The year is 2003. Unemployment in Germany has hit 4.5 million, a rate of 10.5 percent. The federal employment agency (Bundesagentur für Arbeit, or BA), Germany’s largest government agency, with more than 90,000 employees at that time, stands accused of doing little more than tallying this figure. It is perceived as a bureaucratic monstrosity, so inefficient that it struggles to survive on the budget provided by taxpayers’ unemployment insurance premiums. It is seen as a black hole, completely dependent on government handouts.
To deal with the situation, the Social Democrat–Green Party coalition government, led by Chancellor Gerhard Schröder, passes the “Hartz laws,”1 initiating what may be the most substantial labor-market overhaul ever undertaken in Germany. “Challenge and encourage” is the motto under which job seekers—including welfare recipients, who had previously been invisible in unemployment statistics—will be mobilized, using all of the measures at the government’s disposal. The goal is to integrate customers into the workforce faster and in a more targeted way, shortening the duration of unemployment and accelerating the hiring process. More intensive mobilization measures, along with work incentives and entitlement cuts, are designed to encourage the unemployed to reenter the workforce.