Zhao Zhong
He is a full-time researcher at the National Institute of Development and Strategic Studies, Chinese Min University, and a professor at the School of Labor and Personnel
Ge Peng
Ph.D. in Economics, School of Labor and Personnel, Chinese Min University
Germany's relatively complete social welfare system
Active labor market policies
Successful dual vocational education and its
Manufacturing workers have higher wages and benefits, etc
Both have played an important role in alleviating widening income disparities
Germany's gap between rich and poor is at a low-middle level in developed countries. Official data from the Organisation for Economic Co-operation and Development shows that Germany's Gini coefficient from 2011 to 2018 was around 0.29, well below the level of about 0.36 in the UK and about 0.39 in the US in the same period; germans are ranked from low to high, and the ratio of the income of the rich in 90% to the poor in 10% was 3.6 in 2018, lower than the 4.5 in the UK and 6.2 in the US in the same period.
Germany is the largest economy in the euro area, according to the World Bank, Germany in 2020 population of 83.24 million, is the most populous country in the European Union; with a land area of 357,580 square kilometers, it is the fourth largest country in the European Union after France, Spain and Sweden; gdp is 3.81 trillion US dollars, ranking fourth in the world, with a per capita GDP of 4.57 million US dollars. In terms of industrial structure, Germany's agricultural added value in 2020 accounted for 0.66% of GDP, manufacturing added value accounted for 17.82%, and service industry added value accounted for 63.59%. From the perspective of employment, the employed population in Germany accounted for 76.7% of the working-age population in 2019. Among them, agricultural employment accounted for 1.21% of the total employment, industry accounted for 27.18%, and service industry accounted for 71.61%.
The level of the gap between rich and poor in Germany has been relatively stable after 2005 and has not shown a significant trend of widening. Germany has a lot of experience to learn from in alleviating the widening income gap, among which Germany's relatively complete social welfare system, active labor market policy, successful dual vocational education and the higher wages and benefits of manufacturing workers have played an important role. From the perspective of political ecology, Germany's domestic politics has also been influenced and guided by the debate on social justice, which is the political soil of German social policy.
The changing trend of the gap between rich and poor in Germany
Over the past two decades, wage inequality in Germany has been at odds with the inequality of total household income. Wage refers to wage income, which is the main source of income for many people; total household income is all income including wages, property income, social security benefits, etc.
Studies show that before 2006, the wage gap among German workers widened rapidly. In 2000, the wages of high wage earners ranked 90% were 3.3 times that of low-wage earners ranked at 10%, and by 2006 their ratio had risen to nearly 4 times; from 2006 to 2014, Germany's wage inequality remained at the above high; and after 2014, wage inequality began to decline, and by 2019, the above ratio fell to 3.5.
However, the decline in wage inequality among workers in recent years has not led to a decline in inequality in total household income. Germany's Gini coefficient in terms of household disposable income increased from 0.26 to 0.29 from 2000 to 2005, and remained at around 0.29 thereafter. Germany's Gini coefficient in 2018 was 0.29, lower than the OECD average of 0.31.
From the perspective of the growth of real household income, from 2000 to 2014, the average household income in Germany grew slowly, and the pre-tax income of households increased by only 3% in 14 years, and the disposable income of households increased by only 4.5%. Since then, both have experienced significant growth from 2014 to 2019, with pre-tax income growing by nearly 12% and disposable income growing by about 9% in just five years. The rapid growth of household income after 2014 has benefited from a sharp decline in unemployment and rising wages on the one hand, and an increase in pensions on the other. From 2010 to 2015, the disposable income of the lowest 10% of households declined year by year, but after 2015, with the implementation of the statutory minimum wage system, the disposable income of these families has been rising.
Although household income inequality in Germany has not declined in recent years, the proportion of "materially deprived" households, as defined by nine indicators such as whether they can pay rent on time and whether they can keep their homes warm, has decreased from 5.5% in 2008 to 2.7% in 2019 due to the increase in the real income level of low-income families. In Europe, germany has a low proportion, comparable to Denmark (2.6%), Finland and the Netherlands (2.4%), with the highest proportion in Bulgaria (19.9%).
Workers in a BMW factory in Germany. Photo/Visual China
After the outbreak of the epidemic, unlike the United States and other countries, the degree of income inequality in Germany has not risen but declined, whether from the Gini coefficient or from the income ratio of high-income families to low-income families, the income inequality in Germany at the beginning of 2021 has declined compared with 2019, because the income of low- and middle-income families has risen slightly, while the income of high-income families has declined. The results show that the short-term work allowance provided by the German government to self-employed people and business owners during the epidemic has helped their workers to keep their jobs, but the revenues of self-employed people and business owners themselves are inevitably affected by the epidemic.
