Work, the economy and social security

Germany has a social market economy (Soziale Marktwirtschaft): a free market with competition, and a state that protects people who cannot help themselves.

• Companies compete freely, prices are mostly set by supply and demand, and property is protected, but the state sets rules to protect workers, consumers and the environment.
• The idea was developed after the Second World War by Ludwig Erhard and Alfred Müller-Armack. The strong growth of the 1950s and 1960s is called the “Wirtschaftswunder” (economic miracle).
• Germany is one of the biggest export countries. Typical industries are cars, machines and chemicals, and most companies are small and medium-sized (Mittelstand).
• The currency is the euro (since 2002). The European Central Bank has its seat in Frankfurt am Main, the financial centre of Germany.

Employees are protected by the law and by collective agreements. The test asks about the main rights.

• A work contract (Arbeitsvertrag) says the work, the salary, the hours and the holidays. A statutory minimum wage (Mindestlohn) applies to nearly all employees; the amount is reviewed regularly.
• Employees have a right to paid holidays: at least four weeks (24 working days with a six-day week) a year. The working time is normally not more than eight hours a day.
• A dismissal needs a reason in companies where the protection against dismissal (Kündigungsschutz) applies, and has to be in writing, with a period of notice. Pregnant women are specially protected.
• Workers can form and join trade unions (Gewerkschaften); unions and employers negotiate collective agreements (Tarifverträge). The right to strike exists. In a company, the works council (Betriebsrat) represents the employees.
• The employment agency (Agentur für Arbeit) helps with the search for a job; the Jobcenter helps long-term unemployed people with basic income support (called the “Bürgergeld”; the name and the rules change).

Exam tip: A works council, a union and a collective agreement are three different things: company, workers’ organisation, agreement.

The social state is built on five compulsory insurances. Employees and employers pay contributions together, and the insurances pay in the event of illness, old age, unemployment, accident and need of care.

• Health insurance (Krankenversicherung) is compulsory for everybody in Germany. It pays the doctor, the hospital and medicines. Most people are in a statutory health insurance fund (gesetzliche Krankenkasse) and have an insurance card.
• Long-term care insurance (Pflegeversicherung) pays when people need care. Pension insurance (Rentenversicherung) pays a pension in old age; the retirement age is rising to 67.
• Unemployment insurance (Arbeitslosenversicherung) pays unemployment benefit (Arbeitslosengeld) for a limited time. Accident insurance (Unfallversicherung) is paid by the employer and covers accidents at work and on the way to work.
• The contributions are taken directly from the gross salary; the employer pays about half of them. Children, and the spouses without income, are often insured free of charge with the family.
• For a medical emergency you call 112; for a doctor outside the surgery hours, the number 116 117 of the medical on-call service.

Taxes finance the state: schools, roads, the police and the social benefits.

• Income tax (Einkommensteuer) is paid on income; for employees it is taken from the salary as wage tax (Lohnsteuer). Everybody has a tax identification number (Steuer-ID).
• The value-added tax (Mehrwertsteuer) is included in the prices: 19 percent in general and 7 percent for food and books.
• Most employees make a tax return (Steuererklärung) only if they want money back or if the law says so; the tax office is the Finanzamt.
• You get a payslip (Gehaltsabrechnung) every month with the gross salary (Brutto), the taxes and contributions, and the net salary (Netto) that you receive.