Who is affected by Germany's proposal to reduce 'Elterngeld' eligibility?

"NO to the cancellation of Elterngeld (parental allowance)": this is the name of an online petition launched on Monday that has already collected more than 300,000 signatures within a short time. 

The reason for the outrage is Family Minister Lisa Paus' plan to reduce the income limit for Elterngeld - the allowance couples receive when taking parental leave - from €300,000 to €150,000 starting in 2024. 

The petition describes the Green politician's proposals as a "slap in the face for all the hard-working couples in Germany" - a sentiment shared by some politicians opposed to the move, which is meant to save money for Germany's new budget.

But what does the planned change actually mean?

READ ALSO: 600,000 families in Germany could no longer qualify for 'Elterngeld'

Income limit does not mean gross income

Until now, the income limit for receiving Elterngeld was €300,000 for couples and €250,000 for single parents. This limit is now to be lowered to €150,000 for both couples and single parents as of next year.

But economists say that it's important to note that the income limit is not the gross income, but taxable income (zvE). 

"The zvE results from the gross income minus income-related expenses, other expenses and tax allowances," the Ministry of Education's page states. "Therefore, the zvE is always lower than the gross income."

This means that for the new income limit, couples' gross income can technically be higher than €150,000 and they would still be entitled to Elterngeld.

"All tax allowances, special expenses, income-related expenses, pension expenses and so on still have to be deducted from the gross income," Katharina Wrohlich, professor of public finance, gender and family economics at the University of Potsdam, told Germany's Tagesschau.

"This means that a taxable income of €150,000 results - depending on the individual case - approximately in a gross income of €180,000 or more."

How many couples and single parents are affected?

According to Family Minister Paus, about 60,000 families could be affected by the changes. According to the Family Ministry spokesperson, that would be about five percent of the slightly more than one million people receiving Elterngeld in 2020. However, this does not include couples who could potentially still have children.

The Institute of the German Economy (IW) therefore arrived at different figures in an evaluation based on data from the Socio-Economic Panel (SOEP) from 2020. 

According to this estimate, 435,000 couples under the age of 50 lived in Germany in 2020 who had a joint taxable annual income of more than €150,000. Of these, 125,000 were unmarried and 310,000 were married. 

Overall, therefore, slightly less than five percent of couples under 50 would potentially be affected by the new income limit.

Based on the wage and income tax statistics for 2019 from the Federal Statistical Office (Destatis), the figures are different again. According to these statistics, of a total of just over 41 million taxpayers, around 819,000 had a taxable income of more than €150,000 - this corresponds to 1.99 percent.

READ ALSO: How much do you have to make to be considered rich in Germany?

Of the approximately 15.6 million taxpayers who use the spousal splitting (Ehegattensplitting) when paying taxes, about 638,000 had a taxable income of more than €150,000, which corresponds to about 4.1 percent. 

However, the figures apply in each case to all age groups; there is no subdivision into different age groups.

"From a socio-political perspective, lowering the upper income limit for the parental allowance is justifiable," said Wrohlich. 

"From an equality policy perspective, however, it is not a good signal - on the one hand, the aim of Elterngeld was to enable parents to be economically independent of their partner, but for some this is counteracted.

"In addition, they wanted to increase the participation of fathers in parental leave, but the lowering of the income limit also partially stands in the way of this goal."

READ ALSO: Ehegattensplitting: How did Germany's marriage tax law become so controversial?

Danger for equality?

According to Destatis, just under 1.4 million women and 482,000 men in Germany received Elterngeld in 2022 but only 26.1 percent of them were men. Women continue to receive Elterngeld much longer than fathers, or 14.6 months opposed to 3.6 months.

The IW assumes that inflation will cause more couples to exceed the €150,000 limit. In addition, inflation causes "the maximum parental allowance of €1,800 to lose value - parents can afford less and less of the money." 

The amounts have not been adjusted since the introduction of the system in 2007, in part to bolster Germany's low birth rate.

What consequences the new income limit will have in practice cannot yet be foreseen, says Wrohlich.

"As far as parents with very high incomes are concerned, it should be noted that the maximum amount of €1,800 per month has already replaced only a small part of their net income for this group," she said.

"So parental allowance is unlikely to have played a really relevant role for this group in their considerations on how to divide up parental leave even before now."

However, it is not uncommon for the two partners to earn very unequally when the household income is very high. 

According to the IW, men in a partnership with a zvE of more than €150,000 earn on average €140,000,  while women earn €65,000.

"For the parent who has a lower income before the birth and for whom the individual entitlement to Elterngeld will cease in future due to the joint income limit, this austerity measure may create a financial dependence on the partner that the parental allowance was actually intended to reduce," said Wrohlich.

READ ALSO: EXPLAINED: Everything you need to know about parental leave in Germany