Social expenditure: Employer president warns of collapse of the welfare state

Germany’s employer warn of a collapse of the welfare state. “If our welfare state collapses, it is of no use. And he will collapse if we continue,” said employer president Rainer Dulger of the German Press Agency in Berlin. “We urgently need to reform this welfare state.”

An open and honest discussion is necessary “about what we can no longer pay for social benefits,” said Dulger. “We can no longer afford everything we want.” Dulger pointed out employer calculations, according to which the administrative costs in the social security funds are 25 billion euros. “There is a lot of space for improvements. We fault a lot of money for inefficiencies.”

Commission should start quickly

The announced commission on the reform of the welfare state must quickly start work. “I expect the Commission to present concrete points as soon as possible, how to reform and improve social insurance,” said Dulger. “We have to move away from the high wage additional costs. We therefore urgently need expenditure -reducing structural reforms.”

In the coalition agreement, the Union and SPD announced a commission on the welfare state reform, which presented a result within the fourth quarter of 2025. In autumn, the government also wants to reform the citizens’ allowance.

Above all, the welfare state must become more accurate again, the head of the Federal Association of German Employers’ Associations demanded. In the government’s reform announced by the government, the goal must be “that those who work are noticeably better than those who do not work”.

Effects on political stability

That is not the case today. “And this means that more and more disappointed, working citizens turn to extreme political edges,” said Dulger. “If the welfare state becomes accurate and therefore fairer, the political center will also become stronger again.”

Dulger pointed out that he was talking to many working citizens who paid and are disappointed and angry with taxes and angry, “because someone who has never worked, has never paid for contributions – but at the end of the day it is no worse than themselves”. The employer president said: “I do not know how long our democracy can withstand this before some ask the system question here.” Those who work hard and a lot of work must always be better than the one who doesn’t work.

A lowering of social security contributions to less than 40 percent is central. The expenses currently went up rapidly. “This is massive net claw with the employees.” Social security contributions over 40 percent of a penalty tax would be equal to work. There is a lot of potential for savings through more digitization and the use of AI.