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Economy
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Dwindling Value of Parental Allowance
2024-12-26 13:29:08
Economy
Government

Dwindling Value of Parental Allowance

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Since its inception in 2007, parental allowance has seen a reduction in purchasing power by approximately 38%. Despite this, the minimum amount of 300 euros and the maximum of 1,800 euros have remained unchanged, failing to keep pace with inflation.

This stagnation has led to more families hitting the maximum limit, reflecting a broader impact on the middle class. Promised adjustments in the coalition agreement were not fulfilled, leading to cuts instead.

The income threshold for higher earners has been progressively lowered, and from 2025, only those earning less than 175,000 euros annually will be eligible. A study suggests inflation-adjusted amounts should be 413 euros for the minimum and 2,480 euros for the maximum.

The government offers an online calculator to help families determine their specific entitlements. These changes highlight the growing need for a dynamic adjustment of parental benefits to better support families in the face of economic shifts.

Related news on that topic:

Parental Allowance Loses Value Amid Inflation

A recent study highlights significant devaluation of the parental allowance in Germany since its inception in 2007. Originally, the allowance was set with a minimum of €300 and a maximum of €1,800, figures that have not been adjusted over the years. This has resulted in a 38% decline in purchasing power due to inflation, impacting families across various income levels. The study, conducted by the Institute of German Economy, underscores the need for an inflation adjustment to prevent further erosion of the allowance's value. Despite promises for indexation, no changes have been implemented. This lack of adjustment has particularly affected middle-income families, who have seen their financial support dwindle in real terms. Additionally, the income threshold for receiving the allowance has been lowered. The coalition government, despite its commitments, has reduced the eligibility limits instead of increasing them. From 2025, the income cap will be reduced to €175,000, further restricting access to this essential support for new parents. The study's findings call for urgent action to align parental allowances with inflationary trends. Without intervention, the allowance will continue to lose its effectiveness as a financial safety net for families. The need for a fair and dynamic adjustment mechanism is more pressing than ever to preserve the financial stability of parents and ensure adequate support during the critical early years of child-rearing.

Declining Value of Parental Allowance

Since 2007, parental allowance has suffered a significant loss of purchasing power, amounting to approximately 38%. The minimum payment of 300 euros has remained unchanged since 1986, while the maximum of 1,800 euros has not been adjusted for years. Consequently, an increasing number of families are now receiving the maximum benefit. The coalition agreement had promised to dynamically adjust these amounts, yet instead, cuts were implemented. The income threshold for higher payments has been reduced from 300,000 euros to 250,000 euros, with plans to lower it further to 175,000 euros by 2025. A recent study advocates for inflation adjustments, suggesting an increase to 413 euros for the minimum and 2,480 euros for the maximum allowance. Without these adjustments, families will continue to find that their financial support is inadequate in the face of rising living costs.

Read 3 more recent news on this topic

The press radar on this topic:

mdr
25. Dezember 2024 um 14:53

Parental allowance is worth less and less - increasing number of parents receiving the maximum amount

Economy
Politics
Parental allowance has lost around 38% of its purchasing power since 2007. The minimum amount of 300 euros has not been adjusted since 1986. The maximum amount of 1,800 euros has not been increased for years, which means that more and more families are reaching this amount. The coalition agreement promised a dynamic adjustment of the basic and maximum amounts, but instead there were cuts. The income limit for higher incomes was reduced from 300,000 euros to 250,000 euros and from 2025 to 175,000..
noz
26. Dezember 2024 um 05:28

Child Benefit, Maintenance, Parental Allowance: What Changes for Families in 2025

Finance
Families will receive more child benefit, higher tax-free allowances and child maintenance in 2025; the entitlement to parental allowance will be restricted for high-income earners.
DER SPIEGEL
26. Dezember 2024 um 10:14

Parental Allowance: Purchasing Power Has Fallen by 38 Percent Since Its Introduction - DER SPIEGEL

Economy
Politics
Finance
The parental allowance has lost 38% of its purchasing power since 2007. The minimum amount of 300 euros has not been adjusted, but should have increased to 413 euros. Even the maximum rate of 1800 euros could not keep up with inflation and should have increased to 2480 euros.
rp_online
26. Dezember 2024 um 10:58

Unpublished IW study: parental allowance is now 38 percent less valuable than at the beginning

Economy
Politics
Finance
Unpublished IW study shows: parental allowance has suffered a 38% loss of purchasing power since 2007; the minimum amount of 300 euros was not adjusted, it should have increased to 413 euros; the maximum rate of 1800 euros was also not increased, affecting higher earners.
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