High level of social security under threat

Uwe Kerkow
Social Watch Germany
Forum World Social Summit

The implementation of neoliberal concepts requiring the scaling back of social security systems has led to major cuts in Germany’s highly developed safety net. The recent raising of the retirement age means a pension cut for anyone who stops working before the age of 67, while health insurance reforms increasingly shift risks onto individuals. Meanwhile, the basic rights of asylum seekers are being violated, and promises of aid to promote development and social security in the global South remain unfulfilled.

Germany has a highly complex system of social security.It is enshrined in a wide variety of corresponding legislation, ranging from theGerman constitution, known as the Basic Law, to labour law and labour marketlegislation and the country’s comprehensive social laws. Both governmentaction[1] and, to some extent, evenprivate property[2]have obligations relating to social welfare.

Being closely related to the Fordist boom in the yearswhich followed the Second World War, the financing of Germany’s socialsecurity system is still based on the presumption of full employment and jobswith regular salaries. Today, however, the pay-as-you-go funding system based onthis model no longer functions effectively, for Germany has a high level ofunemployment and the number of workers with “full-time permanent contracts ofemployment in West Germany fell from almost 84% … to just 68% of all employedpersons between 1970 and 1995” (Dombois, 2003). There are far more jobless than before,and the number of people in marginal and part-time employment has also increasedsubstantially.

Admittedly, new models to finance social functions have recently been underdiscussion, such as the ‘basic income’, which would be funded by the stateand guaranteed to every citizen regardless of income. Another alternative is alow wage supplemented with state benefits (‘combi-wage’), and there are alsocalls for a minimum wage, which is intended to safeguard an adequate level ofearned income. In practice, however, it is mainly neoliberal concepts which arebeing implemented at present, supposedly requiring social security systems to bescaled back even further. This, it is argued, is essential due to theconstraints of globalization, which is restricting German companies’ scope associal partners. A key feature of Germany’s statutory social insurance schemesis that they are generally financed jointly by both sides of industry – theworkforce and the employers. By far the majority of companies in Germany havebeen complaining about this obligation for years on the grounds that this placesthem at a competitive disadvantage.

Statutory pension and health insurance: towards the privatization of socialrisks

The currently very healthy state of the economy has pushed discussion aboutpoverty in Germany into the background. Nonetheless, major cuts in the safetynet provided by the social security systems have been made in recent months. Themost significant change has undoubtedly been the raising of the retirement agefrom 65 to 67 years. The stated objective of this measure was to limit thepension contributions being made, especially by companies, not to secure theincome replacement ratio. In effect, the raising of the retirement age means apension cut for anyone retiring from working life before 67. Yet at present,only 38.4% of the 55-64 age group in Germany is still working (ver.di, 2007).Although many thousands of workers responded when the two largest German tradeunions, the Metalworkers’ Union (IG Metall) and the United Services Union(ver.di) called for protest demonstrations early in 2007, they were unable toprevent this change in the law.[3]Moreover, as far back as 2000-2001, the maximum achievable income replacementratio under the statutory pension insurance system was reduced from 70% to 67%of net income.

In the meantime, the latest reform of statutory health insurance actually breakswith the previous system and increasingly shifts risks onto the insured persons:in future, the financing of the system will no longer be shared equally by theemployers and the workforce. The health insurance funds can now require insuredpersons to pay a ‘top-up’ contribution, amounting to as much as 1% of theirincome, with no corresponding employer’s contribution. Furthermore, somebenefits are now being paid from tax revenue – currently accounting forspending of around EUR 2.5 billion (USD 3.4 billion), with plans to increasethis to EUR 14 billion (Federal Ministry of Health, 2007). Admittedly, taxrevenue is currently flowing in abundance (see below), but this type of subsidycould well be subject to cutbacks later. Criticism of the new arrangements alsofocuses on the fact that the funding base of the statutory health insurancesystem has not been expanded and that the self-employed and the affluent stilldo not have to contribute (Attac Germany, 2007).

Nonetheless, this latest health reform also has some positive aspects. First,everyone living in Germany is now required, by law, to obtain health insurancecoverage. Second, private health insurance providers will in future be forced tooffer a basic tariff whose services and benefits, in terms of their type, scopeand amount, are comparable with those provided by the statutory health insuranceschemes. This basic tariff means that private insurers will now have to complywith some of the solidarity principles which underpin the statutory healthinsurance system: in the basic tariff, for example, insured persons cannot becharged extra to cover individual health risks (Federal Ministry of Health,2007). It remains to be seen whether this type of market regulation will proveits worth.

