ifo study on the financing of social insurance

ifo study on the financing of social insurance

“The pension is secure,” was the famous sentence of a former federal labor minister. But how can the German social systems actually be made future-proof?

In order to find out, experts from the ifo Institute formulated the following question as part of a study: How much contribution revenue and what additional funds can be achieved if the assessment base is expanded and additional income components are used for financing?

For the ifo experts, the following factors come into question: “Non-employment income such as rental income, interest or dividends, which has not yet been used to finance social security”, in short: components of the total income of the contributors that have not played a role in the calculation so far played.

Ever increasing expenses

The basic assumption is that the social security systems would require considerable additional financial resources in the coming years. Resource-saving adjustments should also be made, according to the article by ifo authors Anne Steuernagel and Marcel Thum. Demographic change is putting pension and long-term care insurance under pressure. In statutory health insurance, technical change is leading to constantly higher health expenditure.

The broadening of the assessment basis would focus on additional income from employees who are already subject to social security contributions, the text says. An expansion of the insured group of people, for example to include the self-employed or civil servants, was not investigated.

“Vanishingly small additional income”

The two experts came to the conclusion that an extension of the obligation to pay contributions would be unsuitable for financing the social security systems: “An extension of the obligation to pay contributions to all types of income is currently being discussed, i.e. also to interest, profit and rental income. However, the additional income that could be achieved as a result would be negligible low,” summarizes Joachim Ragnitz from the Dresden branch of the ifo Institute.

The results in detail: According to the economists’ calculations, the additional income from the statutory pension insurance would only amount to 5.6 billion euros, with total expenditure amounting to 341 billion euros.

In the statutory health insurance, too, the achievable additional income of 5.3 billion euros is negligible in view of the total expenditure of 275 billion euros. The reason for this is that employees who are subject to social security contributions typically have only little additional income.

“Demography festival through longer lifetime”

“Higher income could be achieved if the contribution assessment ceiling were abolished or other groups of people were included in the social security obligation,” says Ragnitz. However, the claims for payment would then increase, at least in the pension insurance system, in the medium term. “So that’s not a contribution to increasing the sustainability of pension insurance.”

Co-author Thum adds: “In order to make the social security systems demographic-proof, there is no way around making adjustments on the expenditure side. In pension insurance, this also includes a longer working life.”


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