The welfare state is central to German identity since Chancellor Bismarck's creation of the first modern pension system in the 1880s to undermine socialism and ensure stability. Many features of the system remain in place today: mandatory insurance, benefits tied to earnings, and use of decentralized private associations to carry out national policy.
Needs of wartime production increase workers' bargaining power, and benefits continue to be extended up the social ladder. The retirement age is lowered.
Unemployed veterans are a major problem, and Weimar governments modernize and expand programs such as unemployment insurance and public assistance. The Depression undermines many of these programs, which depend on worker contributions. Hitler's National Socialist Party exploits this lack of an effective safety net in recruiting followers. Ambitious plans for universal education are not realized.
In 1933 Hitler disbands the labor movement and strips Jews of citizenship. Jews, dissidents, and other minorities are put in concentration camps, where they are forced to work or killed outright. The Reich centralizes social programs and education as a means of control. The regime extends health insurance to retirees in 1941, and expands health care and maternity leave the following year.
Five million Germans die during the war, and many families are left homeless or divided. A ruined economy and global food crisis force many Germans to eat only a quarter of their prewar diet. Allied efforts to create a uniform benefits system are rejected. The old network of decentralized administration of social programs by non-government associations, with labor and business input, is restored.
The scale of devastation and historical focus on welfare lead Ordoliberals to mix a free market with social programs. In 1950 unemployment reaches 10 percent but will fall to 1 percent in a decade. Cooperation among state, business, and labor, plus public regard for health and safety, contribute to a responsible work environment. Comprehensive programs retain inequities towards women and the poor.
In 1963, at the height of the economic miracle, social spending reaches almost 20 percent of GDP. To meet demand for labor, farm workers are first absorbed, contributing to the depopulation of the countryside. Foreign "guest workers" are recruited from Turkey, Italy, and later Yugoslavia. Many will stay permanently, bringing their families to join them.
Benefits such as health insurance for students and the disabled are expanded further in the 1970s. But attempts to make benefits uniform across occupations are not successful. The SPD-FDP coalition makes divorce and abortion easier and reforms the education system to reduce unequal access. Efforts to rein in health care costs begin.
Unemployment rises to 6.4 percent. Chancellor Helmut Kohl's platform includes reducing state spending, but reducing benefits is politically difficult. To reduce health care spending, cost-control measures and co-payments are introduced.
Reunification requires subsidies from the West, further straining a social budget that is already 10 times its 1960 level. Some benefits, such as unemployment insurance, are extended to the former East Germany, while others are reduced, such as health and child care coverage. The gap in unemployment and manufacturing in East and West further strains the collective bargaining system.
European integration raise fears that workers will be hurt by privatization and spending cuts. High unemployment, an aging population, and low birth rates make generous social benefits increasingly untenable. Unemployment at the end of 1996 reaches of 11.4 percent, and the IMF urges reforms of the "German model," such as labor market deregulation and a contraction of the welfare state.
Continued unemployment challenges the old labor and welfare models. The state works with labor and business on wages, retirement, hours, and training to increase flexibility and competitiveness. Collective bargaining still calls for uniform wages and hours across diverse regions and firms. More firms try to negotiate outside the system, and unions increase activity to respond to these threats.
The strong showing of the Greens in the 2002 elections confirms the political maturity of the movement and the entrenchment in German society of environmentalist and anti-militarist ideas. Economic stagnation brings changes: More Germans seek work abroad, and long-fixed shopping hours are extended at home. In a ray of good news, Germany reaches the finals of soccer's 2002 World Cup.
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