Economic crisis? Also question and optimize the negative impact of mini-jobs on the German economy!

Contrary to initial hopes, mini-jobs rarely serve as a stepping stone to regular employment

The mini-job variant is proving to be a structural obstacle to Germany's economic development. It displaces more productive jobs, weakens social security systems, wastes human capital, and creates economically harmful incentive structures. The negative effects far outweigh the supposed flexibility benefits, making a fundamental reform of this form of employment urgently necessary.

In Germany, approximately 4.4 million (2023) to 4.5 million (2024) people work exclusively in mini-jobs. This corresponds to approximately 11.4 percent of all employees. These individuals have the mini-job as their sole employment and do not hold any other employment subject to social insurance contributions.

Negative effects of mini-jobs on the German economy

The mini-job variant is having a significant negative impact on various sectors of the German economy. Current research demonstrates structural problems that extend far beyond the individual level and cause damage to the economy as a whole.

Displacement of regular jobs

Substitution of jobs subject to social insurance contributions

The Institute for Employment Research (IAB) has demonstrated that mini-jobs systematically displace regular employment. In small businesses with fewer than ten employees, an additional mini-job replaces, on average, half a position subject to social insurance contributions. Extrapolated, mini-jobs have displaced approximately 500,000 jobs subject to social insurance contributions in small businesses alone.

Structural distortions

Almost 40 percent of the workforce in small businesses works in mini-jobs, compared to just 10 percent in large companies. This distortion particularly weakens smaller businesses, which play a key role in the German economic structure.

Negative productivity and growth effects

Preventing economic growth

Model calculations by the Bertelsmann Foundation show that a reform to abolish mini-jobs could increase gross domestic product by €7.2 billion and create 165,000 additional jobs by 2030. This highlights the significant growth potential blocked by the existing mini-job system.

Weakening of labor productivity

Mini-jobs often lead to the underemployment of qualified workers in unskilled jobs. This wastes human capital and weakens productivity growth—a critical factor in light of demographic change and the shortage of skilled workers.

Burden on social security systems

Loss of income from social security contributions

Mini-jobs cause significant losses in social security systems. While employees subject to social security contributions, together with their employers, pay around 40 percent of their gross wages into social security, this share is only 28 percent for mini-jobs. The revenue losses for social security systems amounted to over three billion euros in 2014 alone.

Additional burden due to basic security

Since mini-jobbers are not entitled to unemployment benefits, they fall directly into basic social security benefits if they lose their job. This places an additional burden on local authorities and the state budget, as was particularly evident during the coronavirus crisis, when 870,000 mini-jobbers lost their jobs.

Labor market distortions and inefficiencies

Negative incentive systems

The mini-job system creates counterproductive incentives. At the €450 threshold (currently €556), the tax burden jumps to around 20 percent, penalizing overtime. For employees, it may be more attractive to work a low-paying part-time job than to work overtime in their main job.

Missing bridge function

Contrary to initial hopes, mini-jobs rarely serve as a stepping stone to regular employment. Marginally employed workers often remain in the low-wage sector and work below their qualifications.

Higher volatility and crisis vulnerability

Extreme vulnerability to crises

Mini-jobs are particularly vulnerable in economic crises. The probability of losing a job is about twelve times higher for mini-jobbers than for employees subject to social insurance contributions. The high turnover rate of 63 percent compared to 29 percent for regular employees results in additional costs for recruitment and training.

Lack of stability

The lack of social security leads to higher staff turnover, which reduces operational planning security and prevents efficiency gains through experience building.

Minijob reform: Paths to economic success

Developing mini-jobs into an economic success story requires fundamental structural reforms based on proven international models. The current problems can be solved through a combination of different reform approaches.

Fundamental system reform: Away from special status

Abolition of the marginal income threshold

The special status of mini-jobs should be ended. Instead, a sliding transition range could be introduced, ranging from zero euros to 1,800 euros per month, with social security contributions increasing linearly. At zero euros, the burden is zero percent, and at 1,800 euros, it's approximately 20 percent.

Dynamic midijob expansion

The existing transition range (currently €556 to €2,000) should be expanded downwards to create seamless transitions. This reform would relieve the burden on 26.1 percent of the labor force and create 165,000 additional full-time equivalent jobs by 2030.

Adapting international success models

Working Tax Credit based on the British model

The United Kingdom's Working Tax Credit (WTC) offers successful alternatives. The system combines minimum wages with tax-based wage subsidies anchored in the income tax system. The WTC promotes employment of 16 hours or more per week and creates genuine work incentives through degressive withdrawal rates.

Earned Income Tax Credit Adaptation

The US EITC system has shown impressive results. It reaches 23 million families with a volume of $64 billion and is considered one of the most successful anti-poverty programs. The system rewards work with a tax credit that initially increases with rising earned income, then remains constant, and finally gradually decreases.

French RSA model

The French Revenu de Solidarité Active (RSA) demonstrates how combined wages can work. When transitioning to employment, only 38 percent of social assistance is deducted, instead of 100 percent as with the old social assistance system. This creates strong work incentives.

Concrete reform proposals for Germany

New incentive systems

Negative income tax

Germany could introduce a system similar to the EITC, where low-income earners receive tax credits instead of paying taxes. This would directly reward work and combat poverty.

Progressive social security contribution

Instead of the hard limit at the mini-job threshold, a sliding contribution rate should be introduced that increases continuously from zero to the standard rate. This eliminates the "mini-job trap" and creates incentives for increasing hours.