It is worth noting that the debate on justice in German society and political parties continues to influence the direction of their redistributive policies.
In the late 1990s, the international perception of capital markets as a solution to the fiscal problems of the welfare state spread to Germany, and many politicians wanted to abandon Germany's traditional redistributive policies. From 1998 to 2003, all political parties in the German Parliament reformulated their party lines and reformulated the concept of justice to reduce the focus on redistribution. Until 2005, the Christian Democratic Party, which did not mention any concepts of "justice" and "equality" in its party policy, dropped from more than 40 percent to 35 percent, highlighting a renewed focus on social justice. Public opinion has also shifted from constant calls for the dismantling of the welfare state and reductions in social welfare to discussions on the social consequences of these reforms, such as the exacerbation of poverty.
In the wake of the 2008 global financial crisis, social justice and the income gap between rich and poor have become at the heart of the public debate, as inequality in the distribution of wealth is found to be rising. The German government's five poverty and wealth reports, 2001, 2005, 2008, 2013 and 2017, have greatly expanded understanding of living conditions in Germany and aroused the pursuit of the concept of justice. Germany's domestic politics has been influenced and guided by the debate on social justice, in contrast to issues such as Germany's long-term economic growth and the importance of the German export economy in the world. Although the level of inequality in Germany is relatively low, in today's Germany, in the debate on social issues, justice is still undoubtedly the core political value, which is the political soil of German social policy and the cornerstone of its concept of alleviating the gap between the rich and the poor.
Perfect social welfare system
and labor market policies that encourage work
Germany has one of the most complete social welfare systems in the world, with around €996 billion spent on public social welfare in 2018, or 25.1% of GDP. Germany's tradition as a welfare state social system dates back to the industrialization of the second half of the 19th century, when bismarck, then chancellor of the German Empire, established it. In 1881, at Bismarck's behest, The Idea was first proposed by The German Emperor Wilhelm I in a letter to the German Parliament. William wrote: "Those who are unable to work because of their age and disability have good reason to demand the care of the state. Under Bismarck's leadership, Germany first introduced workers' compulsory health insurance in 1883, and legislation on social welfare was carried out simultaneously and further expanded in later years, thus laying the foundations for a welfare state-oriented society, and in 1889 became the first country in the world to implement pension insurance.
Bismarck's motivation for social insurance was both to promote the welfare of workers in order to keep the German economy efficient and to resist more radical socialist alternatives.
The pension insurance package, which has been in place since 2014, has improved the economic situation of the elderly, and this reform has introduced the provision that the elderly can retire from the age of 63 to receive a full pension. That is, people who have participated in endowment insurance for a long time and paid insurance premiums for 45 years can retire as early as the age of 63 and receive pensions in full. The reform also introduced the "Mother's Pension" provision: women who had children before 1992 were affected by the fact that there were few institutions to take care of their children at that time, and the "Mother's Pension" was aimed at compensating these mothers for their contribution to the upbringing of their children. According to statistics, about 9.5 million women have received an additional "mother's pension" since 2014, which amounts to more than 300 euros per child per year.
Today, Germany has a tight social safety net of pensions, health care, unemployment, nursing care and work-related injury insurance, such as basic protection for retired employees and the long-term incapacitated, as well as childbirth subsidies and tax incentives. Social welfare policies enable individuals to plan for the long term and be willing to take higher risks in terms of career development, without worrying too much about old age, illness, accidents, poverty and the decline of social class in their daily work. A sound social insurance system plays an important role in improving the welfare of low-income groups and alleviating the widening gap between the rich and the poor.
In March 2017, in Berlin, Germany, trainees at the ABB Training Center
Learn mechanical operation. Photo/Visual China
In addition, active labour market policies that encourage work also play an important role in this regard.
In the classification of labor market policies, the policy of directly giving money to the unemployed through unemployment insurance to ensure their basic livelihood is called a negative labor market policy, while the adoption of measures such as vocational training to enhance workers' opportunities to find work, improve their employment ability, production capacity, etc. is an important part of the active labor market policy.
Germany's labor market policy system takes into account the stability and flexibility of the labor market. In Germany's social security system, including pension, medical, unemployment, nursing care and accident insurance, the proportion of traditional pension and medical insurance expenditure is the highest, and unemployment insurance accounts for the third place. According to 2016 data, unemployment insurance is only 3% of total insurance expenditure. Overall, Germany tends to adopt a more active labour market policy, characterized by the self-help of workers.
The implementation of active labour market policies invests significantly less money than negative labour market policies. Therefore, the policy is generally considered to be a low-input, high-output policy instrument, which is conducive to the overall benefit of social sustainability at the macro level; and can actively prevent the occurrence of labor poverty and social exclusion at the micro level.
