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Welfare State In Germany Report

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Updated: Nov 13th, 2019


Federal republic of Germany was founded in the year 1949 after the Second World War. The country main sectors include agriculture, industry, engineering, and trader. According to Giehle (nd), the federal republic of Germany has the world’s highest levels of learning, technological advance and the commercial output.

The country is based on middle class community, where its social welfare system provides free for all health care, joblessness compensation, as well as other vital social necessities. Variation in welfare sates in Germany compared to other countries such as Canada, France, china and United States are explainable based on the cultures, institutions, and structural background of its political and administrative units.

The report will discuss all aspects of social welfare state in the federal republic of Germany. Predominantly, the report will outline various welfare programs and discuss the entire elements to the programs. In addition, the report will discuss importance of such social programs in eradication of poverty in the country.

Welfare state programs available in Germany

The foundation of the contemporary welfare state programs in Germany started establishment in the late nineteenth century (Congleton & Bose, nd). The first welfare state in Germany was social insurance programs, which was vibrantly supported by political parties. Other welfare programs include the Medicare, social security, unemployment and the Medicaid programs.

Government transfers in Germany

Germany government transfers involve payments to individuals or to families with social needs. These transfers provide financial aid to the poor, assistance to unemployed workers, guaranteed income for the elderly, and assistance in paying medical bills for those with large health care expenses.

Social security and unemployment social welfare programs are focused to provision of guaranteed income to retired or elderly or to the unemployed labor force respectively. Programs such as Medicaid and Medicare are implemented to cater for social needs of individuals and families in case of heavy medical bills or poverty echelon.

According to Corak, Fertig & Tamm, (2005) more than a million children in Germany depend on social transfer benefits. In addition, unemployed labor force also is provided with employment benefit schemes to meet basic social needs.

The elderly programs and the health care programs are covered partly by the government transfers and private funding depending on the Medicare or Medicare insurance policy held by an individual or families. In addition, fiscal budgets provide transfers to marital separation and job loss of household head since both events can led to a spell of low or no incomes (Corak, Fertig, & Tamm, 2005).

Germany Social Security Program

Social security programs in Germany covers five mainly areas that include; health insurance, long-term care insurance, pension fund and insurance, unemployment benefits and insurance, and work accident insurance policies (Giehle, nd). Most important of these five pillars are the social programs regarding retirement incomes for elderly and the insurance for unemployment.

Germany Social Security Programs are divided into compulsorily and voluntary schemes. These social programs cover employees, unemployed, students, trainees, pensioners and their households (Giehle, nd). According Giehle, (nd), the federal constitutions and intergovernmental transfer, the social security programs are for all citizens or non-citizens though some exceptions usually exist. All compulsory social security insurance programs fall under the federal government.

According to the government fiscal policy on expenditure, social security insurance transfers are approximately 26.7 percent of the economy’s gross domestic product (Giehle, nd). This welfare social program in Germany has an extensive custom since industrial revolution and the WWII.

Rationale for each government program

The most important programs in Germany are health insurance, long-term care insurance, pension fund and insurance, unemployment benefits and insurance, and the work accident insurance policies. Their rational are discussed as:

Health insurance and Long-term care insurance

According to (Giehle, nd), Germany is one of the countries, developed and developing, with the best medical care programs. The health division is recorded as the chief employment sector for the nation. The country’s health insurance is based on the principle of solidarity and for everybody. The government has provided a subsidy to companies or institutions that provide or insure large number of sick and old who are earning low incomes. Justification in health insurance provision rest in the foundation of enabling health costs entirely for all employees and the unemployed or at all income levels. Long-term care insurance is subjected to individual contribution and government contributes only for persons with disability or extreme poverty levels. In essence, the objective of providing for Medicaid and Medicare is to eradicate poverty and promote income equality in the country.

Pension fund insurance

The old pension is payable at the age of 65. Employees are compulsory required by law to contribute 48% of the gross salary to cater for the old age pension after retirement (Anon, 1997. Employees with disability are also requiring contributing though full disabilities are required to contribute through government disability transfers. Unlike the health insurance, these are like saving for an individual from the current salaries to be provided by the scheme in future, after retirement. Before this insurance program, employee were require to work until when employers lay them down or until when they have accumulated enough for their savings. This caused labor injustices amounting to labor conflicts and increase in unemployment levels. Thus, this program promoted harmonization in the structural of labor market.

