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

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  • Stefan Arent
  • Wolfgang Nagl

Abstract

The statutory pension system is the most important source of income for senior citizens in Germany. Due to increasing disruptions in employment biographies since the 1970s and due to the mass unemployment in eastern Germany since the 1990s, there is a growing fear of postretirement poverty in Germany. We develop a microsimulation model to compare the distribution of statutory pension incomes for new retirees in 2020 with the incomes of new retirees 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 growing postretirement poverty, especially among low-skilled workers. Eastern Germany will lose its current advantage in high pensions and low inequality.

Suggested Citation

  • Stefan Arent & Wolfgang Nagl, 2010. "A Fragile Pillar: Statutory Pensions and the Risk of Old-Age Poverty in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(4), pages 419-441, December.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201012)66:4_419:afpspa_2.0.tx_2-v
    DOI: 10.1628/001522108X549271
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    1. Michael Berlemann & Marcel Thum, 2005. "Blooming landscapes in East Germany?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(04), pages 16-22, December.
    2. Holger Bonin, 2009. "15 Years of Pension Reform in Germany: Old Successes and New Threats," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 34(4), pages 548-560, October.
    3. Börsch-Supan, Axel & Bucher-Koenen, Tabea & Reil-Held, Anette & Wilke, Christina Benita, 2008. "Zum künftigen Stellenwert der ersten Säule im Gesamtsystem der Alterssicherung," Papers 08-45, Sonderforschungsbreich 504.
    4. Börsch-Supan, Axel & Bucher-Koenen, Tabea & Reil-Held, Anette & Wilke, Christina, 2008. "Zum künftigen Stellenwert der ersten Säule im Gesamtsystem der Alterssicherung," Sonderforschungsbereich 504 Publications 08-45, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    5. Friedrich Breyer & Stefan Hupfeld, 2009. "Fairness of Public Pensions and Old-Age Poverty," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(3), pages 358-380, September.
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    Cited by:

    1. Pfister, Mona & Lorenz, Svenja & Zwick, Thomas, 2018. "Calculation of pension entitlements in the sample of integrated labour market biographies (SIAB)," FDZ Methodenreport 201801_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. Kallweit, Manuel & Fehr, Hans & Kindermann, Fabian, 2011. "Should pensions be progressive? Yes, at least in Germany!," VfS Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48708, Verein für Socialpolitik / German Economic Association.
    3. Hans Fehr & Franz Ruland & Gisela Färber & Annelie Buntenbach, 2012. "Beitragssenkung und Zuschussrente: Ist das eine nachhaltige Rentenpolitik?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(19), pages 04-16, October.
    4. Felix Hüfner & Caroline Klein, 2012. "The German Labour Market: Preparing for the Future," OECD Economics Department Working Papers 983, OECD Publishing.
    5. repec:iab:iabfme:201801(en is not listed on IDEAS
    6. Christoph Metzger, 2017. "Who is saving privately for retirement and how much? New evidence for Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 31(6), pages 811-831, November.
    7. Lorenz, Svenja & Pfister, Mona & Zwick, Thomas, 2018. "Identification of the statutory retirement dates in the Sample of Integrated Labour Market Biographies (SIAB)," FDZ Methodenreport 201808_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Stefan Arent & Alexander Eck & Oskar Krohmer & Robert Lehmann & Wolfgang Nagl & Joachim Ragnitz & Marcel Thum, 2011. "Wirtschaftliche Entwicklung Sachsens im Ländervergleich: Bestandsaufnahme und Perspektiven: Gutachten im Auftrag der Sächsischen Staatskanzlei," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 59, May.
    9. Stefan Arent, 2012. "Zuschussrente: Die Diskussion um die Altersarmutsgefährdung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(19), pages 21-25, October.
    10. Stefan Arent & Wolfgang Nagl, 2010. "Binnenwanderungssalden der sächsischen Landkreise," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(05), pages .5-10, October.
    11. Stefan Arent & Wolfgang Nagl, 2010. "Binnenwanderungssalden der sächsischen Landkreise," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(05), pages 5-10, October.
    12. Alexander Eck & Joachim Ragnitz & Johannes Steinbrecher & Christian Thater, 2012. "The future appropriateness of the revenue sharing between different groups of municipalities in Saxony," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 67, May.
    13. repec:mea:meawpa:12264 is not listed on IDEAS
    14. Gasche, Martin & Lamla, Bettina, 2012. "Erwartete Altersarmut in Deutschland: Pessimismus und Fehleinschätzungen – Ergebnisse aus der SAVE-Studie," MEA discussion paper series 201213, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    15. repec:iab:iabfme:201808(en is not listed on IDEAS
    16. Bofinger, Peter & Buch, Claudia M. & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2013. "Gegen eine rückwärtsgewandte Wirtschaftspolitik. Jahresgutachten 2013/14 [Against a backward-looking economic policy. Annual Report 2013/14]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201314, February.
    17. Stefan Arent & Wolfgang Nagl, 2009. "Die Entwicklung der Ansprüche an die gesetzliche Rentenversicherung bis zum Jahr 2020," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(02), pages 13-23, April.
    18. Wolfgang Nagl, 2014. "Lohnrisiko und Altersarmut im Sozialstaat," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 54.
    19. Traub, Stefan & Finkler, Sebastian, 2013. "Ein Grundsicherungsabstandsgebot für die Gesetzliche Rentenversicherung? Ergebnisse einer Mikrosimulation," Working papers of the ZeS 01/2013, University of Bremen, Centre for Social Policy Research (ZeS).

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    More about this item

    Keywords

    statutory pension system; old-age poverty risk; pensions; education;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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