Globalization and demographic change are major challenges for Germany. As can be seen in the wake of financial and Euro debt crisis, Germany is fairly well positioned compared with our European neighbors, mainly because of structural reforms since the mid-90s. However, these structural reforms also have their downsides. The German labor market has become more flexible and the number of employees is as high as never before, but the problems (long-term unemployment, precarious employment) have become more stubborn. All in all pension policy reforms have led to a sustainably financed pension system. Hence, it can be reassured that reasonable pension benefits can also be paid in the long term (see Boersch-Supan 2015a). The dampening of the increase of the contribution rate, however, will inevitably mean a reduction in the pension level relative to wages unless this is compensated by later retirement. Additionally, private pensions will help although this is particularly difficult for low-skilled workers. The "Mütterrente", which was adopted in 2014, has improved the situation for a very limited population while the situation for poorer workers has deteriorated. Also the "Retirement at 63" unfolds its beneficial effect only for a small group of recipients who earn more, on average, are better educated and have better health. Moreover, the new early retirement scheme worsens the net income situation of those workers who earn relatively little.
Read more in DP No.11-2015: Armut im Alter (German, PDF)