In March 2013 Bavaria and Hesse took the Länderfinanzausgleich, the system by which richer German states pay money to poorer ones, to the Federal Constitutional Court. In 2012 the system had redistributed 7.9 billion euros, and Bavaria paid about half of it. The two state leaders, Horst Seehofer and Volker Bouffier, called the system unsolide, ungerecht und leistungsfeindlich, unsound, unjust and hostile to effort. Bouffier said: Wer sich anstrengt, muss auch etwas davon haben. Whoever makes an effort must also get something out of it. In December 2016 the chancellor and the state leaders agreed on a new system from 2020, in which the federal government took on a larger share. In September 2017 Bavaria and Hesse withdrew their lawsuit.
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The Mediation Committee
When the Bundestag and the Bundesrat disagree on a law, Article 77 of the Basic Law provides for a joint committee. The Vermittlungsausschuss, the mediation committee, has 32 members. Sixteen come from the Bundestag, and each of the sixteen states has one seat. The members from the states are not bound by instructions from their governments. The sessions are confidential. The Bundestag describes what happens once the committee is called: Es beginnt die Suche nach Kompromissen, um das Gesetz „zu retten“. The search for compromises begins, to “save” the law. The result is an Einigungsvorschlag, a proposal for agreement, and the chambers then decide on it. The committee is needed most when the two chambers have different majorities. It was called 102 times between 2002 and 2005, and three times between 2013 and 2017.
Concerted Action
On 14 February 1967, at the suggestion of economics minister Karl Schiller, representatives of the state, the unions, the employers and academic economists met for the first time in a Konzertierte Aktion, a concerted action. The purpose was to coordinate what each side did in economic and social policy. It never became a permanent institution. In 1977 the unions left in protest, because the employers’ associations had challenged the new co-determination law before the constitutional court. In 2022, with prices rising after Russia’s attack on Ukraine, Chancellor Olaf Scholz brought the format back. The first meeting took place on 4 July 2022. Scholz called it a good step to continue diese wichtige Tradition der Sozialpartnerschaft, this important tradition of social partnership. He described its method as Unterhaken, linking arms.
Pay Appropriate to the Office
Article 33 of the Basic Law requires that the law of the public service take account of the traditional principles of the professional civil service. The Federal Constitutional Court counts the Alimentationsprinzip among them. The state must give civil servants, judges and their families an appropriate living, according to their rank and the responsibility of their office. The court checks this with figures. It compares the development of civil service pay with collectively agreed wages in the public service, with the nominal wage index and with consumer prices. On 5 May 2015, it found that the pay of judges in Saxony-Anhalt for 2008 to 2010 was unconstitutional. In a decision published in November 2025, it found that about 95 percent of the Berlin pay grades it examined, for the years 2008 to 2020, were unconstitutional. It also set a new minimum. Pay must not fall below 80 percent of median equivalized income. Berlin must pass a new law by 31 March 2027.
Work Must Pay More
Until the end of 2010, German social assistance law contained a Lohnabstandsgebot, a wage gap rule. Benefits for a couple with three children had to stay below the net earnings of a comparable household with a low-paid full-time worker. The rule was then removed. The principle stayed in politics. On 9 October 2025, the governing coalition agreed to replace the citizen’s income, the Bürgergeld, with a new basic income support. The CSU leader Markus Söder said: Endlich gilt wieder: Wer arbeitet, muss mehr haben als der, der nicht arbeitet. Finally the rule applies again: whoever works must have more than whoever does not work. The Bundestag passed the reform on 5 March 2026. It takes effect in stages from 1 July 2026.
Studies did not find that people on benefits had more money than people in work. The union-funded WSI institute found in February 2025 that recipients of Bürgergeld did not have more income than minimum wage earners in any household type it examined. The ifo institute noted in 2023 that in some family situations and in areas with high rents, higher earnings can be offset by the loss of housing and child benefits.
Public Pay Tables
The pay of federal employees under the collective agreement TVöD is published in a table that anyone can read. The table valid from 1 May 2026 has pay groups from E 1 to E 15, most of them with six steps. In group E 13, the monthly pay is 4,901.11 euros in step 1 and 7,025.87 euros in step 6. The move to a higher step depends, as a rule, on the length of professional experience. An employee moves from step 1 to step 2 after one year, and from step 2 to step 3 after two more years. Step 6 follows after five years in step 5. From step 3 onward, good or poor performance can shorten or lengthen the time before the next step.
Father State
In a survey by EY published in 2016, 32 percent of students in Germany said they would like to work for the state. No other employer was named as often. For 63 percent, job security was the most important criterion in choosing an employer. A report on the survey called the state by its old nickname, Vater Staat, Father State. In EY’s student study of 2026, a stable and secure job was again the top factor, named by 52 percent. Salary came second with 43 percent. In the 2024 study, salary had been in first place.
Sugar Bread and Whip
Otto von Bismarck introduced health insurance in 1883 and accident insurance in 1884. On 24 May 1889, the Reichstag passed insurance for old age and disability. The aim was also political: to bind the workers firmly to the government. Together with the law against the Social Democrats, the policy is known as Zuckerbrot und Peitsche, sugar bread and whip. Unemployment insurance followed under a law of 16 July 1927. It came into force on 1 October 1927 and created the national agency that is the predecessor of today’s Federal Employment Agency.
Promoted While Still Teaching
A teacher at a German Gymnasium is appointed as Studienrat. The first promotion is to Oberstudienrat, with pay in grade A 14. The next is Studiendirektor. Until the 1980s, the promotion to Oberstudienrat was mostly automatic after a set time. Today, in almost all states, it requires taking on extra tasks in running or administering the school. Bavaria still promotes teachers to Oberstudienrat without such a function, at Gymnasien and at vocational schools.
Retraining
The Vocational Training Act defines Umschulung, retraining, as training meant to qualify a person for a different occupation. The Federal Employment Agency funds full-time retraining for a recognized training occupation if, as a rule, it is at least one third shorter than the regular training. Retraining inside a company is possible only in recognized training occupations. It ends with the examination before the chamber. A retrainee funded by the agency receives a bonus of 1,000 euros for passing the intermediate examination and 1,500 euros for passing the final examination.