What makes us poor

Family policy

Anne Lenze

Professor Dr. Anne Lenze is professor for "Law of Social Security" in the Social Work department at Darmstadt University of Applied Sciences. She also advises the Labor and Social Affairs Committee in the Bundestag.

Despite the good economy, child poverty is increasing in Germany. Over two million children and young people under the age of 18 depend on basic state services. Children of single parents and families with more than three children are particularly affected. The development of the labor market does not explain the growing child poverty, says the welfare lawyer Anne Lenze. She sees an important cause in the social security system that disadvantages parents.

Parents are burdened twice, says the welfare lawyer Anne Lenze. They pay social security contributions and make a generative contribution by raising children and thus keeping the social security system in its current form alive. This double burden contributes to child poverty. (& copy picture-alliance / dpa)

Children from single parents and families with three or more children are particularly poor. Whereby poverty can be measured in two ways. According to the common in the European Union relative concept of poverty people are described as poor who have less than 60 percent of the median social income. In 2015, single parents with a child under the age of 14 were below the poverty line if their monthly income was less than 1,225 euros. For a family with two children under the age of 14, this limit was 1,978 euros. Single parents (43.8%), families with three or more children (25.2%), the unemployed (59%), people with low qualifications (31.5%) and foreigners (33.7%) were particularly affected by poverty. [1].

Another, social law measurement of poverty looks at the number of people in Germany who live on basic state security [2]. In 2015, almost two million children in Germany were living on Hartz IV. In relation to all children under the age of 18, this was 14.7 percent. In spite of the good economic situation and the steadily increasing number of employees, this proportion increased, because in 2011 it was 14.3 percent [3]. In June 2017, over two million (2,063,507) children under the age of 18 were dependent on Hartz IV. [4] This increased child poverty again. The number of refugees who have come to Germany also plays a role.

Even after this type of poverty measurement, children in two family constellations are particularly affected: Of all children with state basic security, 50 percent live in single-parent families and 36 percent in families with three or more children. In addition, the majority of children who live on Hartz IV grow up in poverty over a longer period of time: 57.2 percent of the affected children aged 7 to under 15 received benefits under the Second Social Code (SGB II) [5].

In the case of single parents, there is also the fact that in about half of all cases they do not receive any support for their children from the other parent and the state advance maintenance payment has not yet taken effect in many cases [6]. So far, this has been limited twice: to a maximum of six years and no longer than the 12th birthday. This means that single parents who raise their children on their own and can therefore pursue gainful employment under difficult conditions also have to earn even more income than singles. Because they also have to cover the financial support of their children. The situation has improved since July 1, 2017. Because the maintenance advance has been expanded: Since then, it has been valid until the age of 18 without a maximum period of payment.

This was a necessary and important step. Because the longer children live in poverty, the more negative the consequences for their development and their educational opportunities. They often do not have a room of their own, no retreat for school work, and they hardly eat any fruit and vegetables at all. Compared with children with secure income, poor children are more likely to be socially isolated, their health impaired and their entire educational biography is made significantly more difficult by poverty [7]. This means that, for example, they repeat a class more often or receive a recommendation for high school less often. The children themselves experience this poverty very concretely and experience that they do not have the same opportunities to participate as children from better-off families [8].

Causes of Child Poverty? The labor market alone does not provide an answer

The common solution to combating child poverty today is to get parents into work. A new family policy has been in effect in Germany since 2007 at the latest. Their guiding principle is to ensure, through the combination of parental allowance and the expansion of daycare, that mothers return to work early - ideally after the child's first year of life [9]. It is obvious that this model is most likely to be fulfilled by parents with one or two children, while other life constellations often fail because of the new demands and thus carry a particular risk of poverty. On the one hand, these are families with more than two children, but also single parents who regularly have to cope with raising their children on their own in everyday life.

It is true that the poverty rate of couple families in which both parents work is the lowest. Nonetheless, there are some worrying findings that prompt us to look into other causes of child poverty. Because:
  • Child poverty has risen sharply since the 1960s, although parents and society have fewer and fewer children to look after.
  • Child poverty has risen, although more and more mothers are employed.
  • Child poverty has risen, although the number of unemployed has fallen significantly in recent years.
  • Child poverty is increasing even in federal states such as Bavaria and Baden-Württemberg with particularly good employment [10].
So there must be other reasons for increasing child poverty than just the development of the labor market.

The social security costs were collectivized - the costs for children remained privatized

With the introduction of the statutory pension insurance in 1889 and even more so with the Great Pension Reform of 1957, which established a pension level that would secure a living, old-age insurance was completely collectivized. Up until this point, children were an important provision for old age.

