Social systems contribute to economic success and political stability in many
ways. They mitigate the negative social effects of the Schumpeterian ‘creative
destruction’ caused by international competition to which Germany, as an open
economy, is particularly exposed.
Anyone who loses their job in Germany usually receives ‘level I’ unemployment
benefit for at least one year, with older people receiving this benefit for a
maximum of two years. This is equivalent to a generous 60% (67% for people
with children) of their previous net wage. The German Federal Employment
Agency also pays contributions to social insurance schemes to ensure
continuing provision for old age and to preserve health insurance cover. In the
event of extended unemployment, individuals can generally access means-
tested ‘level II’ unemployment benefit.
This comprehensive social protection not only encourages acceptance of
structural changes but also makes it easier for insured individuals to take
professional risks. Apprentices also receive full social security entitlements that
incorporate affordable protection for (industrial) accidents and illness to
encourage young people to undertake such training.
Generally speaking the
protective shield offered by social insurance schemes is likely to have a positive
effect on workers’ willingness to change jobs and their professional flexibility. All
of this promotes structural change thus placing the relatively high cost of social
security into perspective.