Especially in times of economic stagnation, Germany should view its welfare state not as an obstacle to growth, but as a foundation of economic prosperity.
Social policy can function as an employment-enhancing investment if its various components are properly aligned. To ensure the long-term viability of the Social Market Economy, policymakers should make certain that individual elements of the social security system interact more effectively and that their investment potential is fully realized.
Reforms within such a “Social Investment Agenda” can be structured around three pillars:
Human capital investment, particularly in education. Examples include strengthening early childhood education and establishing a comprehensive nationwide lifelong learning system.
Support for transitions between life stages, especially into and within the labor market. Examples include expanding childcare infrastructure and introducing dedicated paternity months within parental leave benefits.
Social protection measures. Examples include earnings insurance, reducing benefit withdrawal rates, and consolidating social benefits.
This policy paper builds on the report “Social Investment in Germany.” More detailed discussions, background information, and analyses can be found there (Mushövel and Hemerijck, 2026).
Torben Fischer is not only responsible for planning and managing projects at the ZSP, he is also in charge of designing and developing studies and projects.
