Opinion
18.03.20

Help for the self-employed in the time of the coronavirus

Anke Hassel and Christian Odendahl see a way to help those with a total earnings loss.

Life in Germany is coming to a standstill. All areas of public life are shut down, employees have been ordered to work from home, schools and daycare centres have switched to emergency operations; conferences, culture and "social consumption" have been cancelled, borders are closed. In this situation, one of the core tasks of the state takes on new significance: its role as the insurer against major risks like illness, unemployment and poverty.

Too many fall through the cracks

The state must intervene courageously, some would say radically, and protect the people. The government has rightly made protection against disease a top priority. Businesses and employees have been offered easier access to liquidity or short-time work compensation, which is urgently needed. But too many people are falling through the cracks who also urgently need help.

The stoppage of public life affects not only big companies in manufacturing, but to an even greater extent the service economy such as tourism, cultural institutions, gastronomy and event management. In these areas there are particularly large numbers of precariously employed and self-employed persons. Think of the city guides, conference interpreters, sausage vendors, hotel cleaning staff, the many temporary workers in restaurants and at trade fairs and, of course, the artists.

In Germany, there are about 2.3 million stand-alone self-employed people. In addition there are almost seven million marginally employed with less than €450 monthly earnings (mini-jobbers). These include retirees who supplement their pensions, as well as students who finance their studies.

Some earn pocket money and are not dependent on it, because they may live in a household where their partner earns more. For many, however, the loss of earnings can quickly turn into an existential crisis. How can they be helped quickly?

So far, micro service providers do not receive compensation

The German law on pandemics (Protection against Infection Act)  already compensates the loss of earnings for a worker who is quarantined as a possible carrier of viruses. Wages are paid in full for the first six weeks the person is off work and thereafter is covered by a defined sickness benefit. However, this does not apply to indirectly affected persons, for example if a general ban on events is imposed.  It certainly does not apply to small service providers whose contracts are terminated when events do not take place. Those indirectly affected by the pandemic should be also covered by similar regulations, i.e. when service cannot be performed because the authorities have imposed a ban.

In addition, there are many self-employed persons who are not directly affected by the bans, but by the knock-on costs of cancelled events, trade fairs, concerts and conferences. Guided tours of the city may not be prohibited, but they cannot take place if no tourists come to the city. The same applies to self-employed cleaning staff in hotels. Here there should be a possibility of wage compensation for short-term contracts and a medium-term loss of earnings.

Reform insurance benefits for stand-alone self-employed workers now

One possibility would be to open up the benefits of voluntary unemployment insurance to the self-employed who were previously uninsured and to structure them better. The crisis would be a good opportunity to reform the inadequate insurance benefits for the stand-alone self-employed. At the very least, a bridging loan should be made available by government agencies.

However, both measures need some lead time, even if the German government were to implement them quickly. Agencies would need to ramp up capacity to calculate earnings losses and check claims. Also, an implementation process would be needed to distribute wage replacement benefits to the stand-alone self-employed.

500 euros in coronavirus compensation for each person affected

In order to bridge this lead time, the government should offer a 500-euro supplement for those affected by losses in income due to the coronavirus over the coming weeks. The coronavirus supplement should be paid to anyone who asks for it in order to cover necessary bills.

They could apply for the money at their own bank through the digital presentation of two documents: identity card or passport and the tax identification number or social security number. A central, digital reporting point for disbursed amounts could be implemented very quickly.

Preventing free-riders through tax surcharges

In order to prevent free-riders from applying, the amount could later be added back to the income tax. This would remove the incentive for higher earners to apply for the coronavirus money. All those who do not pay income tax – people with low incomes –should be allowed to keep the supplement. This benefit is not the same as introducing an unconditional basic income, but rather a short-term solidarity benefit for those most affected by a serious crisis.

The aim of the coronavirus money is bridging, like the "big bazooka" being used for companies. Other, more targeted measures are not realistic for some needy population groups in the short term. Even if Germany’s Hartz IV long-term unemployment benefit provides a safety net for all, the bureaucracy associated with it would currently overburden employment agencies.

 

This opinion piece appeared originally in Der Tagesspiegel on 17 March (in German). 

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