Reforming the German Public Pension System

Chancellor Bismarck introduced public pensions in Germany more than 120 years ago. That system has expanded into one of the most generous pension systems in the world. Most workers receive virtually all of their retirement income from it. Costs are almost 12 percent of GDP, more than 2.5 times as much as the U.S. Social Security System. The pressures exerted by population aging, amplified by negative incentive effects, have induced a reform process that began in 1992 and reached its peak in the 2001 and 2004 reforms. The 2001 reform converted the exemplary monolithic Bismarckian public insurance system into a complex multipillar system. The 2004 reform converted the pay-as-you-go pillar into a quasi notional defined contribution (NDC) system. This paper delivers an assessment in how far these reform steps will solve the pressing pension problems in Germany.

The German Public Pension System: How it Was, How it Will Be

Germany still has a very generous public pay-as-you-go pension system. It is characterized by early effective retirement ages and very high effective replacement rates. Most workers receive virtually all of their retirement income from this public retirement insurance. Costs are almost 12% of GDP, more than 2.5 times as much as the U.S. Social Security System. The pressures exerted by population aging on this monolithic system, amplified by negative incentive effects, have induced a reform process that began in 1992 and is still ongoing. This paper has two parts. Part A describes the German pension system as it has shaped the labor market from 1972 until today. Part B describes the reform process, which will convert the exemplary and monolithic Bismarckian public insurance system to a complex multi-pillar system. We provide a survey of the main features of the future German retirement system introduced by the so called “Riester Reform” in 2001 and an assessment in how far this last reform step will solve the pressing problems of the German system of old age provision.

How an Unfunded Pension System looks like Defined Benefits but works like Defined Contributions: The German Pension Reform

This paper describes the German pension reform process 1992-2007 with a stress on a remark-able development: the public pay-as-you-go-financed pension system has almost silently moved from a traditional defined benefit system to a system which works in many respects like a defined contribution system. The paper combines economic with political considerations, hopefully offering a few lessons that are useful also for other countries.

Gesundheitszustand und Erwerbsminderungsrenten

Disability insurance - the insurance against the loss of the ability to work - is a substantial part of social security expenditures in many countries. The benefit recipiency rates in disability insurance vary strikingly across European countries and the US. This paper investigates the extent of, and the causes for, this variation, using econometric analyses based on new data from SHARE, ELSA and HRS. We show that even after controlling for differences in the demographic structure and health status these differences remain. This holds for a broad set of objective and subjective physical and mental health measures as well as for contemporal, intertemporal and life-course specifications of health, including measures of childhood health. In turn, indicators of disability insurance generosity explain 75% of the cross-national variation. We conclude that it is not health but the country-specific design of early retirement and labor market institutions, and especially disability insurance rules, which explain the observed cross-country variation in the receipt of disability benefits

Regionale und sektorale Arbeitslosigkeit: Durch höhere Mobilität reduzierbar?

The paper investigates the thesis that unemployment in the Federal Republic of Germany is “mostly structural” and that therefore increased labor mobility is desirable. Structural unemployment is defined as a lack of equilibration among unbalanced regional and sectoral labor markets. As it turns out, the regional and sectoral distribution of vacancies and unemployed workers - disaggregated by „Arbeitsamtbezirke“ and „Berufsgruppen“ - does not warrant the conclusion that labor markets with excess demand coexist alongside labor markets with excess supply such that aggregate unemployment could be reduced by more labor mobility. The data appear to stress the role of frictional, classical, and keynesian unemployment rather then that of structural unemployment

Global Aging: Issues, Answers, and More Questions

Global aging will be a major determinant of long run economic development in industrial and developing countries. The extent of the demographic changes is dramatic and will deeply affect future labor, financial and goods markets. The expected strain on public budgets and especially social security has already received prominent attention, but the aging poses many other economic challenges that threaten productivity and growth if they remain unaddressed. While aging is global, there are marked differences in the speed and the extent of the aging processes across countries. These differences are likely to generate different growth paths and change the international pecking order, e.g. within the G8 countries. Due to the globalization of labor, financial and goods markets, however, these differential demographic developments will also precipitate trade and factor movements. Exploiting these movements offers large chances during the aging process. The purpose of this paper is to review the most important economic chances and challenges due to global aging. It summarizes what we know and identifies research areas where it is important to know more.Social Security Administrationhttp://deepblue.lib.umich.edu/bitstream/2027.42/50535/1/wp084.pd