According to a recent analysis by the Ifo Institute, the aging of German society is by far the largest factor driving the sharp increase in social expenditures.
Ifo researcher Lilly Fischer noted that in 2025, spending dedicated to old age and illness will account for approximately 70 percent of total social spending. Furthermore, these two areas have been responsible for over 80 percent of the real increase in expenditures since 1992. She emphasized that demographic change is the central structural cost driver of this trend, thereby intensifying the shift of burden from one generation to the next within the German social safety net.
The Ifo authors also determined that there has been a significant rise since 2019, both in absolute terms and in the ratio of the social budget to the gross domestic product (GDP). Emilie Höslinger, another Ifo researcher, explained that the social budget is growing faster than the GDP, and the weak economic climate contributes to this rising social budget ratio. She also identified the primary cost drivers as increased spending on the aging population who require care and have illnesses, alongside rising federal pension payments.
In terms of real purchasing power, social expenditures increased by 11.5 percent, equating to 104 billion euros, between 2019 and 2025. During this same period, the social budget ratio climbed from 29.6 percent to 32 percent, reaching a new record level. The Institute projects that aging will continue to push social costs even higher in the future, concluding that this development can only be mitigated through systemic reforms to the social security structure.
