Altersarmut

Ein Gespenst geht um in Deutschland, das Gespenst der Altersarmut (A specter haunts Germany, the specter of old-age poverty). Marx may not pardon me, but I could not find a better introduction to another chapter of German angst: Altersarmut. Admire the efficiency of the German language expressing all that misery just in one word, which in English is translated possibly best into poverty among the elderly. I am sure Altersarmut will be elected Germany's Unwort 2012, the ugliest word of the year.

Germany's age pyramid in 1911

It is obvious and has been known for a long time that fewer young earners have to support more old-age pensioners in the future. Just look at Germany's age pyramid. What 1911 looked like the top of a fur tree now resembles a mushroom.

Germany's age pyramid in 2011

Bismarck pushed for a social security system in Germany in the late 1880ies, not because he pitied the misery of the working class, but because he tried to cut the ground from under the socialists' feet. Germany's old-age pension is based on the so-called generation treaty, i.e., the young are paying into the system financing the pensions for the retired. This works fine if the age structure shows a natural evolution, but who envisaged that people now live longer than in the past (increasing the cost for Medicare, by the way) and that young couples have fewer children than our grandparents. 

I still remember discussions in Germany during my adolescent years about how to finance future social security benefits because the people lost during the last war did not contribute to the system. When looking at today's age pyramid, you will still notice a dent for the period in question, but that is nothing compared with the distorted present-day age structure.

To better balance the social security system, our government introduced two palliative measures a few years ago: lowering the level of pensions from 50% of the average income to 43% until the year 2030 and increasing the age of retirement from 65 to 67 years during the same period. Like everybody else, my organization forced me to retire at age 65. 

I still remember my American friends shaking their heads when learning that. One of them even said that he could not afford retirement, for his institute had invested their pension fund in stocks that had lost money, so his pension had.

In Germany, people were urged to put part of their earned money into private old-age insurance in the past years. Like Switzerland, our system is based on three pillars (as they call it) legally bound, occupational, and private insurance. However, with the presently low-interest rates, people see their financial efforts to ensure decent pensions melting down with low-interest rates and inflation. On the other hand, many people had low earnings at times or were even unemployed during their working life. They will face mini pensions or even Altersarmut.

A few weeks ago, our Christian Democrat federal minister for social affairs forwarded an old idea to break the rule that pensions mirror your financial contributions in Germany. She proposed toping up all mini allowances so people can survive on their pensions based on the social security system. It is true that presently, the system has a surplus, but what will happen (and what happened in the past) if the social security fund gets into the red? Taxpayers' money will then fill the deficit, meaning that the working young people will again support the old. 

The head of the opposition Social Democratic Party said, "Let us not take the hidden detour proposed by the minister but use taxpayer's money right away to guarantee everybody a pension on which he/she can survive." Since the differences between the government and the opposition were only marginal, an agreement could have been found, but the trade unions did not agree. They requested to increase the level of pensions to the original 50% of the average income in combination with the retirement age lowered again to 65. Returning to square minus one (!), they did not specify how to finance their proposal.

You can turn it around as long as you wish: the battle of generations for the share of wealth will become more challenging. Our grandchildren will have to work longer to meet both ends, some until they kick the bucket. Already now, more people following their retirement continue to work or take up new occupations in Germany than our government is willing to admit. Why don't they just tell us the truth? Again, it is the usual Volksverdummung (brainwashing) of the voters.

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