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After Blue
Bundesbank: Raise German Retirement Age to 69

Are the first shots in a generational political war in Germany being fired? Government projections for when workers should retire are unrealistic, the German central bank has said, and must be revised upward—so that younger workers can subsidize older retirees. The Financial Times reports:

Older workers in the eurozone’s largest economy can now retire after 45 years in employment or at 65. The government has planned to gradually increase the retirement age to 67 by 2029. But economists at the influential Bundesbank have said that is unlikely to meet the cost of financing pensions for the rising number of retirees.

Instead the retirement age would, after 2029, have to rise by another two years by 2060. That means a 25-year-old entering the German labour force today would have to work four more years than the current crop of retirees — until they are 69.

Some sort of reform along these lines is, from a fiscal standpoint, obviously necessary. Older Germans have been made expensive promises that they have relied on in planning the rest of their lives. And they have the electoral weight, for now, to ensure that they will be kept. This will likely be the beginning, not the end, of reforms to make those viable.

Similar efforts will play out all over the Western world, where Blue Model retirement programs are running into both cold, hard arithmetic and the heat of a debate between two big generations, the boomers who’ve planned for retirement on a Blue Model basis and the Millennials who are expected to pay for it. Here in the U.S., in an election where both candidates fully embrace the Blue Model social programs, including social security, such generational issues are on the back-burner—for now. But given these realities, it probably won’t be too long before the fight over retirement will be back with a vengeance.

And when you look at the German deal as a paradigm—for someone will propose something like it—you can understand how American millennials would be angry. Millennials are being explicitly asked to work longer so that their parents can retire at unrealistically young ages: when 65 became the standard retirement age across the Western world, in the mid-20th century, it was much closer to the age of death than it is today. According to the World Bank, German life expectancy at birth was 69 in 1960 and is 80 today; in the U.S. those numbers are 70 and 79 respectively. The older generation, of course, rejected any attempts to change this in the past, essentially writing themselves larger and larger retirement checks as they came to live longer and longer.

And now the bill is coming due. To add insult to injury, as these reforms are gradually implemented, older, senior managers will continue to work for more years, rather than clearing room at the top by retiring. So if you’re a millennial, you’ll be working longer, at less pay and at a lower position, to fund benefits for the older generation that, realistically, probably won’t be viable for their own. Some deal.

And so, soon we will likely be having the same arguments here that this is kicking up in Germany. The fights about whether and how to reform the Blue Model’s retirement structure are just beginning.

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  • Boritz

    “Some deal.”

    It would not necessarily be correct to say the millennials wouldn’t have it any other way, but they certainly support as a block politicians that wouldn’t have it any other way.

    • f1b0nacc1

      Precisely right. My sympathy for them would considerably greater if they didn’t so aggressively reject the simple consequences of their ‘feelz’

  • Beauceron

    But wait…I thought bringing in a million muslims was the cure-all for the German demographic problem.
    In any case, one week I read about how robots and new AI algorithms will mean a near jobless future. The next I read about how there aren’t enough people to work.

    • ljgude

      Careful there, mate, the next thing you know you will be saying the emperor is stark naked.

  • Andrew Allison

    Leaving aside the disturbing fact that German longevity has been increasing faster than that in the USA for the past half century, the issue here is that governments have collectively ignored the impact of increased longevity. It’s blindingly obvious retirement age must be linked to longevity in order for benefits to be maintained.

    • f1b0nacc1

      While I agree with you, keep in mind that the burdens associated with increasing retirement age will not fall upon everyone equally. A worker in a physically demanding job (lets say a gardener, just for example) is going to be less capable of working into his 70s (80s at some point?) than say a lazy desk jockey like myself. This doesn’t mean that increasing retirement age is a bad idea (I endorse it myself), but there are going to be a few kinks to be worked out as we go forward….

      • Andrew Allison

        That’s why we have Social Security Disability [grin] As an aside, might I suggest that somebody who is physically active will outlive softies like you.

        • f1b0nacc1

          Only the good die young, I will live forever (grin)…

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