Raising retirement age reignites national debate

In 2007, the German parliament adopted new regulations to gradually increase the retirement age from 65 to 67 years between now and 2029. When the regulations came into force on 1 January 2012 they prompted a heated debate among political parties and social partners about the higher pensionable age and the employment situation of mature workers. Since few workers over 64 pay social security contributions, some partners dispute the need to raise the statutory retirement age.

Background

In 2006, the then German government proposed gradually raising the statutory retirement age from 65 to 67 years. At the time, the coalition was made up of the conservative Christian Democratic Party (CDU), its Bavarian sister party, the Christian Social Union (CSU), and its coalition partner, the Social Democratic Party (SPD).

The former government’s proposal was finally adopted by the German parliament in 2007 (DE0702019I). It was decided that from 1 January 2012 the retirement age would be raised initially by one month each year, and from 2024 onwards by two months each year. By 2029, under this scheme, people born in or after 1964 will have to work until 67 to reach the statutory retirement age and receive full public pension benefits (DE0612039I).

As the changes began to take effect at the beginning of 2012, they revived the debate among the major political parties and social partners.

Proposal to suspend rise of statutory retirement age

In December 2011, Andrea Nahles, General Secretary of the SPD, called for a suspension of the higher retirement age. She does not want to support the rise in the statutory retirement age until at least half of all employees aged 60 to 64 years hold a job that requires them to make social security contributions.

At the party’s national congress in early December 2011, other retirement options, such as partial retirement, were presented for consideration. Her opposition to the current scheme was reported (in German) in the daily Rheinische Post newspaper on 4 January 2012, in which she declared her intention to introduce a new parliamentary bill suspending the move towards retirement at 67.

These developments are part of a heated debate within the SPD and other parties. For example, CSU Leader and Bavarian Prime Minister Horst Seehofer declared his support for the current scheme in a press statement (in German) on 2 January 2012, saying that the new retirement age was necessary due to demographic changes in Germany and the ageing of the workforce. However, he also stressed that employment opportunities for workers over 50 had to be improved because otherwise the rise in the statutory retirement age would lead to a cut in pensions, a development he would not stand for.

Several Green party members and their Leader Cem Özdemir have also rejected Ms Nahles’ proposal. On 5 January 2012, Sueddeutsche Zeitung reported (in German) Mr Özdemir’s view that formal steps had to be taken to prepare for a longer working life. In his opinion, to suspend the introduction of retirement at 67 was to ignore present realities.

At the beginning of 2012, the social partners, including the German Confederation of Employers’ Associations (BDA) and the Confederation of German Trade Unions (DGB), also stepped into the debate.

Position of social partners

DGB executive board member Annelie Buntenbach told the press she thought it was a ‘gross error’ to introduce retirement at 67 when the conditions for a longer working life for older employees were not yet favourable. Given the current employment situation, in which only 10% of 63 and 64-year-olds are in full-time employment and paying social security contributions, and nearly 60% of those over 60 have no job, the current German government should stop the rise in retirement age, she said.

Ms Buntenbach called for a review of the labour market situation for mature workers and for the introduction of stricter criteria to decide whether or not retirement at 67 was reasonable. She also stressed that before a higher retirement age was introduced, at least 50% of workers aged 60 and above should be employed in jobs that qualify for social security contributions. At the same time, measures needed to be taken to improve the pension situation of those who were not able to continue working until they reached pensionable age.

At the turn of the year, however, the employer organisation BDA insisted that a higher retirement age was ‘indispensible’ because rising life expectancies meant that retirees were likely to be claiming their state pensions for longer, and the funding of the German pension system had to be secured. The BDA stressed that any exception to retirement at 67, such as that foreseen by the law for particularly longstanding contributors to the pension system, was a ‘great mistake’. In the long run, it would place an additional burden of €2 billion on the pension insurance scheme.

The employer organisation also argued that mature employees are now, in most cases, healthier and able to stay in employment longer than previous generations, and there are already other retirement options available to those unable to carry on working until the statutory retirement age due to ill health or disability.

Establishments are employing mature employees more often due to a shortage of skilled labour and the number of those aged 60 to 64 years working in jobs liable for social security contributions has doubled to over 1.2 million within the last decade.

A study (in German, 760Kb PDF) by the Cologne Institute for Economic Research (IW Köln) shows that 51.6% of all employees of working age (15 to 64 years) were employed in a job liable to social security contributions in 2010. The highest proportion, 56%, was in the 50–54 age bracket. It should also be noted that the employment rate for employees liable to social security contributions in the 60–64 age bracket has risen steadily during the last decade from 11% in 2000 to 24.6% in 2010. Given this dynamic, it can be expected the number will rise even further within the next two decades.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

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