1. Welfare spending and its relevance
for Germany’s federal budget
hans-joerg.schaeper@bk.bund.de

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.