Volume 216, Issue 4-5

The editorial outlines essential trends of development of the German Sozialstaat since 1948 and interpretes the editors intention to promote the diagnosis as well as proposals to overcome the long lasting and still increasing crisis of Germany’s Sozialstaat by publishing the view of invited experts in the fields of labor economics, fiscal policies, health, housing and social security. Starting from the conviction that the limits of the welfare state are exceeded and that the financial consequences of persistent unemployment as well as of the forthcoming demographic changes require reforms of the social security system, the editors asked the authors firstly to describe the main problems which are to be solved in the field the authors are dealing with, secondly to evaluate the effectiveness and the efficiency of policy measures and thirdly to present possibilities as well as limits of reform.

This article tries to develop a comprehensive economic approach to the necessary reconstruction of the German Sozialstaat. Social aspects of a competitive order as such, social policies which conform to the general idea of a market economy, and policies aiming at equal opportunities for every individual are counted among the central features of the concept of Soziale Markwirtschaft. The theoretical arguments in favour of the Sozialstaat follow Walter Eucken who understood social policies as being not only a separate issue but also as a (hidden) ambition of all his principles according to which a competitive order should be both constituted and regulated. As to the discussion of Sozialstaat reform, it follows that social policies should be rearranged according to the “subsidiarity principle”, that they should leave more scope for private initiative and for competitive solutions, and that equal opportunities and a benefit approach should be given priority to pure equity considerations and to an inter-personal redistribution of wealth.

After a sketch of structural changes relevant for old-age security, basic concepts of old-age security are described aiming at provision for old-age security (intertemporal redistribution) or support in old age (interpersonal redistribution) as well as minimum protection or incomerelated protection. There is a tendency in many countries for more old-age provision, in redesigning public pension schemes. Economic arguments in favour of a strategy for the German statutory pension scheme based on a concept of old-age provision are pointed out as well as instruments to realize this. Recent proposals for pension reform in Germany are discussed, namely changes of the pension formula for calculating and adjusting pensions and for reducing the pension level as well as linking the retirement age for a full pension to changes in life expectancy. In preparing decisions, an integrated approach is needed taking into account effects of different measures, long-term consequences and consequences for different generations. There are deficiencies in the present-day discussion in Germany and tasks for future research.

The article shows the negative consequences of the accumulation of several social security contributions in one person. Such consequences include, for example, unequal effects on income, the squandering of limited financial resources, a lack of transparency and unnecessarily high administrative costs. The article investigates the different reasons for accumulation. From the specific functions of the accumulating contributions it deduces criteria which provide a basis for a possible reduction of accumulations. The article states that the reduction of accumulations can help to make Germany’s social security system more transparent and efficient and at the same time create the financial leeway needed to provide consolidation in the long term.

Social Security for Women encompasses gender-related measures of Old-Age-Security, Health-Care and Long-Term-Care and Public Assistance. The German Social Security system bases its benefits on two major factors: labor force participation and family: The paper traces the development of these elements. It describes the existing structures of Old-Age-Security, Health- Insurance and their future options. Labor force participation continues to gain importance for women’s Social Security. Nonetheless the family continues as irreplaceable second pillar of their Social Security. Women born after 1940 depend predominantly on their own labor force participation for their livelihood and for their Social Security. In the future an adequate adjustment of work-derived and family-derived Social Security will be called for.

In the past years, the financial deficit of the German Social Health Insurance System gave rise only to short-term measures of cost reduction while fundamental restructuring as a basis for long-term remedy has not occured. This can be partially explained by considering the political system and its penetration by special interests. Furthermore, systematic problems such as a lack of transparency concerning cost and quality of services are responsible for the current extent of inefficiency in the Social Health Care System, and this is of special relevance in respect to the overall state of the German economy. Strategies to improve performance of the system are, first, concerned with increasing its orientation towards patients’ needs and wishes. This requires insured people to be better informed and to have more decision-making power. Preference orientation must be the rule for allocating resources to health care provision as a whole and for allocation within this sector as well. Second, competition among health insurance funds must be intensified to improve quality and reduce cost. For this purpose, free contracting between insurance funds and service providers is required, and the frequently legally defined monopolistic market structures are to be dissolved. Finally, institutional structures such as payment systems and the extent of individual responsibility are of substantial relevance for being able to cope with future, in particular demographic, challenges to Social Health Insurance.

