MONTGOMERY VILLAGE, MD., January 13, 2015 – Germany’s economy is usually one of the best in the world. While other countries in Europe suffer from wild swings in their economy, for example Greece and Italy, the Germans continue being on top of the continent’s economies.
After the consolidation of Germany on October 3, 1990, a significant portion of the citizens found themselves faced with the difficulty of finding a new way to make a living that required much more than just knowing how to play the political machine.
Notwithstanding this great handicap, Germany rose again to be the top economy in Europe. Even in the crises days following the economic downturn of 2008, the country was able to recover faster than all of its neighbors. During the worst days of the crises, German companies were asked to retain their employees even if it meant reduced working hours. Part time employees were encouraged to go back to school to hone their skills so that they could return to work at an advantage.
Americans often believe German success must be thanks to lack of regulation and low taxes. Americans are taught that if we just let free enterprise alone, it will make all of us comfortable economically.
However, this perception couldn’t be further from the truth. Deductions for people earning a middle class salary in Germany, around 50K Euros, are close to 50%. While the income tax is about 20% to 24% depending on whether you are married or not, the balance is not considered taxes and can be labeled as social security deductions. These include:
*Health insurance: 7.75 % out of your salary (capped at 48,600 € pa)
*Old age care: 1.025 % out of your salary (capped at 48,600 € pa)
*Unemployment benefits: 1.5 % out of your salary (capped at 71,400 € pa)
*Pension: 9.45 % out of your salary (capped at 71,400 € pa)
The corporate tax in Germany is around 20% and it is lower for food related corporations. Germany is rated as one of the safest “tax haven” countries in the world. The corporate tax in the US is between 0 and around 12%.
The Health Insurance system in Germany was first developed in the XIX century by Bismarck. Fearing that Germans would be attracted by Communist politician’s offers to the workers, Bismarck founded a system that to some extent is still in operation in the country. All employees are required to have health care insurance of their choosing, not chosen by their employers. The total cost is about 15%, of which the employer pays half. The insurance covers all medical expenses and pays for 90% of drugs. Since the system is open, insurance providers have to fight for each client, keeping the cost under control. In the case of unemployment, the unemployment benefits continue covering health costs at a set tier, usually lower. Those who can’t pay are covered by government programs.
Besides full coverage for medical visits and 90% of drugs, mothers are paid for 12 months of pregnancy leave and fathers for three months. Insurance also covers helpers for the mother during the medical leave.
There are some inconveniences to the so called public health care system. There may be relatively long waits to see a doctor if there is no emergency and some procedures like aesthetic dentistry are not covered. For upper middle class and rich Germans, there is also private insurance, and about 20% of them have it. It is relatively costly, but these lucky citizens don’t have to wait like the rest to see a doctor.
While German workers are usually considered some of the most productive in the world, rating par with US workers, they are entitled to six weeks of vacation per year. There are no laws in the US mandating vacation for workers. An article on the subject lists some differences in the way workers and managers in both countries go about their business. Results based management and less meetings are listed as being key for the Germans.
So far it seems that the German workers may have a reason to be happier than us in the US. While taxes are high, people don’t die from a tooth ache or have to mortgage their future because they get sick. They also enjoy six full weeks off every year by law. They also apply themselves to their toil and are successful at it.
There has to be a catch.
High School education in Germany has been classified as less open than in other countries, like the US. By the time students enter the middle grades, they are already assigned to a specific path. There are the ones that will go to the university, the ones that will have white collar non-professional jobs and those that will end up learning a trade. Several attempts to revise this system have been mostly unsuccessful and the three tier high school system is still dominant. While the system is somewhat flexible, and students can change paths, the Germans believe it works and they have left it almost unchanged.
Another thing that works in German education is education after high school. Any qualified student can attend a university free of charge.
But wait, that is not all.
Any foreign student can also attend college for free in Germany. They are required to be “conversationally fluent” in the language. Laws deferring all fees were passed recently.
Looking at this somewhat limited view of Germany one can say that on most important aspects they surpass most other countries, especially from the perspective of the worker.
Critics have been saying that this worker affluence is not sustainable. However, the critics keep being proven wrong.
So why it is that everyone is not trying to go to Germany?
An even better question is why other countries aren’t trying to be more like Germany.
Mario Salazar, the 21st Century Pacifist was extremely surprised at the results of the research for this article, having heard only anecdotal information in this respect before. He is in Tiwtter (@chibcharus), Google+ and Facebook (Mario Salazar).