Germany is suffering from a decline in its international competitiveness. Therefore, revitalizing economic growth requires not only sustainable changes in economic policy. Even in the short term, steps need to be taken to stimulate public and private investment in Germany.
However, increasing social security contributions are an additional burden and may discourage investment. In the medium to long term, increased contributions could halve economic growth compared to a constant contribution burden. This is because higher labor costs mainly affect the competitiveness of the German economy, while higher employee contributions lead to lower personal consumption and domestic demand. To slow the impending rise in premium rates, some political parties are proposing in federal election campaigns to raise the income threshold for compulsory social security contributions. Indeed, the anticipated additional income could be used to avoid short-term contribution rate increases. However, this purportedly fairer distribution of burdens cannot hide the fact that the overall contribution burden for employees and employers has increased. Furthermore, as the population ages, insurance premium rates are expected to rise further in the medium to long term, even if the income threshold increases. Rather, in order to stabilize the contribution rate under the rules of the current contribution law, it is necessary to suppress increases in expenditures for both statutory endowment insurance and health and long-term care insurance.
