Working Always Means Higher Income in Germany
In Germany, people always have a higher income working than not working. People who work and take advantage of all the social benefits available to them always have more disposable income than people who do not work and receive only social benefits. This is according to the ifo Institute’s calculations. “Some politicians assert that people who receive only social benefits have a higher net income than low earners, but this is simply false,” says Andreas Peichl, Director of the ifo Center for Macroeconomics and Surveys. “What rules this out are the income allowances that come into play when setting an employee’s income off against social benefits, which exist precisely to prevent that situation from arising,” adds ifo researcher Maximilian Blömer.
A single person living in a city with an average rent level, such as Dresden, who has a gross monthly income of EUR 1,000 will – after taxes and social security contributions are deducted and social benefits added – receive EUR 891. Someone on social benefits alone gets a mere EUR 563 in basic income. “But if that single person with the gross income of EUR 1,000 fails to claim any of the social benefits they are entitled to, then they will end up with a net income of EUR 357,” says Manuel Pannier of the Center for Economic Studies (CES) in Munich. A single person with a gross income of EUR 2,000 receives net EUR 1,020 with social benefits, EUR 965 without; both amounts are much higher than the basic income of EUR 563.
The same goes for single parents. A single parent with a gross income of EUR 1,000 actually receives EUR 2,033 with social benefits. Once again, this is more than for someone whose income is made up solely of social benefits, who gets EUR 1,553. “Someone with a gross income of EUR 1,000 who doesn’t claim any social benefits whatsoever will end up with just EUR 622,” says ifo researcher Lilly Fischer. ifo also performed these calculations for coupled households and using a variety of rent levels.
"Lohnt" sich Arbeit noch? Lohnabstand und Arbeitsanreize im Jahr 2024
ifo Institut, München, 2024
ifo Schnelldienst, 2024, 77, Nr. 01, 35-38
