Inflation eats up parental allowance amounts: Experts call for adjustment

The minimum and maximum amounts for parental allowance have remained the same since 2007. Experts view this critically and suggest options for action.

Berlin – The world is constantly changing. And Germany is no exception. Given the fast pace of life today, traditions that have been tried and tested for years are winning hearts. Because they exude reliability and trust. People know each other and appreciate each other.

Parental allowance is one such political instrument that is a few years old but has long since proven itself. It was introduced in 2007, also by the first government under Chancellor Angela Merkel – a grand coalition. The guidelines have remained the same since then: the minimum amount of the so-called basic parental allowance is 300 euros, the maximum amount is 1800 euros.

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Parental allowance and the maximum amount: Almost one in four fathers now reaches the upper limit

This is precisely why there is now criticism. Prognos, one of the oldest economic research companies in Europe, criticizes the fact that the upper and lower limits have remained unchanged for 17 years with regard to price developments: “Due to inflation, however, the amounts have lost value since then and more and more parents are receiving the maximum amount.”

In 2009, 14 percent of fathers and three percent of mothers were affected by the cap on parental allowance because of their salary, and in 2021, 24 percent of fathers and seven percent of mothers were affected. While the maximum amount was above the median income of families in 2007, it has been below it since 2017. The experts state: “The ratio of income to the parental allowance limit has worsened.”

New maximum amount for parental allowance? Orientation towards inflation or contribution assessment limit

According to the forecast, it is therefore time to increase the minimum and maximum amounts. The main focus must be on ensuring that parental allowance today meets the goal of replacing wages to the same extent as when it was introduced in 2007. Two ways of doing this are outlined.

Parental allowance can therefore be adjusted to inflation. To do this, the researchers use price developments according to the Federal Statistical Office's consumer price index as a basis. The maximum amount should therefore have been 2,480 euros in 2023 instead of 1,800 euros, and the minimum amount should have been 413 euros instead of 300 euros.

Alternatively, parental allowance could be increased in line with the social security contribution assessment limits, as this is also what the 1,800 euros 17 years ago was based on. For 2023, the maximum amount would then be even higher, at 2,870 euros.

Criticism of parental allowance: According to experts, “inflation adjustment is long overdue”

According to project manager Dr. Claire Samtleben, “an inflation adjustment of parental allowance is long overdue.” She goes on to say: “This is the only way to keep financial support for families at the level that was intended when parental allowance was introduced.”

As early as November 2023, Prognos, together with the German Economic Institute (IW Cologne), published further proposals for the further development of parental allowance. The main aim is to achieve a more balanced distribution of paid work and care work for both parents.

However, the current limits stand in the way of disclosure. “There is a fear that it will deter fathers from taking parental leave if they are the main earners and their parental allowance entitlement does not sufficiently cover the gap in household income,” the newspapers of the Funke Media Group (article behind a paywall) quote Samtleben, who is of the opinion: “If they had more parental allowance at their disposal, these considerations would have less weight.”

Adjustment of parental allowance? Ministry of Family Affairs refers to “tense situation in the federal budget”

However, a quick adjustment does not seem possible. The Family Ministry also has its say in the article and makes it clear: “Against the background of the tense situation in the federal budget and a reform of parental allowance that has already taken place last year, parental allowance cannot currently be adjusted to the development of purchase prices, contrary to what was agreed in the coalition agreement.”

For example, the income limit above which parents are no longer entitled to parental allowance has been changed. For couples and single parents, this is 200,000 euros of taxable income for births from April 1, 2024, and has been reduced to 175,000 euros of taxable income for births from April 1, 2025.

For births between September 1, 2021 and March 31, 2024, the limit is 300,000 euros for couples and 250,000 euros for single parents. The taxable income in the calendar year before the birth of the child is used.

It was also determined that parents can only receive basic parental allowance for births from April 1, 2024, for a maximum of one month and only within the first twelve months of the child's life. There are exceptions for parents of premature babies who are born at least six weeks before the expected due date, parents of twins, triplets or other multiple births, and parents of newborn children with disabilities and siblings with disabilities, for whom they receive the sibling bonus. (mg)