Structural improvements

Dynamic adjustment of minimum wage

The earnings limits should be automatically linked to minimum wage increases, as already introduced in 2022. This prevents future adjustment problems.

Strengthen social security

All forms of employment above a minimum level should be subject to social security contributions. This strengthens the systems and provides security for workers.

Accompanying measures

Qualification and further training

Mini-jobs should be systematically used as a springboard through mandatory further training and qualification measures.

Time limit for certain groups

Restricting mini-jobs to pupils, students, pensioners and those in transitional situations would prevent the permanent trap effect.

Corporate incentives

Companies that transfer mini-jobbers into regular employment could receive tax incentives or subsidies.

Financing and implementation

Counter-financing

The reform costs can be covered by the elimination of fiscal costs from mini-jobs and higher tax revenues from regular employment. In the medium term, the reforms will result in net additional revenue of €2.21 billion annually until 2050.

Step-by-step introduction

A reform should be introduced gradually over several years to avoid disruption and give companies time to adjust.

Expected successes

If these reforms are consistently implemented, Germany would achieve:

• Increasing productivity through better use of human capital
• Strengthening social security through more contributors
• GDP growth of up to 7.2 billion euros by 2030
• 165,000 additional full-time equivalent positions
• Reduced old-age poverty through higher pension entitlements
• Strengthening domestic demand through higher net incomes

International experience shows that "Make Work Pay" strategies work when they are properly designed and not driven by party politics. By reforming the mini-job system, Germany could not only eliminate the negative effects but also create an internationally exemplary model for flexible, socially secure employment.

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Origin and target group of mini-jobs in Germany

Marginal employment, now known as mini-job, was originally designed for specific target groups: schoolchildren, students, pensioners and full-time workers who wanted to earn some extra money on the side.

Historical development and original intention

Marginal employment was introduced in the 1960s, when Germany experienced an acute labor shortage. Even the guest workers recruited at that time could not fully meet labor demand. In this situation, politicians attempted to mobilize additional labor reserves.

The original target groups were explicitly:

• Employed people in their free time (secondary activities)
• Non-working housewives
• Pensioner
• Pupils and students

These groups formed the so-called “labor market reserve,” which was to be activated by increasing the attractiveness of marginal employment.

Legal framework since the beginning

Since the creation of the Social Security Code at the end of the 19th century, exemptions from compulsory insurance for secondary employment or marginal activities have existed. The original motive was to avoid claiming small pensions, as such activities were considered of no significance for retirement provision.

Marginal employment was introduced as a term in the Social Code with the creation of SGB IV on 1 July 1977.

Increased attractiveness in the 1960s

In the 1960s, tax-free marginal employment was made more attractive in light of the acute labor shortage, encouraging housewives, retirees, students, and part-time workers to work on an hourly basis. Exemption from social security contributions was granted because social security funds were not yet scarce at that time.

Modern development from 2003

The form of mini-jobs we know today emerged as a result of the Hartz reforms in 2003. The original concept was significantly expanded, and the earnings limit was raised from €325 to €400. The limit on weekly working hours of a maximum of 15 hours was abolished.

Current situation

Today, it is clear that the original target group has expanded significantly. Of the approximately 7-8 million mini-jobbers in total, the following are:

• 63 percent women
• Around a third are housewives or househusbands
• One in five is a pupil or student
• 17 percent are already full-time employees with a part-time job

The current earnings limit is 556 euros per month in 2025 and has been dynamically linked to the minimum wage since 2022.

In short, mini-jobs were originally intended as a tool to mobilize additional labor from specific population groups—especially for people who were already financially secure elsewhere (housewives through spouses, retirees through pensions, school/students through parents/student financial assistance) or who wanted to earn some extra income alongside their main job. This original conception as "supplementary income" for specific target groups is still evident today in the legal structure and tax benefits of mini-jobs.

Full-time mini-jobbers in Germany

In Germany, approximately 4.4 to 4.5 million people work exclusively in mini-jobs. This corresponds to approximately 11.4 percent of all employees. These individuals have the mini-job as their only gainful employment and do not hold any other employment subject to social insurance contributions.

Citizens' allowance recipients with mini-jobs

According to current statistics from the Federal Employment Agency, approximately 356,000 citizen's allowance recipients worked exclusively in a mini-job in July 2024. This corresponds to approximately 43 percent of all employed citizen's allowance recipients. Other sources estimate that approximately 350,000 citizen's allowance recipients also work in a mini-job.

Calculated share

Based on the available data, the following proportion results:

• Total number of full-time mini-jobbers: 4.4 million people
• Citizens’ allowance recipients with mini-jobs: 356,000 people
• Calculated share: About 8.1 percent of full-time mini-jobbers also receive citizen’s allowance

Legal framework for the combination

The combination of mini-job and citizen's allowance is legally permissible, but is subject to certain crediting rules:

Non-creditable amounts

• The first 100 euros remain completely tax-free
• Of income between 100.01 and 520 euros, 20 percent remain exempt
• Of income between 520.01 and 556 euros, 30 percent remain exempt

Example calculation for a full-time mini-job (556 euros)

• For a 556-euro mini-job, approximately 194.80 euros remain untaxed
• The remaining 361.20 euros will be credited to the citizen’s allowance

Development trends

The figures show a stable to slightly increasing trend among marginally employed people. From 2022 to 2023, the total number of mini-jobbers increased by approximately 240,000 to around 7.9 million. The number of those holding a mini-job in addition to another job increased in particular, by approximately 150,000.

Among those employed exclusively in marginal employment, women are significantly overrepresented at around 60 percent, which reflects the social structure of this form of employment.

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