Germany: A Flexible Labour Market Plus Pension Reforms Means Poverty in Old Age

Abstract

In Germany, as in most other European countries, the income position of elderly people has improved over recent decades. Declining poverty risk rates indicate these positive developments, although there are substantial differences among EU member states (European Commission, 2006, p. 54; OECD, 2009, p. 62). Looking at people aged 65 and older in Germany who actually receive means-tested basic security benefits, poverty for them appears to be a minor problem, particularly when compared with the number of poor children. In December 2008, no more than 2.5 per cent of people over retirement age drew (supplementary) means-tested benefits (that is 410,000 people). In contrast, 1.74 million children below the age of 15 — every sixth child — lived in private households claiming basic security benefits (ALG II; Duschek, 2011, p. 146; Bundesagentur, 2009, p. 37; see also OECD, 2008, pp. 138, 140). It is likely that the relatively favourable financial situation of today’s pensioners is not going to last. There is an intense debate in Germany about the recurrence of poverty in old age. Labour unions, charities, seniors’ interest organizations, the Left party, academic social policy experts, and others accuse the formerly incumbent governments of having enacted pension reforms whose combined effect will be a rapidly growing number of elderly people dependent on means-tested benefits.1