The basic social insurance benefits paid by the German government are for basic needs and, although they can sustain themselves, are significantly lower than the income obtained through paid labor. For example, the basic social insurance benefits received by celibace persons are only about one third of the average income of all single families; the income of long-term unemployed childless couples through basic social insurance benefits is only one fifth of the average income of all childless couples. The gap between basic social insurance benefits and income earned by paid labour, as well as the social status associated with them, serve as a powerful motivator for the unemployed to actively seek work, thereby reducing the incidence of poverty.
High-quality vocational education ensures that blue-collar workers receive higher incomes
In Germany, vocational education is not only an important means of training highly skilled workers, but also an important means of addressing income inequality. Germany promulgated the Vocational Training Act in 1969 and established a "dual" vocational education and training system covering all economic and administrative departments, which not only trained a large number of high-quality technical personnel for Germany, but also played a positive role in improving the income level of workers and social stability.
Germany's vocational education system, which plays an important role in raising the incomes of low-skilled, low-wage workers at the bottom of the income distribution, has significantly improved income inequality.
In Germany, around 500,000 new apprentices start vocational training each year, two-thirds of whom receive dual vocational education training. The dual vocational education in Germany differs from the pure school education before most other countries enter the working life, and about half of the German teenagers receive dual vocational training in one of the more than three hundred types of work recognized by the state at that time after school education. They learn practical operations in enterprises for 3 to 4 days a week and receive 1 to 2 days of professional theoretical training in vocational schools. Dual vocational education generally lasts from two to three and a half years and is paid.
German institutions have worked together to ensure the quality of dual vocational education: chambers of commerce advise enterprises that implement training, review their facilities and organize examinations;
Germany's vocational education system combines theoretical knowledge with practical work experience and is welcomed by many companies. Germany's low youth unemployment rate also prompted many countries to learn from Germany's dual vocational education, due to the huge demand, the German government set up a special German Vocational Education and Training International Cooperation Office to carry out international vocational education, all inquiries about the German vocational education system are summarized in this office. In 2019 alone, the office received 239 inquiries.
The incomes of manufacturing workers in Germany are at a high level among developed countries. According to OECD data, in 2020, the remuneration of workers in Germany's secondary industry will account for 18% of the added value, much higher than the 11% in the UK and the 9.5% in the US. The higher wages and benefits of blue-collar workers in Germany are an important reason for the smaller income gap in Germany. The higher wages and benefits of Blue-collar workers in Germany are the result of multiple factors such as Germany's economic structure, education system, corporate behavior, trade union organization and government policy.
The higher wages and benefits of Blue-collar workers in Germany are first of all due to Germany's strong, high-quality manufacturing industry, which makes the German manufacturing industry have high added value and a large proportion of labor remuneration. The aforementioned dual vocational education in Germany provides Excellent Skilled Workers for Germany as a manufacturing power, so that Germany's manufacturing industry can maintain a dominant position. The important position of the German manufacturing industry in the German economy and the leading position in the global manufacturing industry are the economic basis of the Dual Vocational Education system in Germany.
At the same time, the better wages and benefits of workers are also related to the importance that German companies attach to skilled personnel. In Germany, companies give benefits to their employees before the implementation of the national social welfare policy. As early as the 18th century, for the first time, employees of enterprises could buy shares in order to enjoy the profits of shares in retirement; some well-known German enterprises understood the production value of social welfare policies very early.
In addition, German unions also play an important role in negotiations to raise workers' wages and benefits. Due to the flexibility of German trade unions, German companies also recognize the role of trade unions in improving employee productivity, and german labor relations are more harmonious. Some reports show that the incidence of strikes in Germany is much lower than that in countries such as the United Kingdom and the United States, which shows that German trade unions play an active role in improving workers' welfare benefits and reducing income disparities, which is conducive to the stable development of enterprises.
Of course, the German government also plays an active role in implementing many labor market policies. For example, the statutory minimum wage has been implemented since 2015. Since 2016, in public companies and companies with employee referendums, Germany has stipulated that 30% of the seats on the supervisory board must be held by women. In addition, the Uniform Labour Wages Act ensures that different labour contracts may not be used for the same work in enterprises. While effectively reducing social income disparities, these policies are also promoting the establishment of a modern, equitable and transparent labour market.
