The German Social Welfare System
Introduction
The social welfare system of a state …
– is a key factor for the economy.
– shapes the social structure.
– prevents poverty.
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Introduction
– Role of Social Policy in the EU
– Concepts to describe different welfare
states
– Historic development of the German
welfare system and its basic characteristics
– Situation of today
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The EU – Social Agenda
Lisbon Agenda 2000 / Review 2005:
– Focus on Growth and Jobs
– 20 million jobs, 70% employment rate by
2010
Social Agenda: European labour market
– enable workers to take pension and social
security entitlements with them
– support the Member States in reforming
pensions and health care
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The EU - The Charter of
Fundamental Rights (2000)
Article 33
Family and professional life
1.
2.
[…]
To reconcile family and professional life, everyone
shall have the right to protection from dismissal for
a reason connected with maternity and the right to
paid maternity leave and to parental leave following
the birth or adoption of a child.
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The EU - The Charter of
Fundamental Rights (2000)
Article 34
Social security and social assistance
1.
The Union recognises and respects the entitlement
to social security benefits and social services
providing protection in cases such as maternity,
illness, industrial accidents, dependency or old age,
and in the case of loss of employment, in
accordance with the rules laid down by Community
law and national laws and practices.
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Describing Welfare States
Three Types of Welfare States
–Liberal
–Social-democratic
–Conservative
(Esping-Andersen (1990): The Three Worlds of
Welfare Capitalism)
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Liberal Welfare States
 Market-based social security schemes
 Private schemes
 Means-testing
 Limited benefits
 “[…] a blend of a relative equality of poverty
among state-welfare recipients, market
differentiated welfare among the majorities.”
(Esping-Andersen, p.27)
 Examples: USA, UK
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Social-democratic Welfare States
Universalism and equality
Redistribution of wealth
High benefits
State organized childcare
Encourage women to work
Examples: Scandinavian countries
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Conservative Welfare States
Maintain the differences between social
classes
No redistribution of wealth
Traditional role models are protected
Example: Germany
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German Social Welfare System
Unemployment insurance
Health care insurance
Pension insurance
Long-term care insurance
Social assistance
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Bismarck Area and Weimar
Republic




1883 Workers’ health insurance
1884 Industrial accident insurance
1889 Invalidity and old-age insurance
1911 Reich insurance system extended to civil
servants / white-collar workers
 1927 Unemployment insurance
 Characteristics:
– Contribution financed, not tax financed, no pay-as-you-go
– Contributions shared: 50% paid by employer, 50% by
employee
– Widely supported by middle class
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Post war Germany
Konrad Adenauer (1949-1963 ), CDU
Ludwig Erhardt (1963 – 1966), CDU
The Social market economy
(Alfred Müller Armack)
“A system which allowed business and
finance to operate under the conditions of
free market trading yet which worked within
the legislative framework of industrial
democracy at plant, company and industry
level and within a statutory social security
scheme seemed to enjoy the best of both
worlds.”
(Nigel Reeves, 1995, 213)
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The Social Market Economy
Die soziale Marktwirtschaft
Free market trading
The industrial harmony
Laws of Codetermination
Mitbestimmungsgesetz 1951
Betriebsverfassungsgesetz 1952
Monetary policy of the Bundesbank
(Federal Bank of Germany)
Extensive social security scheme
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Post War Germany The Economic Miracle
 1957 Pension reform (Rentenreformgesetz)
– Pay-as-you-go principle
– Pension adjustments linked to gross wages
 Characteristics of the welfare system:
– Based on traditional role models:
Women as mothers and carers,
male breadwinner, “family wage” / splitting of income
full-employment, standard employments
– Core aim: securing the achieved standard of living of
families
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Growth of the government
sector from the 60s to mid 70s
Grand Coalition (1966-1969), SPD and FDP (1969–1982)
 1966 / 67 Recession: government investment
programme (7.5 billion DM)
 1967 Stability Law (Law for the Promotion of
Economic Stability and Growth)
 Public sector grew about 1.3 million
employees between 1960-1973 (~60%)
 1968 Average unemployment benefit: 68% of
prior net wage
 1972 Pension reform law: age of entitlement
63
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The Social Expenditure Rate
Sozialleistungsquote
35
30
25
20
15
10
2002
2001
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1975
1970
5
Social expenditure rate in %
Source: Wewer, G. (1998), Bilanz der Ära Kohl, p. 348,
Statistisches Bundesamt
Rolling back the welfare state in
the 80s?
Helmut Kohl (1982 – 1998), CDU
 1992 Pension reform: pension adjustments
linked to the net wage, age of entitlement 65
 1992 Social expenditure rate: ~70% in the
former GDR
 1995 Long-term / nursery care insurance,
pay-as-you-go (Pflegeversicherung)
The Safety Net

–
–
–
–




 Social assistance
Social security
Pension
Unemployment
Health care
Long-term / nursery
care
Insurance-based
Wage-related benefits
Financed by
contributions
“Conservative”
– Alleviation of the poor





Means-tested
Fixed levels of benefits
Tax financed
“Liberal”
Social Assistance Rate
1) Social assistance rate: claimants of social assistance not living in
care institutions / population
2) Before 1991: former FRG
Source: Stastisches Bundesamt (2003) Sozialhilfe in Deutschland,
http://www.destatis.de/presse/deutsch/pk/2003/sozialhilfe_2003i.pdf
The Situation of today – Reforms
Gerhard Schröder (1998-2005), SPD
 „In an ageing society it is fair to expect people to take
more responsibility for themselves, especially
concerning health care and pensions. It is fair not to
cripple citizens‘ willingnes to work by excessive nonlabour costs“ (Agenda 2010,p.4)
 2002: Gesetz zur Reform der
Rentenversicherung („Riester“-pension):
– Promotion of capital-covered private pensions,
– Times of child-raising taken into account
– no adjustments of pensions in 2004
 2004: Reform of Health Care:
– quarterly fee of 10 €
“Harz”-Laws
 Hartz I (2001):
– Personnel Service Agencies
– Job-AQTIV Laws
 Hartz II (2003):
– Jobcenters
– “Ich-AGs” / “Me-plcs”: support for one-person startups
 Hartz III (2004):
– Restructuring and renaming of the Bundesanstalt für
Arbeit (= Bundesagentur für Arbeit, Federal
employment agency)
 Hartz IV (2005):
– Means-tested Unemployment Benefit II
The Social-insurance Scheme
Contrib.
Pension
Unemployment
Health
Long-term
care
19.5 %
6.5%
~14.3%
1.7%
Unemployment
benefit
Unemployment
assistance
(Unemployment
benefit (II) 2005)
after 12 months of
unemployment, all
jobless persons
able to work
Compulsory
if wage <
3.862,50 € /
month
When
> 65
years
after 12 months of
contributions, for
12 months
How
much?
~70 % of
final net
pay
~67 % of final net
53% of final net
pay (one child), for wage
12 months
(345 € West / 331
€ East, plus rent)
everybody
gets the
same
Level I: 345
€ Level III:
1.432 €
wagerelated
wage-related
“principle of
solidarity”
care at
home
promoted
wage-related
(fixed level,
means-tested)