Increases in citizen's allowance cannot compensate for the loss of purchasing power

Increases in citizen's allowance cannot compensate for the loss of purchasing power

The increase in citizens' money has recently sparked controversial discussions because, despite the adjustments, losses in purchasing power could still not be adequately compensated. Critics complain that the increase in citizens' money at both the beginning of 2023 and the beginning of 2024 was around twelve percent too high. As a result, citizens' benefit recipients had a total of 25 percent more money, which was viewed as disproportionate given the significantly lower inflation rate.

According to experts, the increase in citizens' allowance was even too low and could therefore not compensate for the loss of purchasing power that people in basic security suffered. Irene Becker, an economist commissioned by the Joint Association, found that an unemployed single received a total of 1,012 euros less in the last three years than would have been necessary to secure the subsistence level. For a family with two adults and two children, the deficit even amounted to 3,444 euros.

The adjustment of the citizen's benefit rate is based on a formula that is recalculated every five years by the official statisticians. This adjustment takes into account partly the general wage development and mainly the inflation rate. The problem is that the calculations are based on data going back up to 18 months, meaning the increases do not reflect the true cost of living increases. In 2022, the social assistance rate only rose by three euros or 0.76 percent, while the inflation rate for people on basic security was already a good four percent at the beginning of the year and reached almost 16 percent towards the end.