Migrants’ basic social rights flouted

In its comments on Germany’s fifth periodic report on the InternationalCovenant on Economic, Social, and Cultural Rights (ICESCR), the NGO Pax Christi(2006) draws attention to “serious failings in the situation of refugees whosedeportation has been temporarily suspended and people with no formal residencestatus, i.e. so-called ‘illegals’.” As a result of the restrictionsimposed on refugees since the asylum laws were tightened up in 1993, says PaxChristi, Germany is violating the prohibition of discrimination enshrined inArticle 2 of the Covenant. Although the employment ban for refugees has beenabolished, the new regulations are so rigid that they still violate Article 6 ofthe Covenant, which guarantees “
the right of everyoneto the opportunity to gain his living by work which he freely chooses.”[4]

Moreover, the right to education and even the right to health (ICESCR Articles13 and 12, respectively) of refugees are being violated in Germany: in seven ofthe country’s 16 federal states, there is no requirement for refugee childrenwhose deportation has been temporarily suspended to attend school, and the sameapplies to some extent to the children of asylum seekers as well. In thesecases, it is up to the head of the school to decide whether to admit thechildren. Meanwhile, the right to health is being denied, first and foremost topeople who apply for political asylum. According to Pax Christi, the AsylumSeekers Benefit Act grants them only “very limited” healthcare, “and onlyfor conditions causing acute pain. No provision is made for the treatment ofchronic, pre-existing illnesses.” (
Pax Christi, 2006).

Development policy and social security in the global South

The development of the countries of the global South and support for theirsocial security systems is one of the programmatic objectives of Germandevelopment policy. A policy paper published by the Ministry for EconomicCooperation and Development (BMZ)[5]in 2002 demonstrates a comprehensive understanding of social security indeveloping countries – albeit without any specific reference to socialsecurity as a human right. The catalogue of measures outlined in the policypaper includes:

• Measures to improve … informal social security systems and theirintegration into a … universal system.
• Support for reforms in the field of public social insurance … with the aimof (a) expanding solidarity mechanisms within the systems and (b) … openingthem up to persons employed in the informal sector.
• Promoting best-practice partnerships between the private insurance industry,the state and organizations representing the poor (including the development ofinsurance services …).

In the Programme of Action 2015[6]adopted by the federal government in 2001, which sets out a poverty reductionstrategy encompassing all policy areas, “Guaranteeing Basic Social Services– Strengthening Social Protection” is identified as a separate priority areafor government action. However, with development policy focusing primarily onthe attainment of the Millennium Development Goals (MDGs), social security nowrarely features as a separate category. The term “social security” appearsjust four times in the 309 pages of the German Government’s 12th DevelopmentPolicy Report,[7]published in 2005. In its policy paper, the BMZ comments on the development ofsocial security systems as follows: “On the one hand, there must be a balanceof interests between private-sector and public-interest solutions; on the other,there must be a consensus-based balance between social justice and thedevelopment of well-performing systems”.[8]

In practice, German development policy mainly supports two types of project:firstly, the administrations of developing or newly industrializing countriesare given support to develop social insurance schemes for their populations, asin Vietnam and Indonesia, for example.[9]Secondly, the German government is promoting ‘partnership’ initiatives withprivate companies. In the Indian state of Tamil Nadu, it is working with theAllianz Group, a major German insurance corporation which provides lifeinsurance coverage for poor groups there (GTZ, 2005). At present, nocomprehensive evaluations of this field of activity have been carried out, so nofirm conclusions can be drawn.

According to preliminaryOrganisation for Economic Co-operation and Development (OECD) figures,Germany’s official development assistance (ODA) amounted to USD 10.3 billionin 2006. In real terms, this reflects a marginal increase of 0.9% compared tothe previous year. The ODA/GNI ratio (ODA as a percentage of gross nationalincome) increased to 0.36% (OECD, 2007a). However, USD 3.6 billion or 35% ofGermany’s ODA in 2006 did not deliver fresh resources for developingcountries. For the second year the lion’s share of the increase in Germany’sODA/GNI ratio was due to debt cancellation, notably for Nigeria and Iraq. In2006, Germany’s debt relief amounted to more than USD 2.7 billion (OECD,2007b). Excluding debt cancellation and expenditures for educating foreignstudents from developing countries in Germany (about USD 925 million), Germanyin fact spent only USD 6.7 billion or 0.23% of GNI on genuine aid resources in2006.

