Social Insurance and Welfare Programs

Germany Table of Contents

Historical Development

After Germany was united in 1871 under the direction of Otto von Bismarck, the nation developed a common government structure and social policy. But the fact that united Germany had been formed out of four kingdoms, five grand duchies, twelve duchies, twelve principalities, and three free cities was a crucial factor in the way social welfare was administrated. Although after unification social welfare policy was increasingly formulated on the national level, the social insurance programs implementing national policy were aimed at different social strata and were administered in highly decentralized ways.

The new social welfare system that developed after unification in 1871 used existing decentralized structures to provide an ever increasing range of benefits. Because of this, most social welfare programs in Germany are not administered by state bureaucracies. Instead, except for the period when Germany was ruled by the regime of Adolf Hitler (1933-45) and when the former East Germany (1949-90) established a state-run social welfare program, the organizations implementing social policy have been private voluntary entities, some of which date from the Middle Ages. Thus, Germany has implemented a national social policy through an extensive decentralized and pluralistic network of voluntary agencies.

Germans see their economy as a social market economy, that is, one that combines a capitalist mode of production with the belief that society should protect all its members from economic and social need. Such protection is provided by a system of social insurance to which people contribute according to their incomes with the understanding that they may someday need its assistance. The belief that society is responsible for the well-being of its members is called solidarity, or Solidaritšt , and is a key concept of German social policy.

Germans have combined the notion of solidarity with federal and decentralized arrangements of power sharing, or Subsidaritšt , another concept that lies at the heart of German political culture and is characteristic of all German-speaking countries. Fundamentally, Subsidaritšt means building social organizations and society from the bottom up rather than from the top down. As a result of this concept, Germans rely on grassroots social entities whenever possible to provide social services and make use of higher-level institutions only when lower-level ones are found to be inadequate.

Solidaritšt and Subsidaritšt have affected the development of a national social policy, but most of all they have shaped its implementation. For example, Germany's social insurance programs are quasi-public self-governing bodies subject in most cases to labor and management control, but they are largely independent of the public sector, which retains only supervisory powers. The primary providers of most social assistance services are private-sector voluntary organizations, most of which are church related. Government offices at the regional and local levels generally determine and handle cash benefits and allowances established at the national level.

Some of the most important voluntary social service agencies and church-related groups predate the unification of Germany in 1871; others date from the last decades of the nineteenth century. The first German chapter of the International Red Cross was founded in 1863. Out of it grew the German Red Cross, one of the country's key voluntary agencies. The Innere Mission, which later became the Diakonisches Werk of the Evangelical Church in Germany, was founded in 1848. The Roman Catholic charity Deutscher Caritasverband, the largest of the voluntary welfare associations, dates from 1897. The German Non-Denominational Welfare Association, as it became known after 1932, was founded in 1920 to represent all nonchurch-related hospitals. The Workers' Welfare Organization was founded in 1919 from numerous Social Democratic women's groups working for the well-being of children.

Despite the radically different political regimes in power in Germany since 1871, German social policy has shown a remarkable degree of continuity in organizational arrangements and financing. Change has been largely of an incremental nature, and new programs have conformed to previously existing principles and patterns.

The beginning of the national German social welfare system occurred in the 1880s while Bismarck was in power. A primary motivation for social legislation was the government's desire to erode support for socialism among workers and to establish the superiority of the Prussian state over the churches. The government hoped that provision of economic security in case of major risks and loss of income would promote political integration and political stability. Three laws laid the foundations of the German social welfare system: the Health Insurance of Workers Law of 1883, which provided protection against the temporary loss of income as a result of illness; the Accident Insurance Law of 1884, which aided workers injured on the job; and the Old Age and Invalidity Insurance Law of 1889. Initially, these three laws covered only the top segments of the blue-collar working class.

The second phase of the German social welfare system spanned the period from 1890, the year of Bismarck's resignation, to 1918. During this period, improvements were made in the initial programs.The National Insurance Code of 1911 integrated the three separate insurance programs into a unified social security system, and compulsory coverage and benefits were extended to white-collar workers. Survivors' pensions for widows were also introduced in 1911. (The many amendments to the National Insurance Code of 1911 were later integrated into the Social Insurance Code of 1988.) In 1916 survivors' benefits were increased, and the retirement age for workers was reduced from seventy to sixty-five. Because its cooperation was needed to maintain production during World War I, the working class acquired more political influence and won greater social protection and representation during this period. Efforts were also made to develop mechanisms for settling labor disputes and organizing voluntary employee committees, issues taken up by new labor legislation and decrees. Most efforts were completed by the mid-1920s.

The Weimar Republic (1918-33) saw a further expansion of social welfare programs. In 1920 war victims' benefits were added to the social welfare system. In 1922 the Youth Welfare Act was passed, which today continues to serve as the basic vehicle for all youth-related programs. Unemployment relief was consolidated in 1923 into a regular assistance program, financed by employees and employers. The same year, the 1913 agreement between doctors and sickness funds about who could treat sickness-funds patients was integrated into the National Insurance Code. Also in 1923, a national law on miners created a single agency for the administration of social insurance programs for miners; before the law went into effect, 110 separate associations had administered the program. In 1924 a modern public assistance program replaced the poor relief legislation of 1870, and in 1925 the accident insurance program was reformed, allowing occupational diseases to become insurable risks. In 1927 a national unemployment insurance program was also established. These gains in social insurance and assistance programs were threatened by the Great Depression of the early 1930s, however. Reduced wages meant smaller contributions to social insurance and assistance programs, all of which were soon on the brink of bankruptcy.

The Hitler regime introduced major changes in individual programs and program administration. In 1934 the regime dismantled the self-governance structure of all social insurance programs and appointed directors who reported to the central authorities. The regime made many improvements in social insurance programs and benefits, but these changes were conceived to serve the regime rather than the population. In 1938 artisans came to be covered under compulsory social insurance, and in 1941 public health insurance coverage was extended to pensioners. In 1942 all wage-earners regardless of occupation were covered by accident insurance, health care became unlimited, and maternity leave was extended to twelve fully paid weeks with job protection.

Two separate German states evolved after World War II, each with its own social welfare programs. In the GDR, the state became even stronger than it had been under Hitler. The communist-directed Socialist Unity Party of Germany (Sozialistische Einheitspartei Deutschlands--SED) had a near monopoly of control over all social and political institutions, including those that administered social welfare programs.

Initially, the GDR retained separate social insurance plans, but by 1956 the plans had been unified into two compulsory, centrally controlled, and hierarchically organized systems that provided universal flat-rate benefits. Special programs also served the so-called technical and scientific intelligentsia, civil servants, police, and members of the National People's Army (Nationale Volksarmee--NVA) and other security organizations. All programs were heavily state subsidized, unlike those in West Germany. Because the right to work was guaranteed, unemployment insurance did not exist.

West Germany moved away from Hitler's central state direction and returned to decentralized administration and control. Social insurance and social protection programs under labor and management control, which were characteristic of the Weimar period, were restored. The return to separate earnings-related and means-tested benefits for different groups meant that social insurance, social compensation, and public assistance (or social aid) were not integrated into one overall administration, as some Germans wished and as the Allied Control Council had intended in 1946 when it drafted a unified national insurance system. In the mid-1970s, legislators attempted to consolidate the goals, the protection, and the entitlements as much as possible. But they failed to develop a coherently organized and uniform system that would have eliminated disparities in individual entitlements. Indeed, by the mid-1990s the disparities in welfare benefits entitlements in unified Germany had become more significant than ever before.

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Source: U.S. Library of Congress