Lukas Hochscheidt from the Arbeiterwohlfahrt (AWO) gives the welfare state in Germany a very bad report. It is "too complex, too bureaucratic, its services are insufficiently coordinated - and it does not adequately protect against poverty and social exclusion."
His verdict: The welfare state is in a crisis of legitimacy. In order to get out of this crisis, the welfare association recommends a fundamental reform, based on the recommendations of the Federal Government's Welfare State Commission.
26 recommendations for modernizing the welfare state
In its report in January, it listed 26 concrete recommendations on how to modernize the welfare state. One of the key points is the consolidation of tax-financed social benefits such as basic security, housing benefit and child allowance.
Hochscheidt praises the experts' recommendations as "very courageous and very far-reaching" and speaks of a "window of opportunity", a favorable moment to make progress with the necessary reforms of the welfare state.
Bundling of services and financial incentive
The AWO wants to use a study to show how this could be achieved. Its title: “How pooling social benefits can work against poverty.” For this purpose, the Ifo Institute has calculated proposals from the workers' welfare organization, says study leader Maximilian Brömel from the Ifo Center for Financial Science.
Like the Welfare State Commission, the AWO proposes to combine basic security, housing benefit and child allowance into a new benefit for people of working age.
There is also an “earnings booster” - a financial incentive to take up employment subject to social security contributions. Specifically, that would be 100 euros for each person in the household who has an income above the mini-job limit. There should be an additional allowance for single parents if their income is counted towards the new social benefit.
Goal: Less poverty, more working hours
The calculations by the Ifo Institute show that the lowest income groups could have an average of 515 euros more available per year. The “at-risk-of-poverty rate” in the country would fall by 0.9 percentage points.
The rate in Germany is currently around 16 percent. “Single parents and families with children particularly benefit,” says study leader Blömer.
The economist sees another positive effect from the reform: the greater work incentives could lead to an increase in working hours amounting to 188,000 full-time equivalents.
Financing the additional costs
Nevertheless, the Ifo expert expects additional costs of 5.4 billion euros per year. The main reason for the additional costs is the “relatively generous performance,” says Blömer.
In order to counter-finance this large sum, Hochscheidt from Arbeiterwohlfahrt proposes reducing the better position for wealthy families through tax allowances for care, upbringing and training compared to child benefit.
If this gap were closed, it would bring in around three billion, says the AWO representative. He hopes to use reform to get away from the prevailing stigma of "I have to go to office." Social benefits are not a handout, but rather legal entitlements that one has by law, emphasizes Hochscheidt.