Germany would need toincrease its ODA by at least USD 1billion in ‘fresh money’ annually in order to fulfil its commitment to raiseODA to 0.51% of GNI by 2010 and to 0.7% by 2015 (Commission ofthe European Communities, 2007).[10]With a tax surplus expected to reach around EUR 180 billion by 2011, there iscertainly the financial scope to honour this pledge.[11]


Attac Germany(2007). Der Anfang vom Ende der solidarischen Krankenversicherung. Pressrelease of 2 February. Available from:<www.attac.de/presse/presse_ausgabe.php?id=660>.

Commission of the European Communities (2007). “Keeping Europe’s promises onFinancing for Development”. Document COM(2007) 164 final.

R. (2003). Der schwierige Abschied vom Normalarbeitsverhältnis. [online] Chapter 2. Available from:<www.sowi-online.de/reader/berufsorientierung/dombois.htm>.

Federal Ministry of Health (2007). Fragen und Antworten zur Gesundheitsreform2006/2007.
Available from:<www.die-gesundheitsreform.de/gesundheitsreform/ueberblick/pdf/gesundheitsreform_2007_fragen_antworten.pdf>.

GermanAgency for Technical Cooperation) (2005). PPPReport No. 17. Eschborn, October.

OECD(Organisation for Economic Co-operation and Development) (2007a). “Net Official Development Assistance in 2006. Preliminary data for 2006”.<www.oecd.org/dataoecd/14/5/38354517.pdf>.

OECD (2007b).“Share of debt relief grants in net official development assistance.Preliminary data for 2006”. <www.oecd.org/dataoecd/14/4/38341318.pdf>.

Pax Christi (2006). Asylum Commission. Stellungnahme zum 5. Staatenberichtder Bundesrepublik Deutschland nach Art. 16 und 17 des Internationalen Paktes überwirtschaftliche, soziale und kulturelle Rechte 2006.
Available from: <www.paxchristi.de/fix/files/doc/Parallelbericht_Asyl_3_2007.2.pdf>.

VER.DI PUBLIK (2007). Berlin: ver.di (ed.), p. 3.


[1]The principle of the social state: see, for example, the website of the federaladministrative authorities:<www.bund.de/nn_3580/Microsites/Deutsche-Demokratie/Grundlagen/Sozialstaat/Soziales-Handeln/Soziales-Handeln-knoten.html__nnn=true>.
[2]There is a constitutional requirement that the use of property should serve thepublic weal, Basic Law, Art. 14, para. 2.
[3] See, for example,die tageszeitung. Berlin, 30 January 2007.
[4]Decision on the right to stay, adopted by the Conference of Interior Ministerson 17 November 2006. See, for example: <www.migrationsrecht.net/nachrichten-auslaenderrecht-politik-gesetzgebung/731-bleiberechtsregelung-beschlussvorschlag-wortlaut-innenministerkonferenz.html>
[5] <www.bmz.de/de/service/infothek/fach/spezial/spezial069/spezial069_90.pdf>
[6] <www.bmz.de/de/service/infothek/fach/materialien/ap2015_kurz.pdf>
[7] <www.bmz.de/de/service/infothek/fach/materialien/entwicklpol_bericht.pdf>
[8]See footnote 6.
[9]On Vietnam, see: <www.gtz.de/de/weltweit/asien-pazifik/vietnam/11287.htm>.On Indonesia, see:<www.gtz.de/de/weltweit/asien-pazifik/indonesien/14137.htm>. A detailedpublication, “Extending Social Protection in Health”, compiled on behalf ofthe German Agency for TechnicalCooperation (GTZ), is available from: <www2.gtz.de/dokumente/bib/07-0378.pdf>.
[10] <www.bmz.de/de/ziele/ziele/internationale_abkommen/odastufenplan/index.html>
[11]See, for example, ZEIT-online,<www.zeit.de/online/2007/20/steuerschaetzer-ergebnis>.

The basic structure and key elements of this report were agreed at a plenary meeting of Social Watch Deutschland/Forum World Social Summit on 15 March 2007. The draft text was cross-checked by the editorial team of the German Social Watch Report and approved, with amendments, on 11 June 2007.