Ifo: Savings from Parental Leave Reform Are Lower

According to a study, the planned parental allowance reform could result in significantly lower savings than hoped for. From November 2027 through the end of 2030, the reform would result in up to 880 million less in spending, according to calculations by the Dresden branch of the Ifo Institute. The Federal Ministry for Family Affairs aims to save approximately 1.6 billion euros over the same period.

The study compares the costs of parental allowance with and without the reform. The analysis is based on data from the Federal Statistical Office.

Fewer Savings When More Fathers Take Advantage of the Benefit

According to the calculations, the savings shrink further if a proportionally larger number of fathers claim the benefit. The reason is that fathers receive more parental allowance on average than mothers.

For children born in 2023, just under one in two fathers received parental allowance, according to data from the Federal Statistical Office. If this trend continues, 880 million would be saved. If the proportion increases by one percentage point each year, the savings would drop to around 597 million euros, and to 311 million euros if it increases by two percentage points. If the annual increase exceeds about 3.1 percentage points, the government would save nothing at all.

Three months of parental allowance reserved for each partner

The draft reform proposed by the Federal Ministry for Family Affairs calls for shortening the benefit period from 14 to 12 months. Three months would then be reserved for each parent, and the partners could divide the remaining six months among themselves. If only one parent takes parental leave, the maximum duration of parental allowance is nine months. At the same time, the minimum amount is to be raised from 300 to 330 euros, and the maximum amount from 1,800 to 1,900 euros.

Reform Goals Are at Odds with Each Other

“The goal of cost savings and the goal of greater father involvement in the planned parental allowance reform are at odds with each other,” says ifo researcher Kyra Puteanus, according to the press release. “The more fathers the reform encourages to take parental leave, the less the government saves.”

Most recently, the proportion of fathers taking parental leave grew by only 0.2 percentage points per year. However, a faster increase cannot be ruled out if months would otherwise go unused, added ifo researcher Franziska Nuernbergk.