1. The German Social Welfare System

2. Euro 200: France, Germany and Modern Europe
Introduction
The social welfare system of a state …
is a key factor for the economy.
shapes the social structure.
prevents poverty.
Euro 200: France, Germany and Modern Europe

3. Euro 200: France, Germany and Modern Europe
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
Euro 200: France, Germany and Modern Europe

4. Euro 200: France, Germany and Modern Europe
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
Euro 200: France, Germany and Modern Europe

5. The EU - The Charter of Fundamental Rights (2000)
Article 33
Family and professional life
[…]
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.
Euro 200: France, Germany and Modern Europe

6. The EU - The Charter of Fundamental Rights (2000)
Article 34
Social security and social assistance
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.
Euro 200: France, Germany and Modern Europe

7. Describing Welfare States
Three Types of Welfare States
Liberal
Social-democratic
Conservative
(Esping-Andersen (1990): The Three Worlds of Welfare Capitalism)
Euro 200: France, Germany and Modern Europe

8. 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
Euro 200: France, Germany and Modern Europe

9. Social-democratic Welfare States
Universalism and equality
Redistribution of wealth
High benefits
State organized childcare
Encourage women to work
Examples: Scandinavian countries
Euro 200: France, Germany and Modern Europe

10. Conservative Welfare States
Maintain the differences between social classes
No redistribution of wealth
Traditional role models are protected
Example: Germany
Euro 200: France, Germany and Modern Europe

11. German Social Welfare System
Unemployment insurance
Health care insurance
Pension insurance
Long-term care insurance
Social assistance
Euro 200: France, Germany and Modern Europe

12. 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
Euro 200: France, Germany and Modern Europe

13. Euro 200: France, Germany and Modern Europe
Post war Germany Konrad Adenauer ( ), 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)
Euro 200: France, Germany and Modern Europe

14. 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
Euro 200: France, Germany and Modern Europe

15. 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
Euro 200: France, Germany and Modern Europe

16. Euro 200: France, Germany and Modern Europe
Growth of the government sector from the 60s to mid 70s Grand Coalition ( ), 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 (~60%)
1968 Average unemployment benefit: 68% of prior net wage
1972 Pension reform law: age of entitlement 63
Euro 200: France, Germany and Modern Europe

17. The Social Expenditure Rate Sozialleistungsquote
Source: Wewer, G. (1998), Bilanz der Ära Kohl, p. 348, Statistisches Bundesamt

18. Rolling back the welfare state in the 80s
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)

19.  The Safety Net Social security Insurance-based Wage-related benefits
Pension
Unemployment
Health care
Long-term / nursery care
Insurance-based
Wage-related benefits
Financed by contributions
“Conservative”
Social assistance
Alleviation of the poor
Means-tested
Fixed levels of benefits
Tax financed
“Liberal” 

20. Social Assistance Rate
Social assistance rate: claimants of social assistance not living in care institutions / population
Before 1991: former FRG
Source: Stastisches Bundesamt (2003) Sozialhilfe in Deutschland,

21. 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 non-labour 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 €

22. “Harz”-Laws Hartz I (2001): Hartz II (2003): Hartz III (2004):
Personnel Service Agencies
Job-AQTIV Laws
Hartz II (2003):
Jobcenters
“Ich-AGs” / “Me-plcs”: support for one-person start-ups
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

23. The Social-insurance Scheme
Pension
Unemployment
Health
Long-term care
Contrib.
19.5 %
6.5%
~14.3%
1.7%
Unemployment benefit
Unemployment assistance
(Unemployment benefit (II) 2005)
Compulsory if wage < 3.862,50 € / month
When
> 65 years
after 12 months of contributions, for 12 months
after 12 months of unemployment, all jobless persons able to work
How much?
~70 % of final net pay
~67 % of final net pay (one child), for 12 months
53% of final net wage
(345 € West / 331 € East, plus rent)
everybody gets the same
Level I: 345 € Level III:
1.432 €
wage-related
(fixed level,
means-tested)
“principle of solidarity”
care at home promoted