The changing composition of the social budget indicates some of the new challenges
of the welfare state (figure 4). Health Insurance is a cost factor as can be seen from its
growing share in the budget. The ageing of the population is not reflected in figure 4
because its peak is still ahead. The problems of the immediate postwar decades have
subsided: war compensation was a major item in 1960 but no longer is in 1997. In
turn, increasing labour market problems, including those in East Germany, are clearly
mirrored. All in all, the share of social insurance has even grown from below to well
above half of social spending (including the ‘labour market’ item which largely flows
from Unemployment Insurance). But at the same time, expenditure for Social
Assistance and local personal services has more than doubled, indicating the increase
in social risks not covered by the standard systems of social insurance.