German taxpayers' bill for unemployment costs rose 12.6% in 2024

German taxpayers had to underwrite 12.6% more annually in unemployment costs in 2024 or €76.6 billion ($90.2 billion), the research institute of the Federal Employment Agency (BA) reported on Monday.

And the bill will likely be higher for 2025, despite a benefits freeze, the Nuremberg-based Institute for Employment and Research (IAB) reported, as there is higher unemployment this year.

The level seen in 2024 had not been seen since 2015, the IAB said.

Apart from a sharp rise in the number of unemployed, the higher rates paid in basic benefits are driving the data.

The fiscal costs of unemployment came to 1.77% of gross domestic product (GDP), according to IAB calculations. This is made up of insurance payments, benefit payments and lower revenues from taxes and social insurance contributions.

Transfer payments to those drawing unemployment benefits and social security, including social insurance contribution deductions, made up around 61% of the costs, or €47 billion.

Lower revenues to the state in taxes and social security contributions of €29.6 billion were added to this.

Unemployment benefits and related payments for accommodation and heating made up the largest segment at €25.1 billion and a share of more than 37%.

The costs to the public budgets come to 32% for the federal budget, 27% for the BA and 14% for pensions insurance.

The IAB experts note that BA reserves have been completely depleted by the ongoing economic downturn and that it will be in deficit to the amount of €5.2 billion in 2025.

To avoid borrowing from the federal government in future, the BA will need reserves of 0.65% of GDP, equivalent currently to €29 billion, they say.