The baby boomers are retiring – and there are simply not enough young people to make up for it. In an interview, population researcher Reiner Klingholz explains why this is not just a problem for the economy and what is needed now to make Germany fit for the future.
FOCUS online: Mr. Klingholz, the largest cohort of baby boomers will reach retirement age in 2031. That’s in about nine years. Are we well prepared for the upcoming challenges?
Reiner Klingholz: We’re pretty badly prepared. The first cohorts of baby boomers are already retiring today. Among other things, because people in Germany retire at an average age of 64, i.e. before the official retirement age. That’s why we’ve long seen what’s in store for us: handicraft businesses can hardly find any trainees. The shortage of skilled workers is spreading to almost all areas because the number of young people entering the workforce is significantly lower than that of the new retirees.
None of this comes as a surprise. Since the 1970s, when birth rates in Germany fell sharply, it was clear that the baby boomers would one day trigger a pension boom. Why didn’t politicians take measures long ago to cushion demographic change?
Klingholz: We humans are bad at reacting to developments with a long lead time. Nobody wanted to listen to the few politicians who warned about this development and called for timely adjustments. This is also due to the fact that we have long benefited from demographic change. Because fewer offspring meant less expenditure, for the state and for the families. At the same time, the many baby boomers were employed. They were better qualified than all previous generations, and for the first time women were employed in large numbers. Never before have more people been employed subject to social security contributions in Germany than in 2021. This brought record income to the taxpayers and the social systems. The baby boomers created our wealth. They are the main reason why we are so rich in Germany.
Unfortunately, the golden years of demographic change are slowly coming to an end. In which areas will people most noticeably feel the departure of baby boomers in the coming years?
Klingholz: Where it is already critical today: in the care and health sector, because an aging society needs more support here. With teaching staff, craftsmen, truck drivers or locomotive drivers. With engineers and IT experts, i.e. with specialists who are increasingly needed for the energy transition, climate protection and digitization.
It will be particularly critical for public administration, which has an enormous amount of catching up to do in terms of digitization. If the market is empty and the public sector cannot compete with the private sector on salaries, the vacancies simply cannot be filled. This further delays planning processes and approval procedures, which is not exactly good for the economy.
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What major lines of conflict do you see now that more and more baby boomers are retiring?
Klingholz: I see two in particular. On the one hand, there is intergenerational justice. We have a massive redistribution from young to old through social insurance. With the result that pensioners in Germany are usually well secured. Children and young people, on the other hand, live far more often in families that are at risk of poverty. This ratio is likely to shift further without reforms, because young people not only inherit the government debt that has accumulated today, but also the pension promises that the state makes to its citizens today. It is unlikely that those responsible for government will ensure more intergenerational justice in the future. Because the voting power shifts in the direction of pensioners until the baby boomers go on their last trip at some point.
And the second line of conflict?
Klingholz: The other big problem is the financing of the health systems. Health care costs increase with age and there is little that can be done about it. Raising the retirement age to 67 was a piece of legislation that means a four-year gain for pension funds because people pay in two more years and receive benefits two years later. The same is not possible in the healthcare system, because there is no law that allows the occurrence of an age-related disease to be postponed by four years.
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Will we still be able to generate our current prosperity?
Klingholz: In principle yes. But only if you turn the right screws. Education needs to be improved so that young people are optimally prepared for their future job, can later earn good money and pay the appropriate taxes. We would need 300,000 to 400,000 immigrants per year who would fit directly into the labor market in terms of age and qualifications. And we would have to be willing to work longer, and by that we mean both weekly and lifetime working hours. We are not exactly optimally positioned in all three points, which is why prosperity is not guaranteed.
However, the extension of working hours that you mention is not well received by the trade unions and social organizations. Pensions with 70 and 42-hour weeks are dismissed there as cheap bogus solutions “without a social compass”. What’s your take on it?
Klingholz: Life expectancy in Germany has increased by two to three years per decade in the past. This shows how good and healthy we can now live. But we used this gain primarily for a longer retirement. This is not affordable in the long run. Some time ago, the retirement age should have been linked to the increase in life expectancy at a ratio of 2:1. Three more years of life then mean a two-year longer work phase and one year longer in retirement. That would be fair and not worse than in the past, because even today we work an average of 40 years and spend 20 years in retirement. But we can also say that we no longer want to work, but then we have to be willing to accept a loss of prosperity. Politicians would have to communicate this clearly and let the citizens vote on it.
One reason for the demographic change in our country is still the low birth rate. Do we need more incentives to start a family?
Klingholz: A good family policy is necessary for a number of reasons: To relieve the burden on parents. So that family work is better distributed between mothers and fathers. So that women can make better use of their good education on the labor market. But even if people in Germany were to give birth to more children again, that would have little impact on demographic development. An increase in the birth rate from today’s 1.5 children per woman to 1.7 or 1.8 would be a sensation, but would hardly slow down the aging trend. If family policy is intended to close the gaps in the labor market, it comes too late anyway. After all, anyone who is born today will only be able to render outstanding service to society in 20 or 25 years. We can’t wait that long. Well-organized immigration is the much faster and better solution.
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Does the increasing aging of our society also have positive aspects for us as a country?
Klingholz: In Germany we are a kind of pioneer in demographic change, because the birth rate in Germany fell below the value of 2.1 children per woman in 1972, earlier than elsewhere, which would be necessary for a stable population in the long term. This pioneering role forces us to look for solutions in good time on how to deal with change in the most intelligent way. We can’t prevent him. If we manage to do that, if we make our social systems generation-fair, organize immigration well, get involved in society even in old age and provide our junior cohorts with the best education, then we will create models that other countries also depend on. Because everyone is experiencing demographic change, most of them later than we are.
How does Germany have to be in order to really be age-appropriate?
Klingholz: We should do more for justice towards the young. Without their efficiency and productivity, without their taxes and social security contributions, we cannot care for the elderly.
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