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Strong Welfare State

A dense web of state insurances protects citizens against existential risks.
With a monthly child allowance, the state specifically promotes families – pre-school childcare provision has been broadened © dpa

Germany has one of the most comprehensive welfare systems. As in other developed democracies, in Germany too social spending represents the largest individual item of public spending. Around 996 billion euros was committed to public social spending in 2018, equating to a share of 25.1 percent of gross domestic product (GDP).

The tradition of the state welfare system goes back to the age of industrialisation in Germany in the second half of the 19th century and is as­sociated with then Reich Chancellor Otto von Bismarck. It was under Bismarck that firstly mandatory health insurance for workers was introduced in 1883, and with the social legislation that was expanded in the following years the basis was created for an orientation on the welfare state. The principle of the welfare state is embedded in article 20, paragraph 1 and article 28 of the Basic Law of the Federal Republic of Ger­many. Politicians and social players must continually renegotiate which form it takes in a dynamic process; particularly demographic change necessitates adjustments.

Today a tightly woven web of state health, pension, accident, nursing care, and unemployment insurance protects citizens against the consequences of existential risks and threats. Moreover, the social network encompasses a basic income for pensioners and those permanently unable to work as well as fiscal benefits such as the family allowance system (child benefit, tax advantages). Following further increases in 2018 and 2019, families receive 204 euros monthly for the first and second child, 210 euros for the third, and 235 euros for additional children. Moreover, the Coalition Agreement also envisages anchoring children’s rights in the Basic Law.

The pension package that entered into force in 2014 especially improves the situation of elderly people. The reform saw the introduction, among other things, of the full pension from 63 years of age and the so-called mother’s pension, intended to serve as an acknowledgement of mothers’ work raising children. Women who raised children born before 1992 did not have the childcare options available to parents today and as such fewer opportunities in the world of work. The mother’s pension acknowledges women’s work in raising children. Since July 2014 around 9.5 million women (and a small number of men) have received over 300 euros more in pension payments per child per year. Furthermore, since 1 July 2014 people covered by the pension insurance scheme who have paid in for 45 years have been entitled to retire at 63 without their pension being subject to deductions.

In early 2020, the Federal cabinet resolved to introduce a basic pension. Anyone who has paid into the pension insurance scheme for at least 33 years and has been a low-income earner will in future, so the plan, receive a bonus. The basic pension will benefit about 1.3 million persons, many of them women. The scheme is scheduled for introduction as at 1 January 2021.

Health insurance cover is a legal requirement in Germany. Medical care is guaranteed by a broad spectrum of hospitals, practices, and rehabilitation clinics.