Germany also provides several special systems of coverage for groups such as war widows, orphans, and farmers. Unemployment insurance is funded through deductions from wages and salaries. Allowances are made for families with one or more children. Additional public allowances are granted to persons suffering disabilities from wartime injury, whether as military personnel or as civilians. Some small indemnification has been made to property owners whose holdings lay in former German territories now outside the country. War reparations
Under agreements concluded with 12 European countries, Germany has paid compensation to the nationals of those countries who were victims of Nazi oppression or to their families and successors. In particular, the government has assumed the immense financial responsibility of making restitution to the Jewish victims of Hitler’s Germany. Claims for property confiscated during the Third Reich have been honoured, and Jewish refugees and expellees from that era, the vast majority of whom reside abroad, have been paid indemnifications and pensions. Massive reparations have been paid to Israel in the name of the Jewish people at large. East Germany ignored all such claims until 1990, when the transition government of Lothar de Mazière undertook similar restitution. In 2000 the German government, more than 3,000 German companies, the Evangelical Church in Germany, and a number of other institutions and governments established a multibillion dollar fund to compensate those forced to perform labour during Nazi internment. These roughly one million rapidly aging people, living primarily in central and eastern Europe, were among the last large groups of victims of the Nazi era who had received no previous payments or support from Germany. The fund was intended both to provide some restitution to the forced labourers and to shield German companies from potential individual lawsuits. Standards of living
Western Germany’s standard of living is among the highest in the world. The distribution of wealth compares favourably with that of other advanced countries. Powerful incentives to save are offered by the state not only in the form of housing subsidies and tax concessions but also through bonus saving schemes. For those whose income does not exceed a certain level, savings of up to a fixed amount kept in a bank or savings institution for seven years are granted a generous bonus by the government. The accumulation of capital assets is encouraged under a plan whereby workers below a certain earning level who agree to pay into a longer-term savings agreement, such as a home-savings contract, are given a “worker savings grant” by the state.
Earning power for both workers and employers assures an adequate income to meet the cost of living. There is no exaggerated difference between the compensation for blue-collar workers and white-collar employees, although upper levels of management earn generous incomes and benefits. Because a major portion of tax revenue is derived from excise levies and the value-added tax—as in most EU countries—low- and medium-income workers collectively bear a greater relative tax burden.
The absorption of the eastern German population and economy had no more than a marginal effect on living standards in the regions of the western sector despite a rise in unemployment, a housing shortage, and tax increases. Even the exorbitant costs of unification, which brought about a tax increase, seemed to cause few changes in western Germany. The deutsche mark held its strength and grew even stronger. By contrast, the introduction of the mark in East Germany in July 1990—far from being the “magic bullet” hoped for—tended to have a depressing effect. The eastern population with its much lower earning power suddenly had to pay Western prices for food and other commodities. The wholesale shutdown of former state factories and enterprises caused vast unemployment in industrial cities in Thuringia, Saxony-Anhalt, and Saxony and resulted in much hardship and discontent that persisted long after unification.
During its 40 years, the East German government produced a society in which employment was guaranteed and in which most of the requirements of life were often provided free or at low cost. The demands of work were different than in West Germany and were relatively lax; competitiveness, initiative, and individuality were not qualities highly prized or rewarded. The working population was even more ill-suited than workers in Poland, Czechoslovakia, or Hungary for the plunge into a free market economy—largely because eastern German workers needed to learn new technologies, were under new management, had to accommodate the rules and culture of West German labour unions, and were forced to compete with their western German counterparts. But, unlike other former Soviet bloc countries, East Germany had a prosperous neighbour that bailed it out. As a result, in the two decades that followed reunification, the standard of living in the east rose dramatically. Household incomes almost doubled over this period, although unemployment remained significantly higher in the east than in the west, and a wave of migration resulted in a brain drain, as tens of thousands of people left the east for destinations in the west and abroad. Housing
German housing stock is generally of good quality, though there is a considerable discrepancy between eastern and western Germany. In the territory of the former West Germany, the stock is modern, some three-fourths of its dwellings having been built since the end of World War II. In contrast, eastern German housing stock is significantly older, about half of it having been built prior to the end of the war. Home ownership rates also vary considerably; almost half of dwellings are owner-occupied in western Germany, compared with less than one-third in eastern Germany.
In principle, under the communist government of East Germany, every citizen and family had the right to adequate accommodations. Rents everywhere, together with charges for heating and electricity, were held at extremely low levels. The need for new housing after the war was solved by erecting massive apartment blocks of cheap material, places that are now generally out of favour with people who have the means to choose their style of housing.
After unification the government devoted significant resources to modernizing eastern Germany’s stock and alleviating the housing shortages caused by the extensive immigration of the 1990s. Significant tax incentives were offered to spark investment in the real estate sector of the former East Germany, and a speculative boom followed, eventually resulting in a housing supply that far outstripped demand. When the tax incentives expired in 1998, the real estate bubble burst, and housing prices across Germany slumped. This had the unintended consequence of insulating Germany from the exuberance that fueled 21st-century housing bubbles across the industrialized world. As a result, German banks and investors were far less exposed to the shocks of the economic crisis than their American, British, Spanish, and Irish counterparts.
The private sector provides most of the capital for new housing. However, the federal government’s building savings policy offers loans to those who save for a prescribed period to build or purchase a home. Much of the housing built with government subsidies is allocated to “social housing”—dwellings provided at “cost rent” far below the market rental value to families with many children, people with disabilities, the elderly, and persons with low incomes. Stringent definitions of tenants’ rights, including injunctions against arbitrary or unfair evictions and protection against precipitous rent increases, balance the rights of tenants and landlords.