Comparison of the German and the British welfare system

Table of Content

1 Social security system - Germany
1.1 Historical background
1.2 Political background
1.3 Individual insurance
1.3.1 Pension system
1.3.2 Health care
1.3.3 Family
1.3.4 Accident
1.3.5 Unemployment

2 Great Britain
2.1 Historical background
2.2 Political background
2.3 Individual insurance
2.3.1 Pension
2.3.2 Health care
2.3.3 Family
2.3.4 Accident insurance
2.3.5 Unemployment

3 To put in a nutshell

4 Evaluation of welfare states

How are the German and the British social security systems comparable? What are the problems when evaluating welfare states?

1 Social security system - Germany

1.1 Historical background

Germany as well as Austria are pioneers on the field of social security provided by the state. The beginnings reach back to the 19th century - when following insurances were developed:

- 1883 health insurance
- 1884 accident insurance
- 1889 old-age insurance/diability insurance
- 1927 unemployment insurance
- 1995 the compulsory long term care insurance

The chancellor Bismarck wanted to prevent a revolution of the socio-democratical party so he developed the social insurance law. During the industrial revolution the economical and social problems got really critical (e.g. accident danger in fabrics). Still in the very beginning the social insurance was by far not enough to cover the basic needs of human. The fee and the performance are coherent because the insurance was established for the employees that basically excludes the thought of minimum collateral. Germany still is a "conservative welfare state” or in other words Germany owns the "Bismarck Model”.

In the decades after world war II the insurance system extended and benefits and members enlarged.

In the 1950s the government decided to bind the insurance on the income of the people. In the 70s the German economy shrank because of the demographical change and rising unemployment rates and a lot of cut-backs had to take place. Also in the 90s when both parts of Germany reunited it was a big challenge for the social security system. But despite all prognosis it was quite a stable change.^[1] The German system still seems to be quite stable but the annuity insurance is endangered for there are demographically too less people to carry the financial burden of the insurance.^[2]

1.2 Political background

The federal constitution insists that Germany is a social federal constitution. Slogans like "freedom”, "equality” and "solidarity” from the French revolution are part of the socio-ethical context in Germany. So there are rights and responsibilities for every О citizen.^[3] There is also the principal of subsidiary which means the smaller unit has to be prioritized.^[4] There are three more basic principles for the social security system:

- Insurance
- Care
- Provision

These three regulate the risk provision and the protection of the citizen from social emergencies and the way of payment.

The German social insurance insists that social risks are predictable as well as the coverage with fees. But still it is not individual but collective. The service is not strictly connected with the fee. The principle of provision includes compensation for special sacrifices for the state (e.g. post war injuries, appointee). The principle of care is based on the legal right for people living below the poverty limit to be provided with basics for everyday living.

The acceptance for the insurance system is the highest.^[5]

1.3 Individual insurance

The German social insurance system is not only one of the oldest systems but also one of the most comprehensive. The coverage of the social service expanded constantly over the last decades since World War II.^[6]

1.3.1 Pension system

The German pension system is based on the so called "generation contract”. This means that the generation which is currently working pays the pension of the people who are in pension. The aim is to keep the life standards of people in pension, which means that the pension gets customized to the current salary and price development. The pension is equivalent to the wages earned in past times. The pension is mainly financed through fees. Each employer and employee pays half of the fee. The government pays grants for the not insured services. The amount of the pension is calculated on the basis of special formula.^[7]

1.3.2 Health care

In 2002 there were 357 health insurance companies. There are regionally, sectorally and occuptationally structured. Every citizen is free to choose the insurance company and the companies are obliged to contract. Since 1994 there is a risk structure compensation payment. This compensation payment was established to balance salary of contribution of members, number of family member who are freely insured and age and sex of the insured people. This system makes all insurance companies competitive. Generally there is the principle of solidarity. That means that the financial stronger person pays for the financially weaker person (e.g. elder people).

In 2009 there was a great health care reform. One of the major changes is that the amount of the fee is not regulated by the companies itself but by the government. Employees pay 8,5 % of the wage and employer pay about 7,5% into the health care fund. Another change is that physicians will not be paid based on a bonus system but rather on a lump-sum payment. Especially this change causes a lot of resistance already. In Germany it is obliged to be insured.^[8]

1.3.3 Family

Families with children get monthly support from the state depending on the amount of children. After the second child the support rises constantly. The support does not depend on the income of the parents.

Maternity leave is just like Work- and Health care prevention as well as child-raising allowance an important support of family policy. Maternity leave is for women being employed and includes job protection six weeks before and eight weeks after delivery. Maternity allowance does not depend on citizenship and family status. The allowance is as high as the clear salary of the last three month.^[9]

1.3.4 Accident

The most important function of the accident insurance is prevention. Service of the insurance companies includes prevention of accidents and its risks through information and security instructions. But also services which keep the employee and his/her family from the consequence of working accidents or industrial disease are provided. In this case the insurance pays allowances, care and therapies. In these cases it does not matter by whom fault the accident happened. Even accidents on the way to the working place are covered by the insurance.^[10]

1.3.5 Unemployment

The unemployment insurance has to be remunerated both from the employer and the employee. Age, family status affects the amount and length of how long the allowance will be provided.^[11] In Germany as well as in GB only people who can not work will get welfare. Since 2005 there are three steps in the german system:

- the unemployment allowance (ALG)
- poverty proved allowance (ALHI)
- highly poverty proved allowance (SOHI)

[...]

^[1] Schmid 2002

^[2] Seidl/Jickeli 2006

^[3] Schmid 2002

^[4] Blüm/Zacher 1989 as cited in Schmid 2002

^[5] Schmid 2002

^[6] Schmid 2002

^[7] Schmid 2002

^[8] Braasch 2007

^[9] Schmid 2002

^[10] Schmid 2002

^[11] Schmid 2002