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, which expresses all that misery in just one word, possibly best translated into poverty among the elderly in English. 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 well known that fewer young earners will have to support more older 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 1880s, not because he pitied the misery of the working class, but 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 pay into the system, financing the pensions of 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. 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 age structure of today.

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 2030, and increasing the retirement age 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 its pension fund in stocks that had lost money, so his pension had.

In Germany, in recent years, people were urged to set aside part of their earnings for private old-age insurance. Like Switzerland, our system is based on three pillars (as they call it): legally bound, occupational, and private insurance. However, with currently low interest rates, people see their financial efforts to secure decent pensions melting away due to 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 in Germany mirror your financial contributions. She proposed topping up all mini allowances so people can survive on their pensions based on the social security system. It is true that the system currently has a surplus, but what will happen (and what has happened in the past) if the social security fund runs 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 taxpayers' 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 being lowered again to 65. Returning to square minus one (!), they did not specify how to finance their proposal.

You can turn it around as you wish: the battle of generations over the share of wealth will become more challenging. Our grandchildren will have to work longer to make ends meet, some until they kick the bucket. Already now, more people who have retired 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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