Since then, a collective intergenerational contract has been in place: compulsory contributions are collected from the currently employed, which are distributed in the same month to cover pensioners, the sick and those in need of care (pay-as-you-go system). These benefits are independent of the fact that you have raised your own children. For the first time, social security also created insurance against the economic consequences of childlessness without the childless having to pay a special contribution for this effect. (See also the dossier "Pension Policy")

Even in the run-up to the Great Pension Reform, it was feared that this regulation could economically reward childlessness. Therefore, the proposal of the inventor of the dynamic pension, Wilfried Schreiber, was that a youth pension should also be introduced in addition to old-age pensions in order to also socialize the costs of bringing up the next generation [11]. However, this is said to have been rejected by the then Federal Chancellor Konrad Adenauer with the sentence: "People always have children."

Today we know that this was a mistake: Germany is currently characterized by a consistently low birth rate of 1.5 children per woman and one of the world's highest rates of lifelong childlessness [12]. This has resulted in:
  • less and less dependent employees have to support more and more old people in the areas of old-age security, health care and long-term care;
  • that social security expenditures have risen exorbitantly (from 24.4 percent in 1960 to 39.75 percent in 2016 [13]) and will continue to rise in the foreseeable future;
  • that the wages and salaries of employees subject to social insurance are so heavily burdened that no family of four can exist today on an average income of 35,000 euros [14], especially not in urban areas with high rents;
  • that childless have competitive advantages in all relevant markets, especially in the housing market, the labor market and the consumer goods market. Overall, they can simply afford more because they don't have to share their income with anyone.
Family poverty is therefore also a consequence of the welfare state decision to completely impose the care of the sick and those in need of care as well as the pensioners on the collective of insured persons and to keep the costs of raising children largely private with the families.

Parents are thus burdened twice. They make a generative contribution by raising children and thus keeping the social security system alive in its current form. In addition, they make a financial contribution by paying contributions to social security. This is a structural flaw in the German welfare state that contributes to child poverty.

Family policy benefits: less than it seems

Against this point of view, the high expenditure of 200 billion euros for family policy benefits is often put into position [15]. However, the actual level of spending is controversial. It is about the question of which benefits are added to family support at the end - or not [16]. According to the Catholic Family Association, only 39.1 billion euros are spent on "real" family support [17]. (See also the article "Family policy benefits". The author outlines various models for calculating family policy benefits.)

Structurally, it can be said that families cannot be relieved from tax-financed benefits because they co-finance the benefits distributed to them themselves. On the one hand, families pay income taxes, but above all consumption taxes. These are particularly stressful for families because they also pay VAT on expenses for children. These unsocial consumption taxes, which are particularly a burden on families and low-income earners, who have to spend most of their income on daily life, have increased enormously in recent years. The state is now financed almost half from consumption taxes [18]. Cautious estimates assume that families finance 43.6 percent of family policy benefits themselves [19]. The apparently generous family support in Germany also hides the fact that problems arise elsewhere, namely when families are burdened with social security contributions.

Equal equalization between parents and childless

It was the Federal Constitutional Court (BVerfG) which in 2001, with its decision on long-term care insurance, found unconstitutional equal treatment of parents and childless people in social insurance. From the general principle of equality in Article 3, Paragraph 1 of the Basic Law ("All people are equal before the law."), The court derived the principle that bringing up children is to be assessed as a generative contribution to those social security systems in society that are dependent on the regrowth of a sufficient young generation. The insured persons bringing up children ensured the functionality of the long-term care insurance not only by paying contributions, but also by caring for and bringing up children [20]. The Federal Constitutional Court expressly instructed the legislature to "examine the significance of the present judgment for other branches of social insurance" [21].

The legislature has implemented the ruling for the area of ​​statutory long-term care insurance, with insured persons without children paying a slightly higher insurance premium than insured parents. However, he has refused a transfer for the much more important areas of statutory pension and health insurance [22], although the constitutional principles for this are evident [23].

In a judgment of September 30, 2015, the Federal Social Court did not consider the relief of parents in the duties of pension and health insurance to be constitutionally compulsory, with reference to the legislature's broad scope for action, and dismissed the claim of a family with three children for a reduction in contributions [24]. A constitutional complaint was lodged with the Federal Constitutional Court against this judgment [25]. It remains to be seen whether the BVerfG will also transfer its principles from the long-term care insurance ruling of 2001 to pension and health insurance.

Contribution relief as the core of a modern family policy

In order to actually relieve parents, at least a contribution in the amount of the (tax) subsistence level of children must be deducted from the parental assessment base for social security. This would currently be an amount of 238 euros per child per month. Half of this amount can be deducted from the income of working parents and all of it for sole earners. Single parents who do not receive child support from the other parent can also deduct the entire amount from the ceiling. Finally, there would also be no anti-social progressive relief, since the same amount is deducted from taxable income in all cases. The falling social security contributions for parents would have to be compensated by those insured who currently have no maintenance obligations for children.

This would take into account the different capabilities of people with and without maintenance obligations towards children. Childlessness is therefore not a moral, but a socio-economic category that also applies to those whose children have grown up and stand on their own two feet. The redistribution among the socially insured would assign the economic consequences of childlessness to a certain extent to the childless [26].