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Re-regulation of marginal employment and introduction of midi-jobs

Country of implementation
Germany
General short description of the innovation
In 2003, a far-reaching reform of marginal employment was conducted ¤ only four years after marginal employment was already subject to a reform process. / / 1. The maximum income threshold for marginal employment (so called mini-job) was raised from 325 Ž to 400 Ž. Employees earning 400 Ž or less are neither liable to social security contributions, nor taxable. In contrast, employers are obliged to pay a lump sum amount equal to 31% of the monthly earnings. / 2. Since this revision, all issues listed under no.1, also apply to employees having a mini-job as secondary job (whereas previouslysecond jobs would be summed up with first jobs andcharged with contributions and taxes accordingly). / 3. A formerly existing limit on maximum working hours for mini-jobs (15 hours/week) was completely abolished. / 4. Since 2003, special rules apply for mini-jobs in private households such as domestic help, charlady and gardener. In this case the lumpsum amount is 14.44% (instead of 31% for companies and public sector employees). In addition, private households were allowed to claim 10% of their respective labour costs against tax. / / Comment: / The income threshold for marginal employment (so called mini-jobs) was raised from 400 Ž to 450 Ž in 2012. Hence the subsequent description of midi-jobs uses this new threshold. / In addition to the changes in marginal employment, a sliding social security contribution scale (so called midi-job-zone) was implemented to increase net earnings of employees, earning between 450.01 Ž and 850.00 Ž per month. This is achieved by transferring the principle of progressive taxation to the payment of social security contributions. In concrete terms, this means that employees were only liable to the full contribution rate of 20%, if their monthly earnings exceeded 849.99 Ž. Employees who earned less than 800 Ž had to pay a reduced contribution rate that lay between 11% (minimum rate in case that an employee earned exactly 450.01 Ž) and 20%. It is important to note that this rule only applies to employees. Employers are obliged to pay the full contribution rate of 19% as far as monthly earnings exceeded 450 Ž. / Comment I: Although the re-regulation of marginal employment and the introduction of midi-jobs took place in 2003, our description refers to figures (contribution rates, working time etc.) which currently apply in Germany (July 2014). / Comment II: The minimum contribution rate of the sliding social security contribution scale (midi-job-zone) has risen up to 10.7% over time. The maximum contribution rate is subject to constant alteration.
Target group
Total Population
Policy Field
  • general fiscal
Type of Policy
  • public
Duration of the policy
2003; open-ended
Scope of innovation
  • Budgets: no fixed budget ¤ legal requirements must be met
  • Number of intended beneficiaries: No target beneficiaries are entitled if certain requirements are fulfilled. In 2013, there were 4.82 million people working a mini-job as their only job and 2.63 million people having a mini-job as a second job. The number of mini-jobbers has considerably risen over time. In 2003, there were only 5.53 million people having mini-jobs (compared to 7.45 million people in 2013). However, the increase in marginal employment has resulted mainly from an increase in the number of people having a mini-job as secondary job (+1.47 million). The number of people exclusively having a mini-job however, has only slightly risen over time (+ 0.44 million).
  • Spatial coverage: national
General description of (intended) objectives and strategies
The main objective of the innovation was to generate additional employment in the service sector and thus in particular in the household-related service sector which is supposed to have a high share of undeclared work. However, for the by far major part of unemployed people neither mini-job nor midi-job are viable alternatives to full-time employment subject to social security contributions. Hence, the re-regulation of marginal employment was mainly in favour of those, having a mini-job as secondary job.
Type of ideal-typical strategy for the innovation
  • typical strategy for the innovation (optional; according to Obinger)-dualisation
Type of innovation
  • retrenchment or expansion of an existing/earlier policy
New outputs
  • subsidies/tax-credits (the exemption of mini-jobs from income tax and social insurance contributions is an indirect subsidy for workers.)
  • wages
  • working time (A former restriction on working time for mini-jobber (working time might not be of more than 15 hours per week) was abolished)
Clarification of intended mechanisms, outputs and outcomes (optional)
At first glance, tax and contribution exemptions of minijobbers are a public subsidy of workers¡ incomes. As a consequence, minijobbers would earn higher hourly net wages than comparable full-time workers. Employers take this ‰injustice¡ as a justification to pay minijobbers less. As a consequence, minijobbers tend to receive low hourly wages, and the tax and contribution privilege of the workers is transformed into an indirect wage subsidy for employers.
Intended target group
Unemployed, all employees with low earnings. However, this regulation was and still is especially attractive for people taking this job for extra-income, like housewives, pensioners, students.
Working age population
  • employment situation (please specify: e.g. typical work/atypical/unemployed) (Atypical form of employment)
  • income level (low/medium/high) (low-pay sector)
  • main source of income: paid work
Actors involved in policy-making/implementation and/or evaluation
  • making/implementation and/or evaluation-agency or national social insurance body
  • making/implementation and/or evaluation-central state
  • making/implementation and/or evaluation-employees (organised or individual)
  • making/implementation and/or evaluation-employers (organised or individual)
Intended output
  • wages
  • working time
Clarification of outcomes in terms of impacting resilience and labour market inclusion
Minijobbers have been far less affected by the slump of GDP in 2008 and 2009 than other forms of non-standard employment. The reason is that minijobs tend to be concentrated in the service sectors which were much less affected by the crisis than the export-oriented industrial sectors. Minijobs do not, to any considerable extent, serve as capacity buffers in manufacturing; this role is served by temporary agency work and by fixed-term employment contracts.
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