Economic miracle, political disaster? Political consequences of Hartz IV

Abstract

The German Hartz IV reform has been a far-reaching labour market reform which reduced unemployment benefit generosity. The encompassing economic evaluation tends to confirm that the reform was an initial spark for the improvement of German labour market performance. At the same time, welfare state scholars have recently expressed concerns that such reforms may have far-reaching and detrimental political effects. In this article, I contribute to this discussion and analyse the political effects of Hartz IV including decreasing satisfaction with democracy, decreasing political participation and an increase of protest voting and political polarization. To identify the effect of the reform, I rely on bi-weekly representative survey data and exploit the announcement of the Hartz reforms as natural experiment. Comparing political attitudes of persons interviewed immediately before and after the announcement in regression analyses confirms that there was a sharp drop in satisfaction with democracy and the intention to participate in the next election, as well as increasing affinity to non-established and left-wing parties. Supplementary analyses show that the effect is stronger for unemployed workers who are more directly affected by the reform. These results are robust to different model specifications and estimation techniques. Moreover, placebo tests for past and previous years refute the concern that the effect is driven by other factors such as calendar time effects. These findings indicate that the political consequences of welfare state retrenchment go far beyond electoral punishment. This is possibly more relevant today than ever before as the current increase of populist parties substantially impedes the functioning of political systems in modern democracies.

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