevitably fit into the respective welfare structures in different ways, fulfilling different goals.

Poverty and Wealth Reporting of the German Government: Approach, Lessons and Critique

The Capability Approach has been adopted as a theoretical framework for official Poverty and Wealth Reports by the German government. For the first time, this paper provides information on the use of the Capability Approach in this reporting process to international readers. We show the background and processes that might have led the government to adopt Amartya Sen’s Capability Approach as a framework for the reports and describe the Capability-related structure and main contents of the recent 3rd Poverty and Wealth Report. We also explain why the extension of the Capability Approach from poverty to wealth issues in German reports may be promising also for analyses of capability deprivation in general. Finally, we discuss major shortcoming and challenges of the reporting and end with a brief conclusion.capability approach, poverty, wealth, affluent countries, Amartya Sen

A Capability Approach for Official German Poverty and Wealth Reports: Conceptual Background and First Empirical Results

The majority of the literature related to Amartya Sen´s Capability Approach (CA) has been devoted to questions of development and developing countries. In this paper, however, with a theoretical concept and first empirical results at hand, we shed some light on Sen´s argument that the CA is also relevant to wealthy countries (Sen, 1999, p. 6). First, we discuss the political background of CA applications in the case of Germany. Second, we sketch out a new analytical framework for the assessment of poverty and wealth in affluent countries in general from a CA perspective. Third, we show how this framework can be based on a corresponding set of feasible indicators and up-to-date representative information in the German Socio-Economic Panel Study (GSOEP). Finally, three selected empirical examples underline the resulting possibilities for analyses of gender inequalities, the unequal distribution of political participation and interdependencies between financial and nonfinancial issues of poverty and wealth within this integrative framework.poverty, wealth, capabilities, Amartya Sen, affluent countries, poverty determinants.