Apparently the descendants of Ignaz Auer kept this anecdote as an oral tradition. It’s set in the early 1890s. It was the time of the German version of carrots and stick.
I’ll explain. Conservative chancellor Otto von Bismarck pushed his Anti-Socialist Laws in 1878. That was the stick (you know how Germans are: they invert the order of the words in sentences)
A couple of years later Bismarck came up with the carrot. By the early 1880s and with the support of the Centre (Catholic conservative with a strong presence in Bavaria) and National Liberal parties, he started promoting a series of "piecemeal reforms", which became known in German as Staatssozialismus: Health Insurance Bill (1883), Accident Insurance Bill (1884), Old Age and Disability Insurance Bill (1889).
Two other laws (Worker's Protection Act and Children's Protection Act), also part of Staatssozialismus, were approved after Bismarck’s 1890 resignation.
Outside the German-speaking world Staatssozialismus is known as "welfare state". If a testimony to the destitution of the German working class was needed, those reforms provide it and they certainly benefited workers. Bismarck's philanthropic feelings, however, had little to do with them. As a good Prussian, he himself wasn't fond of moralising and explained it: “My idea was to bribe the working classes, or shall I say, to win them over, to regard the state as a social institution existing for their sake and interested in their welfare.”
A few years later, the Liberals in Britain applied similarly-motivated reforms: Education (Provision of Meals) Act, 1906; Old Age Pension Act, 1908; Labour Exchanges, 1909; National Insurance Act, 1911. A good account of that -- slightly heavy on the moralising, as Anglo-Americans like -- is here.
It's worth highlighting that in both cases the SPD and Labour Party, beyond the fact those reforms were meant to deprive them of their voter base, had little direct influence in the creation of their respective welfare states.
Apparently not too long after Bismarck’s resignation, August Bebel, Richard Fischer, and Ignaz Auer (the last two from SPD-Bavaria) met in Bavaria and one day decided to go hiking. They eventually came across some forest workers: a good chance to talk with local voters, Bebel must have thought.
So they asked the workers about the things one would expect: their working conditions, their problems. The workers indulged and an old man, among them, said: “Who cares about the old and poor people!”
“Well, that’s not how it is today”, said Bebel “Today there are enough men who would stand up for the little man, but of course, so far away in the forest solitude, they probably would not have heard of it!”
“Oh”, replied the old man. “It was not like that”. They too kept informed about the world -- he added -- and he, in fact, also knew of someone who cared about the poor.
“What’s the man’s name?”, Bebel asked.
The old man's answer: “Bismarck”.
[A] "Über dem Spitzsteinhaus". Author: Björn Láczay. Source: Wikipedia. File licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license. It's a great photo, and that's why I have it here. That doesn't mean Björn endorses me or my use of the photo.