The child supplement for low-income earners – an example of deficient co-ordination in the German transfer system

In addition to the basic protection provided for job seekers (Arbeitslosengeld II), a child allowance was also introduced in Germany on 1 January 2005. This article examines the effect of this new social benefit for a number of family types in connection with rent subsidies and in dependency on gross wages. In light of the numerous discrepancies revealed in the analysis – both in the design of the child allowance and because of its effects on the tax and transfer system in general – the child supplement should be re-examined by the Federal Government in connection with the designing of a combi-wage model set to take place this autumn.