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Welfare spending and its relevance for Germany’s federal budget - Hans Joerg-Schaeper
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Welfare spending and its relevance for Germany’s federal budget - Hans Joerg-Schaeper



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  • 1. Welfare spending and its relevance for Germany’s federal budget
  • 2. Introduction • Information on the social safety net in Germany • History: In the 19th century Bismarck established an insurance system against social risks.
  • 3. Main topics • Welfare state as a productive factor • As little state as possible • Future of the welfare state • Role and development of the welfare budget • Funding from the federal budget
  • 4. Welfare state as a productive factor • Social security leads to social integration and harmony. • Employees with a social safety net are motivated and productive. • Number of working hours lost through strikes low compared to other countries.
  • 5. Social security – a constitutional task • Principle of the social state enshrined in Article 20 (1) of the Basic Law. • State has a responsibility to provide for its citizens’ social welfare. • State has a duty to keep the costs for each insured person at a reasonable level.
  • 6. Social security network • In Germany the welfare state is shaped by non-governmental institutions. • Social partners define working and economic conditions. • Independent welfare organisations mobilise private funding.
  • 7. As little state as possible • Branches of social security are self-governing institutions. • Subsidiarity is a fundamental organisational principle of welfare state solidarity. • Self-governance is a fundamental aspect of the welfare state.
  • 8. Reform needed • Principle of social security must be upheld for future generations. • Federal Government is reforming health care, unemployment and social security legislation as well as pension insurance.
  • 9. Role and development of the welfare budget • The welfare budget elucidates social security spending trends, shows how spending is financed and includes the medium-term forecasts.
  • 10. Social expenditure ratio • Index for relationship between social security contributions and total economic value added. • Social expenditure ratio = relationship between social budget and nominal GDP.
  • 11. Functional social budget • Summary of social expenditure according to purpose. • Structuring according to function reveals social development priorities. • This is the nucleus of the social budget.
  • 12. Institutional social budget • Summary of social expenditure according to institution. • The focus is on social security.
  • 13. Financing social security • The financial accounts provide information about the annual funding generated by the economy. • They are presented in a way which differentiates between the various forms of funding. • Their structure makes it easier to evaluate the burden on enterprises and labour costs.
  • 14. Financing social security from the federal budget • Most heavily funded sector in the 2014 federal budget. • Expenditure amounted to around 146 billion euros in 2013. • This corresponds to 49.5% of total expenditure. • Expenditure in 2015 and 2016 will amount to around 160 billion euros.
  • 15. Pension insurance payments • Expenditure of 82.5 billion euros in 2014. • Mainly comprises the federal subsidy for pension insurance for wage earners and salaried‑ employees. • 11.7 billion euros were earmarked for child-raising periods.
  • 16. Labour market policy • This sector was characterised by a reform and slow economic recovery. • The only gradual drop in unemployment figures resulted in payments totalling 30.3 billion euros. • 30.2 billion euros were earmarked for basic job seekers’ allowance.
  • 17. Family related expenditure‑ • The Federation has recognised the task of child-raising since 1986. 2.9 billion euros were allocated for this in 2005. • Family allowance – child benefit – is provided tax-free up to the minimum subsistence level. Relief for families totals around 2.3 billion euros. • Parental allowance to support young parents 5.05 billion euros
  • 18. Family related expenditure‑ • Childcare funding, investments: 261.3 million euros
  • 19. Further federal welfare expenditure • Housing benefits: 630 million euros in 2014 • Home owner allowance: 300 million euros • Payments to war victims: 1.3 billion euros • Social policy for the agricultural sector: 3.6 billion euros • Welfare benefits: 4.4 billion euros
  • 20. Future of the welfare state • An ageing population in Germany is presenting a huge challenge to social welfare systems. • Active social change is required. • Economic momentum and social welfare must go hand in hand. • A viable balance must be found between individual needs and the interests of the welfare systems as a whole.