Since its introduction in 2007, the Elterngeld (a German childcare allowance) has lost around 38% of its purchasing power by 2023, according to an unpublished study by the Cologne Institute of the German Economy (IW). The study, reported by the “Rheinische Post” (Friday edition), highlights that the decline in purchasing power will continue without an inflation adjustment.
The study’s authors, citing data from the Federal Statistical Office and their own calculations, note that the effects of inflation have never been offset since the introduction of the Elterngeld in 2007.
Low- and middle-income families, in particular, will be affected by the loss of purchasing power, as the minimum benefit of €300 per month has not been adjusted for inflation. According to the study, the benefit should have increased by 37.8% to €413 per month by 2023 to offset the inflation-induced loss of purchasing power.
Even high-income earners will be impacted, as the lack of an inflation adjustment has led to a significant loss of purchasing power. For example, the maximum benefit of €1,800 per month would have increased to €2,480 per month to account for inflation, the IW notes.
The maximum benefit has not been increased for years, leading to more families reaching the maximum threshold due to rising incomes. The study finds that in 2011, only 6.3% of parents receiving the childcare allowance had a net income of €2,770 per month, but by 2021, this figure had risen to 16.7%.
The IW emphasizes that, to maintain the current level of security for families with higher incomes, an inflation adjustment is essential to keep the benefit’s real value intact, rather than just its nominal value.