Of every euro earned by a German worker, only 47.1 cents remain on average after social contributions and taxes are deducted. Few countries in the world take an even larger share of their citizens’ income. Economists, at least those with a broadly market-oriented outlook, see this as one of the main reasons for the country’s prolonged economic stagnation.
Yet no academic is needed to recognize the problem. A glance at gross and net income is enough. For workers, the self-employed and business owners already carrying the burden, there is now fresh news, and it is not good. To reduce the chronic deficit in the statutory health insurance system, the German government plans to raise the income threshold for health insurance contributions significantly, meaning the level up to which contributions rise in parallel with income.
For employees earning around €70,000 a year, the government’s plan means they will soon pay nearly €800 more annually for exactly the same services. The state’s latest decisive intervention affects not only employees but also businesses. In Germany, employers pay half of health insurance contributions, so labor costs will also rise, especially in sectors with large numbers of highly qualified staff such as finance, chemicals, pharmaceuticals and information technology. These are precisely the parts of the economy, alongside the automotive industry, already under enormous cost pressure.
What may sound like a detail of German domestic policy points to a broader and distinctly German problem: the country’s elites regard it as a form of higher art to partly ignore reality and partly outsmart it. Rising medical costs are a burden shared by all aging societies. But Berlin’s political leaders have added a massive extra weight for working citizens: the obligation to also cover the healthcare costs of those who do not work and therefore do not pay into the system themselves, while still receiving the full benefits of Germany’s high-standard welfare state.
The Cost of Choosing Not to Work
The decision not to work is made by millions in Germany for entirely rational reasons, by natives as well as by many migrants. The so-called Bürgergeld, Germany’s basic welfare benefit, is not in practice reserved for citizens at all, but is available to almost anyone in the world who manages to cross the German border. Taxpayers assume the three costs that weigh most heavily on ordinary working people: rent, heating and health insurance, covering them in full for welfare recipients.
The German welfare system also provides additional payments for every child, meaning benefits increase with family size. While working Germans are often crushed by the cost of raising more children, welfare recipients are financially better off the more children they have.
In a basic service job with an average income, an employee often takes home no more, and sometimes even less, than the state offers someone who does not work at all and instead receives Bürgergeld. For migrants with low qualifications, whose opportunities are largely limited to poorly paid jobs, welfare becomes an almost obvious alternative.
In 2025, 47.6% of the 5.5 million Bürgergeld recipients were not German citizens in the legal sense of the word, but residents with more or less secure residence status. In 2015, when Angela Merkel pushed through her open-border policy, the foreign share of welfare recipients was still only 21.8%. Last year, 512,000 Syrians and 201,000 Afghans received Bürgergeld, representing 52.8% of all Syrians and 46.7% of all Afghans living in Germany.
They all require housing, but they also make use of the German healthcare system without paying contributions themselves. The government transfers only a flat-rate sum per person to the health insurers for Bürgergeld recipients. That amount does not come close to covering the real costs. The insurers must absorb the rest, which means the burden falls on those who work and pay contributions. Their payments have already risen sharply in recent years, and now they are set to rise again in one major leap. It is a self-inflicted deficit, the unavoidable result of allowing ever more people to draw from a system they do not pay into.
When Welfare and Open Borders Collide
Economist Milton Friedman coined the famous line that a country can have either a generous welfare state or open borders, but not both at the same time. This is where Germany’s elite problem becomes apparent: when reality itself shows that something does not work, many officials and media figures treat it as a challenge to prove the world wrong.
The same applies to Friedman’s observation as to the simple fact that a modern country cannot run entirely on solar and wind power, at least not if it intends to remain an industrial nation. Germany’s leaders believed otherwise here too: they insisted it could be done, that it was not a question of physics but of political will, that the impossible could simply be made possible. And as if determined to disprove Friedman, they expanded the welfare state still further after opening the borders in 2015, even as mass migration accelerated.
One of the great political illusions at the time was the claim that mass immigration would cost ordinary people nothing. “No one will have anything taken away from them”, then-SPD minister Heiko Maas promised. Today, many families can see the price of this migration and welfare policy clearly enough - not only in their finances, but also in their declining sense of public safety.
Out-of-touch judges are helping drive the welfare state’s expansion even further through their rulings. A social court recently decided that taxpayers must continue supporting a Bürgergeld recipient who has been treating his depression in Portugal for several months and no longer even lives in Germany. The package also includes covering the cost of the man’s 96 sq m apartment back in Germany.
The governing Social Democrats firmly reject the idea of offering non-working welfare recipients who have never paid into the tax and social security system only basic medical care instead of the full range of German health insurance benefits. Sending unemployed Syrian migrants home now that the civil war in their country has ended is blocked by an alliance of left-wing parties, NGOs and asylum lawyers. Some left-wing politicians have even proposed allowing Syrians to return home on a trial basis while continuing to receive Bürgergeld, including full healthcare benefits.
It is as though the overriding goal is to ensure that no one is ever cut off from German welfare benefits, not even if that person is neither German nor living in Germany.
Migrants who take what the German government makes available to them should not be blamed. The fault lies in the offer, not with those who make entirely legal use of it.
But when politics blocks every reasonable path to a solution, only the usual method remains: raising taxes and contributions even further for those who still work in order to keep the system fed. Claiming that Friedman’s principle does not apply, at least not in Germany, belongs on roughly the same level as denying gravity.
Reality Always Sends the Bill
Another undeniable truth, equally unpopular in political Berlin, comes from Ayn Rand: “You can avoid reality, but you cannot avoid the consequences of avoiding reality.”
Citizens see those consequences in their payslips and tax returns. Those who work will be allowed to keep even less of their income in future in order to finance those who do not.
Germany now serves an important function for the rest of the world: in energy, migration and social policy, it demonstrates which wrong turns other nations should avoid. Water does not flow uphill, no matter how much political will or magical thinking is applied.
Admittedly, it is a rather expensive experiment. But if Germany insists on carrying it out, others should at least draw the right conclusions from it, even if no one in Berlin’s government district does.