News of the week - Elterngeld

Last week, the coalition government in Germany agreed upon the introduction of the so called "Elterngeld", literally translated meaning "Parent money" (a description of it in Wikipedia also exists). As one of their top priorities, the government is trying to increase the birth rate in Germany. With the current value of around 1.3, the birth rate in Germany is one of the lowest in Europe. Many problems are expected in the future as a result of the low birth rate. As in many other European countries, in Germany, the working population pays for the pensions of the retired part of the population. In a few years, when the after-war baby-boom generation goes into retirement, a relatively small amount of people will have to finance their pensions. This is going to cause major problems, so much is clear. These problems cannot be avoided anymore, but in an attempt to reduce the problems for later generations, increasing the birth rate is one of the top priorities of the current government.

Motivated by the success in Scandinavian countries, where, since 2000 the birth rated has supposedly risen by 10% as a consequence of family supporting incentives by the government, the previous German government announced the plan to financially support families if one of the partners decides to take a long-term leave from work to take care of the their newborn.

Last Tuesday, the current minister for family matters, Ursula von der Leyen (herself a mother of seven), announced the agreement of the coalition partners regarding the realisation of "Elterngeld". For all families in which a child is born after 1 January 2007, the government will pay 67% of the last earned net wages (with a max of € 1.800,- per month) of the parent who takes an unpaid leave from his or her job. In case, the other parent also takes an unpaid leave of at least 2 months, two bonus months can be added. This provision will apply, other than is the case today, to all families, regardless of the income level. In this way, the government hopes to reach an effect with the large amount of couples with a high income but no kids, who, in the current situation do not get a financial compensation from the state in case of an unpaid leave.

It is questionable, however, whether financial incentives allone will result in an increasing birth rate. For many couples, the main problem of having children, is the almost obliged step-aside from job life, as too few placements in children day care are available today. Leaving the job for a number of years with the risk of not being able to build up a career anymore, is too often neglected as an important reason for postponing and even refraining from setting up a family. So far, not much has been done to increase the number of children daycare places. If the government is serious about increasing the birth rate, this is problem that should be tackled as well.