Planned Family Policy Reform Will Strengthen Employment

Thanks to the planned family policy reform “Starke-Familien-Gesetz”, which will bring about improvements regarding child supplements allocated to families, gainful employment will become more profitable for families with low incomes in Germany than before. As a consequence, employment figures – measured in full-time units – could rise by around 3,000 jobs. While there are currently around 90,000 households receiving child supplements, the reform could increase the number of eligible households by 80,000. In return, 18,000 households would no longer have to rely on long-term unemployment benefits. These are the main findings of a study conducted jointly by the ZEW – Leibniz Centre for European Economic Research in Mannheim and the IZA – Institute of Labor Economics in Bonn on behalf of the German Federal Ministry for Economic Affairs and Energy.

The simulations conducted by ZEW and IZA are based on data from the German Socio-Economic Panel (SOEP), which provides a representative picture of the financial situation and labour market behaviour of German households.

The reform to child supplements is part of the “Starke-Familien-Gesetz” (“strong families act”), which was debated in the Committee on Family Affairs in the German Bundestag on 11 March 2019. The reform includes plans to increase the maximum amount of child supplements from 170 euros to 185 euros per month and to eliminate maximum income regulations for child supplements. In addition, the proposal promises more leniency in the assessment of the incomes of parents and children.

“The reform proposals are a step in the right direction. They eliminate long-known shortcomings in the way child supplements are designed,” explains Dr. Holger Stichnoth, deputy head of ZEW’s Research Departments “Social Policy and Redistribution” and co-author of the study. “The social welfare system remains, however, very complex for low-income households who receive long-term unemployment benefits, child supplements and housing benefits. The grand plan – a single, simple security scheme for children – still remains to be developed.”

For further information please contact

Dr. Holger Stichnoth, Phone +49 (0)621-1235-362, E-mail holger.stichnoth@zew.de