Trends and inadequacies of reform in German social policy
Since the 1990s, There have been many debates and reforms in social policy among the parties and the public in Germany, including reform directions that are worth learning from, and there are also shortcomings. According to research by Professor Frank Nourmeyer at the University of Bremen, Social Policy in Germany has shown the following five major trends in the past three decades:
The first is the privatization of social security and social services. In the 1990s, ideas of deregulation, liberalization and privatization spread to the debate on social policy in Germany. The first step in this direction is to treat for-profit private institutions on an equal footing with for-profit private institutions on an equal footing with non-profit charitable organizations that previously enjoyed privileges in the field of social services. In 2001, Germany introduced state-subsidized private pension insurance, representing the peak of privatization in the field of social policy. However, the number of contracts signed for private pension insurance in Germany has grown slowly in recent years, and it is unknown whether the privatization of pension insurance can alleviate the gap between the rich and the poor.
Second, education policies and preventive measures take precedence over social welfare. In this century, the concepts of the "social investment state" and "the activation of labour market policy" became the programmatic norms of German social policy. The "State of Social Investment" requires that education policies and preventive measures take precedence over social welfare policies. However, the link between education policy and social security, as well as the priority of preventive measures, have not been fully implemented. After years of debate and controversy, the German Bundestag passed the Act on the Promotion of Health and Preventive Health Care in 2015. Among them, early childhood policies aimed at promoting the development of day-care centres for children are seen as important measures to prevent poverty, such as the introduction of language assessment tests to compensate for the early shortcomings of migrant children. Education policies and preventive measures are more active than social security benefits and, if fully implemented, contribute to social poverty reduction and income disparities.
The third is from the social insurance system to the minimum income plan. The introduction of Unemployment Benefit II in Germany in 2005 as a social assistance policy changed the public's perception of social policy. Prior to this, the social insurance system, as the criterion of social policy, its core criterion was "the current situation of income of social protection individuals", and the social assistance policy was only a supplement to the social insurance system. After 2005, however, poverty prevention and the provision of minimum income guarantees became the dominant ideas of public debate, a trend that began first in the areas of child poverty prevention and old age poverty. Previously, pension policy was mainly to cope with demographic changes, but after the reform after 2000, the welfare level of German pensions has dropped significantly, and if the overall welfare level of pensions is not increased, it will have to need more subsidies from the social assistance system to prevent old-age poverty. As a result, over the past few years, public attention to pensions has shifted to poverty reduction and welfare improvements. The recent call for universal basic income security has once again reinforced the focus on poverty reduction in the German social policy debate and reflects the importance that the German people attach to the gap between the rich and the poor.
The fourth is gender relations and family policy changes. In the 1980s, there was a call for an independent pension scheme for women in Germany. Since then, politicians have had to make their position clear as to whether social policy should be directed at the individual, the family, marriage or the household. Subsequently, anti-discrimination legislation, equal treatment of men and women, equalization of marriage and registered partners, and reforms of maintenance legislation have dramatically changed gender and family relations in Germany. However, some traditional marriage-centric policies, such as medicare, where some members of the family can join forces without paying fees, provides an economic incentive for the traditional "male breadwinner" model to continue. The gender wage gap between men and women in Germany remains large; social services have failed in attempts to expand into childcare and long-term care, resulting in low wages and poor working conditions, which have made it difficult for women to work full-time after childbirth. Gender income inequality is one of the causes of the gap between rich and poor in society, and more social policies to reduce the gender gap can help alleviate income inequality.
Fifth, the Europeanization and internationalization of social policies. With the 1997 Treaty of Amsterdam, which transferred the legal power of EU countries to set employment policies to the EU, the EU's influence on German social policy grew. In addition, the EU's open collaborative mechanisms enable the European Commission to advise on many other social policy issues, and EU budget and fiscal policy guidelines tend to influence the legislation of EU countries' social policies. The free movement of European citizens within the EU has made it imperative for all member states to consider how to attract more people from other countries through legislation, and the EU's anti-discrimination policy has become an important driving force influencing German social policy.
At the same time, international organizations are also influencing German social policy, especially in the case of the United Nations Convention on the Rights of Persons with Disabilities. The fundamental principle of the Convention on the Rights of Persons with Disabilities, namely inclusion, plays an important role in the social policy debate in Germany. A broad interpretation of inclusion requires a universal transformation of social institutions to ensure their accessibility. This broad concept of inclusion requires that all social institutions be transformed into barrier-free environments, not just for people with disabilities. In recent years, however, the concept of inclusion discussed in Germany has been limited to young people with disabilities attending public schools, ignoring a broader reconstruction of the social care and service system. Therefore, alleviating the gap between the rich and the poor and building a society that embraces different groups also requires the joint efforts of many parties in German society.
These changes and trends show the difficulties and challenges facing the social security system established in Germany since the Bismarck era.
Source: China News Weekly, Visual China
WeChat Editor: Tu Cheng
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