The social benefit ratio is likely to rise sharply next year. The recession and citizen income are contributing to this. This puts the Germans in the top spots in an international comparison. Not everyone likes that.

It was 13 years ago, old news in itself, but red hot. Because the events of that time show what will happen next year.

In 2009, the social benefit ratio, i.e. the money that the state spends on social benefits for citizens, jumped in comparison to gross domestic product (GDP): from around 27 to just under 31 percent.

Sounds little, but it was a lot, almost 60 billion euros more were behind it. Since then, the rate has remained around 30 percent, jumping to 33 percent during the corona pandemic due to higher social spending.

Now she will make a leap up again next year. 35 percent and more are in sight. Germany should therefore take a leading position in a European comparison and overtake countries with traditionally high social quotas such as France, Finland and Denmark.

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Two reasons are responsible for this. The first: Germany is in a recession. The gross domestic product (GDP) is shrinking according to everything that economists have been predicting so far. The Kiel Institute for the World Economy, for example, expects gross domestic product in Germany to fall by 0.7 percent in 2023.

But if the GDP falls, the social benefit ratio increases, even if the social benefits actually remain the same. But they don’t stay that way. Because on January 1, the traffic light government wants to keep its election promise and no longer pay out 449 euros in Hartz IV to the needy, but 502 euros in citizen money.

In addition, they should be paid out to more people for longer because the controls on who gets the money and who doesn’t are relaxed. In addition, billions flow from the relief packages to the needy.

The bottom line is that all of this should result in the largest budget item continuing to swell. According to previous calculations, the social budget in Germany in 2023 will be the unimaginable sum of 163.3 billion euros. It is almost three times as high as the next higher budget – that of the Federal Ministry of Health.

Defense spending follows in third place, although in reality it has also grown strongly due to the 100 billion “special assets” not listed in the budget.

The largest and significantly increasing expenditure items within the social budget will be costs for pension insurance and federal subsidies for basic security in old age and for those with reduced earning capacity. The draft for next year provides for a total of 121.28 billion euros (2022: 116.79 billion euros).

This sum consists of payments to the pension insurance scheme of 112.39 billion euros (2022: 108.3 billion euros). The federal government wants to spend 8.75 billion euros (2022: 8.35 billion euros) on basic security in old age and in the event of reduced earning capacity.

The costs for labor market policy services and programs are also a heavyweight in the budget: the federal government is planning 40.96 billion euros for this, including a loan to the Federal Employment Agency – in addition to the funds from the Federal Employment Agency.

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There are funds in here that may be due to increase short-time work benefits. In view of the recession, the federal government assumes that short-time work will be more common than before.

40.59 billion euros (2022: 40.81 billion euros) are attributable to basic security benefits for job seekers. This in turn includes services amounting to 21.33 billion euros (2022: 21.09 billion euros) for the new citizens’ income.

Citizens’ income is met with criticism from the opposition. Hermann Gröhe, once CDU Minister of Health in the cabinet of ex-Chancellor Angela Merkel, warns: Citizens’ income should not become a kind of unconditional basic income to which people are entitled without providing services.

The article “Germany’s social spending will reach unimaginable proportions in 2023” comes from WirtschaftsKurier.