How does the German government calculate the cost of a decent life? By saying no to booze and cigarettes.

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Sept. 29 2010 11:28 AM

Yes to Internet Access; No to Booze and Cigarettes

How the German government calculates the cost of a decent life.

Whiskey and cigarette. Click image to expand.
Germany has removed alcohol and tobacco from its welfare calcuations

BERLIN—What does a person need to lead a decent life? Figuring that out was the job of the German government when the country's highest court ruled that the state's system for apportioning welfare payments required modifications.

On Sunday, Labor Minister Ursula von der Leyen made the official announcement. "Following the Federal Statistical Office's calculation, there will be a slight rise in the standard [monthly welfare payment] for adults of five euros, to 364 euros," she told reporters. "Expenditures for tobacco and alcohol are not factored in, as they are not necessary for survival." (The current exchange rate has 1 euro at around $1.36, which puts the raise at around $6.80 and the monthly payment at around $495. Rent and home-heating allowances are issued separately, taking regional cost differences into account.)

The five-euro increase in monthly payments was quickly derided by the left as inadequate and by the right as unnecessary. But the elimination of tobacco and alcohol from the calculation marked a greater departure from the status quo. Until now, the nearly 5 million unemployed German adults who collect welfare payments under the system known as Hartz IV have been given 7.52 euros a month for alcohol and 11.58 euros for tobacco. To quench their newfound thirst, the government is instead giving people 2.99 euros per month for mineral water and other nonalcoholic beverages.

Also out: houseplants, non-motor-powered garden equipment, and orthopedic shoes. Newly added: Internet access (although factored in at just 2.28 euros a month), jewelry and watches (0.59 euros), and extracurricular lessons and hobby classes (1.61 euros). The government arrived at the numbers by looking at the average expenditures of the lowest-earning 20 percent of the German population. (German speakers can see the full breakdown here.)

"Germans are very precise," said Michael Burda, a professor of economics at Humboldt University in Berlin, "so they took a basket of goods and figured out what it would cost. It's a pretty meager basket."

And of course, it's the basket in its entirety that actually reaches unemployed Germans. They'll be receiving 364 euros to spend however they see fit; the breakdown provided by the government was simply the calculation it used to arrive at the total figure.

Yet the itemized list provides a rare glimpse into a government's judgment of which expenditures are valid and which are expendable. Some new provisions, like the inclusion of Internet access, reflect an effort to tie cost-of-living calculations to the ever-changing social landscape. "There are good arguments that nowadays Internet access is a basic right," Birgit Homburger, the parliamentary leader of the co-governing Free Democrats, told broadcasting network Deutsche Welle.

More controversial is the decision to take alcohol and tobacco out of the equation—two products that are consumed in vast quantities in Germany. The labor minister's assertion that alcohol and tobacco aren't "necessary for survival" disguises the fact that the Hartz IV payments go well beyond the bare necessities; among other provisions, the government is factoring in nearly 40 euros a month for "leisure, entertainment, and culture." The question is whether these products should be recognized as facts of life, goods that unemployed Germans will continue to buy regardless of the government's formula, or if they should discouraged. The administration chose the latter route.

"They're saying it's not your right to smoke on the public's expense," Burda said. "The public prejudice is: These people drink a lot."

Still, few expect that a slight change in the formula will change people's drinking and smoking habits. "How do you tie the payments so that Mom and Dad don't turn to cigarettes and booze?" asked Irwin Collier, an economics professor at the Free University in Berlin. With a lump-sum payment, the answer is: You can't.

Prior to Sunday's announcement, Elke Ferner, deputy party chair of the opposition Social Democrats, told the Bild newspaper, "We demand that the Hartz IV rates continue to reflect the necessities of life. Those have so far always included the very limited allowance for alcohol and tobacco."

The government is constitutionally bound to provide the German people with a decent standard of living. As Gunnar Heinsohn, a professor of economics at the University of Bremen explained, "Article 20 of the constitution states that Germany is a welfare state, and the definition of what is a welfare state is made by the highest court. And the highest courts have decided that every person in the country must be provided for in a decent manner."

That definition leaves a fair amount of wiggle room for administrations to shape the Hartz IV policy—and to further their own goals for the country in the process. Chancellor Angela Merkel hopes that the changes will allow Hartz IV to provide for people's basic needs while encouraging them to find their way back onto the employment rolls.

"We think we've found a solution that is appropriate," she said Sunday, "but that also conveys our main focus of ensuring that the duration that people receive Hartz IV unemployment money is as short as possible, and that people get back to work as quickly as possible."

Maybe, just maybe, nicotine and alcohol deprivation will do the trick.

Aaron Wiener is a freelance journalist and special correspondent for the Los Angeles Times, in Berlin on a yearlong Fulbright reporting grant.

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