German social welfare group backs consolidation of benefits to cut poverty and bureaucracy

The Arbeiterwohlfahrt (AWO), a prominent German social welfare organization, has endorsed a federal government commission's recommendations to merge various social benefits into a more streamlined system. The proposed consolidation includes basic security, housing allowances, and child support, with the AWO arguing that such a move would not only simplify bureaucratic processes but also actively reduce the risk of poverty in Germany.

A study commissioned by the AWO from the ifo Institute in Munich supports these reform proposals. The AWO's plan largely aligns with the government commission's suggestions, with a key difference being the AWO's stipulation that income assessment should not systematically worsen the situation for any recipients. The core idea is to bundle benefits for employable individuals and establish a single income concept, addressing concerns that the current social welfare system is overly complex and prevents many eligible individuals from accessing their entitlements.

According to the study's lead, Maximilian Blömer, the proposed reforms could lead to a reduction in the poverty rate by 0.9 percentage points, from the current 16 percent. The plan includes an "earnings booster" of 100 euros per employed person above the mini-job threshold and additional allowances for single parents, aiming to create incentives for employment. The authors estimate that these changes could bring approximately 322,000 more people into the workforce, increasing working hours by the equivalent of 188,000 full-time positions.

Despite the potential benefits, the reform package is projected to incur significant costs for the state, estimated at 5.4 billion euros per year. However, the AWO emphasizes that by bringing more people into employment, the overall costs associated with the reforms are expected to decrease. The organization believes that the consolidation of benefits is a crucial step towards a more efficient and equitable social welfare system.