Specifically, the government took a fresh look at people who had not worked in years to determine who could and couldn’t work. The able and healthy were matched with potential employers. If they took a low-paying job, which was often the case, they would still receive a small portion of their benefits for a time. If they refused to work, their benefits were reduced anyway.
“The incentives to take up work were strengthened,” says Felix Hüfner of the Organization for Economic Co-operation and Development, “and also the sanctions were strengthened.” Sure enough, the reforms have nudged more people back into the labor force — and work tends to beget more work, as people develop skills and have more money to spend.
It’s worth noting that these reforms were quite unpopular in Germany. Indeed, they played a key role in sparking the rise of a far-left Die Linke party whose strength has made it very difficult for the Red-Green coalition that implemented Agenda 2010 to win elections. What’s more, some Social Democrats have told me they blame Agenda 2010 for structurally shifting the balance of support on the center-left away from their party and toward the Greens. Indeed, one might see Agenda 2010 as fitting alongside the 1993 deficit reduction plan in the United States as examples of how efforts at responsible centrist governance reap few rewards for progressive political parties. No amount of success in producing economic growth and rising incomes changes the business executive class’ loyalty to right-wing parties, and the tendency is to alienate traditional working class constituencies.