The author discusses whether the German system of social welfare benefits fulfils its essential targets: guarantee of a social minimum and incentives to reintegrate into the labour market. The evidence is that living and social participation of the socially deprived are basically guaranteed. However, severe shortcomings exist with respect to incentives for the recipients of social welfare benefits to seek regular jobs. Calculations of the gap between potential earned income and the payments for the long-term unemployed (ALG II) reveal serious disincentives to work for a considerable number of characteristic household types. It is referred to the most relevant policy blueprints discussed in Germany which offer feasible solutions for these incentive problems.