Dr. Maximilian Joseph Blömer

Making smaller cuts to social benefits for recipients of Germany’s basic income (Bürgergeld) who work more would increase their participation in the labor market. This is the finding of a reform proposal by the ifo Institute and ZEW elaborated on behalf of the German Federal Ministry of Labour and Social Affairs (BMAS).

Germany’s traffic light coalition is planning reforms regarding mini- and midi-jobs and income tax that will exacerbate the part-time trap, which primarily affects women as second earners. This is the result of new calculations by the ifo Institute. “While the reforms would have a positive impact on labor market participation overall, it is predominantly men who would increase their hours of work. Women, on the other hand, would reduce their working hours and work part-time jobs even more often,” says ifo researcher Maximilian Blömer. Moreover, the reforms would cost the government EUR 6.5 billion.

The introduction of an “inclusive universal child benefit” in Germany (“Teilhabegeld”) could reduce the poverty risk of millions of children, according to model calculations by the ifo Institute for the Bertelsmann Stiftung. “This could bring down the share of children at risk of poverty by as much as 11 percentage points,” says ifo expert Maximilian Blömer, the study’s author. The “universal child benefit” is a variant on the universal child allowance.

A basic child allowance as envisioned by the Green Party could reduce the risk of poverty for families with children and provide significant relief for low- and middle-income earners. The reform would cost EUR 27 to 33 billion, depending on its design, and parents would work less. This is the finding of an ifo report produced on behalf of the Bündnis 90/Die Grünen parliamentary group in the German Bundestag. The aim is to improve the situation for families and make it easier for people to receive benefits. A basic child allowance is currently being discussed in the coalition negotiations.

Die unteren 40 Prozent der Einkommen könnten entlastet werden, wenn Minijobs in eine sozialversicherungspflichtige Beschäftigung umgewandelt werden und gleichzeitig das Ehegattensplitting reformiert wird. Das ist das Ergebnis einer ifo-Studie im Auftrag der Bertelsmann Stiftung. Gleichzeitig würde die Reform höhere Einkommensgruppen nur mäßig belasten. Insgesamt entstünden keine zusätzlichen Kosten für den Staatshaushalt.

The German government has provided tax relief for many of its citizens in the current legislative period, according to an ifo Institute study. Without the federal government’s tax policy, average household income would be EUR 444 or 1.2 percent lower in 2021. Many households with children, but also high earners in particular, have benefited from the federal government’s tax reforms.

The income tax reforms proposed by Germany’s political parties will lead to more employment, but will have different effects on government finances. This is according to a study by the ifo Institute published in the latest edition of ifo Schnelldienst. Employment growth is highest under the FDP’s plans, which would lead to the creation of 330,000 new jobs. The Left Party’s plans would create 229,000 new jobs, those of the CDU/CSU would create 100,000, the SPD’s 66,000 and the Greens’ 24,000.