Germany's official statistics agency said some 1.2 million more people got social assistance payments in 2008 - a 6.2 percent rise from a year earlier.
The costs - 15.2 billion euros ($22 billion) - were up 4 percent from 2007.
The largest group to use the assistance comprises the handicapped, those in need of home medical care, and the elderly.
A look at Hartz-IV
In contrast to social assistance payments, welfare aid for those who are long-term unemployed is provided under Germany's Hartz-IV unemployment package. The Hartz-IV system went into effect five years ago.
Now, a study published on Tuesday by the Nuremberg-based Institute for Employment Research (IAB) has shown that few people who get onto the Hartz IV scheme are able to get off it again. They often fail to return to a normal work life.
"People very seldom manage to get off of Hartz IV," the group wrote in its report, which is taking a look at the success of the program on its fifth anniversary.
The reform of the German labor market, which combined unemployment and social-assistance welfare, went into effect on January 1, 2005. Since then, IAB has studying the effects of this change.
Reassessing welfare reform
AB director Joachim Moeller spoke of a "cautiously positive assessment of Hartz IV," saying overall the tendency was toward meeting the aims of the labor market reforms.
However, he said, there were still problems in dealing with the long-term unemployed. According to the IAB, the job-training schemes created so far are frequently not up to the task of solving the problem of long-term unemployment.
The famous "one-euro jobs" that were created to bring people back into the workplace should only be given to those who have been out of work for a long time, Moeller said. And single parents also need more assistance than they are currently getting - many fail to go back to work due to a lack of child care.
Editor: Trinity Hartman