Abstract Problems of sustainability do not only relate to explicit public debt but also to the implicit debt inherent in promises made to members of unfunded social insurance schemes. These are particularly burdensome in ageing societies and in insurance branches where the beneficiaries are typically much older than the net contributors, such as pensions and long-term care. In this paper, I present projections of the development of contribution rates in the German social insurance system, which show that, starting from the present level of 42.3 per cent – and in the absence of drastic cuts in the benefit levels – they are very likely to surpass 50 per cent by the year 2040. After arguing that future contributors may well refuse to part with such a large share of their (only slowly growing) income, I then discuss potential reforms of the German statutory pension, long-term care and health insurance systems that are suitable to slow down the increase in contribution rates. Considering the political pressure on governments to defend or even raise benefit levels, my final recommendation is to establish an upper bound for the total social insurance contribution rate in the constitution.
Friedrich Breyer (Thu,) studied this question.