Unemployment benefits and insurance

Unemployment insurance is available to individuals less than 65 years of age, who are registered as unemployed and a searching for job and are available for work (Anon, 1997). The country’s constitution provides a compulsory obligation to employees to contribute 6.5% of their gross incomes to unemployment insurance policy (Anon, 1997). Germany fiscal federalism is based on funding schemes to increase and promote efficiency at all levels of country’s public goods. Unemployed labor force is particularly considers by the fiscal policies to induce incentives and meet social needs. The country cornerstone to surpass or eradicate poverty level is through provision of unemployment benefits. The benefits are related to previous after tax income level of the immediate family (Anon, 1997).

Work accident insurance

Work insurance is paid by employers in fully as long as employee is within the line of duty or in the work premises. Unlike other programs where are either shared between employees and employer or government transfers, work insurance is paid fully by the employer. If one is self employed the contribution are catered by the individual fully. The program was developed and implemented to reduce or mitigate high costs related to risks and uncertainties in work.

Measure of poverty (poverty threshold) in Germany

Financing problems across Europe welfare states and the global competition has raised debate on the increased gap between the rich and the poor (Peichl, Schaefer, Schleicher, 2008). Germany in particular is not an exception from the current debate.

For example in the past years, Germany parliament has demanded report on the poverty and the richness. Germany measuring poverty level reflects on income poverty indices. Germany applies the FGT indices and the headcount indices.

These two provide per capita income in the economy under individual and household levels. Germany poverty level index usually differs from one state to the other. Currently, the country’s overall poverty level is averaged at around 20 percent (Zimmermann, 2011). According to ICFI, 2010 poverty report, the countries poverty level has considerably increased in the past few years (Zimmermann, 2011)

Major causes and consequences of poverty

Poverty levels in Germany are associated with high-level growing rate of unemployment rates. According to Zimmermann (2011), poverty in the country is caused by “the low wage level sectors and the increase in precarious forms of employments”.

Children and the youth are the most prevalent affected by the consequences of impoverishment. Another consequence of the poverty level growth is the increase on the poverty and richness gap in the country and unequal distribution of incomes.

Germany income distribution and Income inequality

Income distribution and poverty level in Germany go hand in hand. Increase in poverty level and the widening of rich-poor gap signify unequal income distribution. The countries economic growth faces concerns over unfair sharing of resources and incomes inequality.

In addition, labor markets and the income effects related to the precarious forms of employments have a big influence to unequal distribution of incomes in the country (Muller & Steiner, 2010). Accordingly, changes of minimum wages in the country and effects to low wages cause income distribution conflicts, which have raised concerns. The inequality in the distribution of incomes in the country consequently has raised political differences and/or debates over the size of the welfare state in Germany.

Political difference arising due to the inequality and income distribution issues has being argued to include the minimum wage rate, and the policies to cater for unemployment and poor children. In addition, the parliament is concerned on the tax systems to apply to reduce the progressive tax rate impact to low income earners.

Role of non-governmental organizations in alleviating economic hardship

Contemporary, the objectives of non-governmental organizations are to protect environments, helping sick, alleviating economic standards of the poor and preserving cultures and arts. In Germany, Non Governmental Organization lack sufficient fund to carry out long term planning and improve the welfare of citizens.

This is ironic since globally Germany has been active in donating to poor countries and particularly raising economic standards. Germany’s Non Governmental Organizations usually are locally formed and focus mainly on diseases and environment conservation and preservation of arts rather than alleviating economic hardship in the country.


Generally, welfare states programs in Germany were adopted early after the Second World War. In fact, the country’s welfare programs have developed and taken new approaches and modern perspectives in alleviating citizens in hardship economic situations. Without welfare programs within a country, the economic growth is low, poverty levels raises and subsequently countries are impacted by the unequal income distribution. Welfare programs are believed by economist to be incentives programs that increase country’s level of savings and therefore reduce poverty levels.


Anon, (1997). Unemployment insurance overview of the system: . Web.

Congleton, R. D. & Bose, F. (nd). The rise of the modern welfare state, ideology, institutions and income security: analysis and evidence. Web.

Corak, M., Fertig, M. &Tamm, M. (2005). . Web.

Giehle, S. Facts about Germany: social security. Web.

Muller, K. U & Steiner, V (2010). Labor Market and Income Effects of a Legal Minimum Wage in Germany. Web.

Peichl, A., Schaefer, T. & Schleicher, C. (2008). Measuring Richness and Poverty: A Micro Data Application to Europe and Germany. Zukunft der Albeit Institute for the Study of Labor. Web.

Zimmermann, E. (2011). . International Committee of the Fourth International (ICFI). Web.

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