High and persistent unemployment in Germany (and in most of the EU-member states as well) is mainly not a business cycle problem. The main part of unemployment is due to a deficit in workplaces which has been increasing from cycle to cycle since 1973. Since then real labour costs (wages and supplementary costs of labour) have been growing nearly as fast as employment-neutral labour productivity despite the global lack of workplaces (giving no room to hire additional employees). It is the decision-making of the monetary and fiscal authorities (which is not analysed here) in combination with the decision-making process within the collective bargaining on wages and within the social policy authorities, which have been hampering the German economy to return to a situation of full employment for more than 20 years.

This paper analyses income poverty in Germany from 1962 to 1995. Income poverty, as measured by three different poverty lines as well as by an institutional social assistance line, has decreased during the first decade and steadily increased after 1974. Since 1990, after the German unification, income poverty also increased considerably in the „New Länder“. The increase of poverty is correlated with a stepwise increase in unemployment, but also with changes in family composition and with cuts and restrictions of the social security system. Poverty rates of children went up tremendously, while poverty rates of the elderly decreased. Men and women are hit by poverty to almost the same extent. Foreigners show a much higher poverty rate than Germans. It seems probable that the tendency to increasing poverty will continue during the next decade.

This article argues that the “Bürgergeld”, a German version of the negative income tax, is not a reasonable way to integrate tax-financed social transfers with the income tax. From a systematical point of view it is shown that there is no reasonable common base for the positive and the negative income tax. But even if there were, a consistent tariff would be questionable with respect to incentives and fiscal cost. The social policy view depends on which social transfers are to be absorbed by the Bürgergeld. As a universal social policy instrument the Bürgergeld would be much too coarsely adjusted to the different social aims. On the other hand, if it is to replace only a few (of more than a hundred) social transfers it would turn out to be a rather generous transfer not much in line with the general demand for more individual responsibility. With respect to employment, the Bürgergeld may have some positive effect, if the trade unions accept it as a reason to accept lower wages within the low wage groups. But altogether again it is a much undifferentiated device for successful employment policy.

As to the position of the family in the formation of the welfare-state (“Sozialstaat”), the following dilemma exists: In the field of the social-economic support of parents in their (long-term) responsibility for children, decisive steps still have to be taken. On the other hand, limits to the burden that is generated by the social security system get more and more visible. Reshuffling the existing volume of social benefits requires a political power of family interests which hardly exists under the conditions of the actual representative democracy. Nevertheless, handicaps of families due to the structures of both economy and society have to be noted especially in the fields of the distribution of income, the family orientated conditions on labour markets and the educational system. Tendencies towards a separation of the society between a „non-family sector“ and a “family sector” have to be overcome by a rational and successful family policy.

Increasing public deficits imply, among other things, a careful examination of the high subsidies which are granted in the course of public housing policies in order to achieve quite a number of differing goals. Measures which subsidize the acquisition of self-inhabited housing property, e. g., should not be abolished, but rather be concentrated on the cases of young families with dependent children. Both equity considerations and the ambition of stabilising the budget suggest that the so-called “consumption approach” should be dropped, and calculatory rents for self-inhabited accomodations should be taxed. Housing programmes should generally switch to grants that do not rise with taxable income of individual recipients, and the Sozialer Wohnungsbau ought to be replaced by less expensive measures. At present, inappropriate procedures of developing new residential areas are pushing the constructions costs for housing and reverse the intentions of the policy for the distribution of wealth.

Considering the narrowing fiscal scopes of unfunded social security systems, a partial completion of public insurance by private wealth formation is advocated both by politicians and academic economists. This paper presents the distribution of wealth in East and West Germany and analyses the instruments dedicated to promote personal saving. Due to the fact that the wealth differentials between households and social groups are still rather high, it is proposed to focus the saving incentive measures on lower income households and families. However, subsidizing alternative compensation schemes such as the „investment wage“ or employee stock ownership plans turns out to be incompatible with the distributional goals mentioned above.