A third at the limit - why the relief hardly reaches large parts of the German population

A third of households in Germany are unable to cope with unexpected major expenses. According to the Federal Statistical Office, almost 32 percent of the population could not raise 1150 euros spontaneously last year. In view of the explosion in energy costs and persistently rising inflation rates, a significant number of people are dependent on rapid and noticeable relief in order to get through this crisis. However, many of the planned aids, such as the gas price cap, are not targeted enough, as economists complain.

Two fifths of the residents had to make do with a net income of less than 22,000 euros in 2021. A fifth of the population only had a so-called net equivalised income of 16,300 euros at their disposal. The equivalent income is a per capita income adjusted for the savings effects in multi-person households.

Single parents with their children, as well as adults living alone, pensioners and the unemployed often have comparatively small household budgets. Two thirds of single parents and half of retirees as well as more than 50 percent of single people have less than 22,000 euros. A third of both single-person households and single parents have to make do with less than 16,300 euros a year.

Families with three or more children are another group that, at almost 58 percent, is disproportionately among the lower-income 40 percent. The financial situation of the students is similar. The income situation of the unemployed is even more precarious, three quarters of whom have a maximum of 22,000 euros at their disposal.

More than every second non-working adult has a net income of less than 16,300 euros. The self-employed and those in dependent employment, on the other hand, are significantly less likely to be at risk of poverty, as the statistics show. A good half of them belong to the two highest-income groups in the population.

Since the start of the Russian war of aggression in Ukraine last spring, the traffic light government has already implemented two relief packages to cushion the consequences and is currently working flat out on a third. Some of the measures implemented, such as the tank discount or the 9-euro ticket, were limited to the three summer months and benefited both the poor and the rich. All employees also received a one-off energy bonus of 300 euros in September. There were also one-off payments for families, housing benefit recipients and Hartz IV recipients.

The third relief package, which currently still contains a few vague items - such as the planned gas price brake - is about an even larger bundle of measures. The traffic light has announced the introduction of an electricity price brake, the permanent increase in child benefit at the turn of the year, one-off payments for students (200 euros) and pensioners (300 euros) and a higher housing benefit for significantly more entitled people.

It is stated that people with medium and low incomes in particular should benefit from this. From the coming year, Hartz IV is also to be replaced by a so-called citizen's allowance, which initially provides for an increase of 50 euros and more generosity with existing assets.

In order to mitigate the extreme increase in the cost of natural gas, the government has set up a commission of experts to quickly work out a practicable solution for a price cap. Each household should receive a basic requirement that has yet to be defined at a subsidized price.

The social expert at the Ifo Institute, Andreas Peichl, criticizes that the current or planned relief measures are "unfortunately not very specifically designed" for low incomes, but are distributed widely to all households with a watering can. "It would be much better to concentrate the measures on needy households and to relieve them even more," emphasizes Peichl.

Last year, 3.7 percent of households in Germany were in arrears with their bills from utility companies such as electricity or gas providers, according to the Federal Statistical Office. Because electricity and gas prices have now risen many times over, many more people are at risk of financial hardship this year.

The government wants to prevent this and has announced a corresponding "protective shield" worth 200 billion euros, which is intended to significantly mitigate the consequences of the acute energy crisis for companies and citizens.

However, some economists have doubts about the planned gas price cap. "Fixed amounts of gas per capita are not accurate," warn Christian Bayer and Moritz Kuhn from the University of Bonn. According to their calculations, only an insufficient amount of their needs would be subsidized in this way for 17 percent of all households.

"This under-subsidy occurs even in the bottom quintile of net income and is by no means an upper-class phenomenon," the researchers write. 44 percent of all households would be supplied with all their needs with subsidized gas. The oversupply is by no means concentrated on poor households. The two economists complain that even in the richest 20 percent of households, every incentive to save energy is destroyed for a third of the households.

Federal Minister of Labor Hubertus Heil (SPD) has meanwhile presented a draft law on the planned one-off payment of a lump sum for energy costs to pensioners. They should receive the 300 euros in December. Just as was the case with the corresponding energy allowance for employees, the one-off payment is taxable.

DIW social expert Markus Grabka from the German Institute for Economic Research (DIW) welcomed the fact that pensioners and students are now also taken into account with the third package. The improvements in housing benefits are also correct. "Unfortunately, there is still no central register of all relevant data in Germany for a really targeted social balance," said the economist.

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