A Fragile Pillar: Statutory Pensions and the Risk of Old-Age Poverty in Germany

Abstract

The statutory pension system is still the most important income source among seniorcitizens in Germany. Due to increasing disruptions in employment biographies since the1970s and due to the mass unemployment in Eastern Germany since the 1990s, there isa growing fear of post-retirement poverty in Germany. We develop a micro-simulation model to compare the distribution of statutory pension incomes for new retirees in 2020 with those in 2004. The pension income distribution is calculated for Eastern and Western Germany separately, for men and women, and for different skill levels.Throughout Germany, we find a growing post-retirement poverty, especially for low-skilled workers. Eastern Germany will lose its current advantage in terms of highpensions and low inequality.