In this commentary, we use the example of the German transfer system and its recent changes to assess consequences of benefit design for social inequalities in times of changing labour markets. Based on the rich literature on the so-called ‘Hartz-IV reforms’ in the early 2000s, we argue that while producing winners and losers, the immediate consequences of benefit reforms in Germany for the generosity of transfers were modest. However, the reforms did change some of the basic design principles of the transfer system. While it is still debated to what extent the reforms of the transfer system can explain the combination of decreasing unemployment and increasing labour market inequalities, they certainly modified the institutional context in a way that fundamentally altered the preconditions for the politics of combating inequality. Thus, the German experience offers an interesting example for assessing both intended and unintended consequences of benefit reforms.