We analyze the impact of changing employment patterns and pension reforms on
the future level of public pensions across birth cohorts in Germany. The
analysis is based on a rich dataset that combines household survey data from
the German Socio-Economic Panel Study (SOEP) and process-produced microdata
from the German pension insurance. A microsimulation model is developed which
accounts for cohort effects in individual employment and unemployment and
earnings over the lifecycle as well as the differential impact of recent
pension reforms. Cohort effects for individuals born between 1937 and 1971
vary greatly by region, gender and education and strongly affect lifecycle
wage profiles. The largest effects can be observed for younger cohorts in East
Germany and for the low educated. Using simulated life cycle employment and
income profiles, we project gross future pensions across cohorts taking into
account changing demographics and recent pension reforms. Simulations show
that pension levels for East German men and women will fall dramatically among
younger birth cohorts, not only because of policy reforms but due to higher
cumulated unemployment. For West German men, the small reduction of average
pension levels among younger birth cohorts is mainly driven by the impact of
pension reforms, while future pension levels of West German women are
increasing or stable due to rising labor market participation of younger birth
cohorts