End of mini-jobs brings better jobs

style="float: right; margin-bottom: 10px; font-weight: 600;"Wed 23rd Jun, 2021

450-euro jobs proved to be a trap during the Corona crisis. While few normal jobs were lost, 900,000 of the mini-jobs that are now becoming an election issue were lost. A new study calls for their abolition in order to create better-paid and more secure jobs. Those who earn only up to 450 euros a month generally do not have to pay taxes and social contributions. The disadvantage of this subsidy for mini-jobs is that it means there is no short-time worker or unemployment benefit. Compared to other employees, mini-jobbers are twelve times more likely to lose their jobs. After their working lives, they face the threat of old-age poverty because they often hardly receive a pension.

Nevertheless, the number of mini-jobbers had leveled off at seven million by the time of the Corona crisis, out of a total of around 40 million employees. And one in five has been in a mini-job for more than five years. For students or retirees, the concept fits; they don't even want to work longer. But low-skilled workers and mothers often stay in mini-jobs. Because as soon as they earn even one euro more, they immediately have to pay ten percent social contributions. Taxes are also due on higher earnings. So it doesn't seem worthwhile to work more.Economists Tom Krebs and Martin Scheffel want to change that. For the Bertelsmann Foundation, they have developed a model that abolishes mini-jobs for all citizens except students, pupils and pensioners. For the other citizens, instead of heavily subsidizing jobs up to 450 euros by exempting them from taxes, as is currently the case, all employees earning up to 1,800 euros per month are to pay lower social contributions. Contributions rise slowly from zero euros in income.

Anyone earning 451 euros in the future would pay only half as much in social security contributions instead of 45 euros. A part-time employee earning 1,000 euros a month would only have to pay social security contributions of 110 euros instead of 190 euros. This would make it worthwhile to work more hours than before. Low-skilled workers, single parents and mothers in particular could benefit from such a reform. "For previous mini-jobbers, the familiar gross equals net no longer applies, but the reform offers the chance of a higher wage and better opportunities for advancement," says Jörg Dräger, Executive Director of the Bertelsmann Foundation.

Social contributions are already reduced for earnings of 450 to 1200 euros. Economists Krebs and Scheffel propose an even greater reduction - and an extension to higher incomes: "Everyone with up to 1,800 euros gets a relief," says Krebs.The economists calculate that the reform will create 165,000 additional fully socially insured jobs by 2030, mostly part-time. The number of unemployed would drop by about 90,000, and the number of citizens at risk of poverty would also decrease. The number of those who only work up to 450 euros a month is not falling that much. Many cannot work longer because, for example, they cannot find childcare or are not in a position to do so due to their health.But for the others, a reform could offer a way out of what is in reality suboptimal employment. Because mini-jobbers receive their earnings without deductions, they are often willing to be paid poorly. Deductions would change that. In other respects, too, minijobs are often second-class work, because companies employ workers on call, forego continuing education and ignore rights such as paid vacation.

Mini-jobs are also a topic in the election campaign. "The Corona crisis has once again shown that social security for mini-jobs is inadequate," the SPD writes in its election program. "Our goal is to include all employment relationships in social security. There will be transitions for existing employment relationships and exceptions for groups such as pensioners*." Social contributions are to be lowered for earnings up to 1600 euros instead of the current 1200 euros. The Greens also want to "convert mini-jobs into employment subject to social security contributions, with exceptions for students, pupils and pensioners."On this, Tom Krebs says: "Our reform proposals are in line with the demands of the Greens and the SPD to provide social security for all employment relationships of working people and to relieve low incomes." Krebs, on the other hand, finds the CDU/CSU's plan to raise the limit for mini-jobs from 450 euros to 550 euros wrong: "The CDU/CSU is expanding the mini-job trap."

More precise figures show who the mini-jobbers are. Of those who only do it on the side, 70 percent have vocational training or a university degree. Those for whom the mini-job is the main job are quite different: 70 percent of them have no degree. And 60 percent of those whose mini-job is the main job live in households that have a total net income of only less than 2,000 euros. So when better-paid and more secure jobs are created by a model like Krebs and Scheffel's, people with lower skills and incomes benefit greatly.Of course, such a reform first costs money. In the first year, the state will lose almost five billion euros in revenue. However, as a result of the expanded employment, the state collects more taxes and social security contributions and saves on unemployment benefits, for example, as a result of the falling unemployment figures. The reform will pay off for the state after some time. From as early as 2041, the additional revenue for the public sector will exceed the costs of the reform.

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