This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2014/07/01/business/international/in-reversal-germany-loosens-rules-on-retirement-age.html

The article has changed 4 times. There is an RSS feed of changes available.

Version 1 Version 2
After Tightening Pensions, Germany Eases Rules for Some After Tightening Pensions, Germany Eases Rules for Some
(about 1 hour later)
BERLIN — In 2007, the German government led by Chancellor Angela Merkel voted to lift the retirement age gradually to 67 from 65, in line with policies being adopted by the United States and other countries concerned about the costs of supporting an aging population. Economists say that move not only stabilized Germany’s public pension system but also put Berlin in a position to insist during the subsequent financial crisis that other European governments follow suit. BERLIN — Back in 2007, Chancellor Angela Merkel’s government voted to lift the retirement age gradually to 67 from 65, in line with policies being adopted by the United States and other countries concerned about the costs of supporting an aging population. Economists say that move not only stabilized Germany’s public pension system, but also put Berlin in a position to insist during the subsequent financial crisis that other European governments follow suit.
But now, with the worst of the economic downturn apparently past, and Ms. Merkel under pressure from her left-leaning coalition partners, Germany is reversing course, loosening the rules to allow some workers to retire early and still receive their full pension benefit. But now, with the worst of the economic downturn apparently past and Ms. Merkel under pressure from her left-leaning coalition partners, Germany is reversing course, loosening the rules to allow some workers to retire early but still receive their full pension benefits.
The shift has brought criticism within Germany from groups concerned about the costs, especially to future generations, and drawn accusations of hypocrisy from nations forced to swallow German-imposed austerity. The law allowing the lower retirement age, which was passed by Parliament in May, has touched off criticism within Germany from groups concerned about the costs, especially on future generations, and drawn accusations of hypocrisy from nations forced to swallow German-imposed austerity.
“We view the early retirement at 63 as sending the wrong signal,” said Anne Zimmermann, an economist with the Association of German Chambers of Commerce and Industry, known by its German initials D.I.H.K. “We view the early retirement at 63 as sending the wrong signal,” said Anne Zimmermann, an economist with the Association of German Chambers of Industry and Commerce.
But it has also proven popular with Germans like Frank Fischer. Mr. Fischer, the superintendent of a nursing home outside Berlin, had to take sick leave last year for the first time in more than four decades when he developed a knee problem. He took that as a sign he had worked long enough. Although leaving the work force before he reached full retirement age meant a smaller pension, he figured it was still worth it. But the change in policy has also proved popular with Germans like Frank Fischer. Mr. Fischer, 63, the superintendent of a nursing home on the outskirts of Berlin, took sick leave last year for the first time in more than four decades when he developed a knee problem, which he took as a sign he had worked long enough. Although leaving the work force before he reached full retirement age meant a smaller pension, he figured it was still worth it.
The new law, which allows anyone who has paid into the state pension system for at least 45 years to retire two years early but still receive the full benefit, made his decision easier. In June, Mr. Fischer finalized his application to retire in January. He plans to devote his time to his family, his garden and his dream of traveling the world. The new law, which allows anyone who has paid into the state pension system for at least 45 years to retire two years early but still receive full benefits, made his decision easier. In June, Mr. Fischer completed his application to retire in January, when he plans to devote his time to his family, his garden and his dream of traveling the world. Right now, early retirement begins at 63, but that will increase to 65 as the higher retirement age is phased in.
“I have seen what happens to people when they are old and infirm, when all the money in the world can’t improve your quality of life,” Mr. Fischer said over coffee after handing in his application. “I wanted to go while I can still enjoy it.” “I have seen what happens to people when they are old and infirm, when all the money in the world can’t improve your quality of life,” Mr. Fischer said after handing in his application. “I wanted to go while I can still enjoy it.”
While an estimated 6,000 Germans like Mr. Fischer have already applied to take advantage of the early retirement law, which was to take effect on Tuesday, the change has been sharply criticized at a time when Germany is grappling with an aging population and a shrinking labor force, and is promoting austerity among its hard-pressed European Union neighbors. While an estimated 6,000 Germans like Mr. Fischer have already applied to take advantage of the early retirement law, which takes effect on Tuesday, the move has been sharply criticized as Germany grapples with an aging population and a shrinking work force and promotes austerity among its hard-pressed European Union neighbors.
Greece and Italy introduced changes to their pension systems within the past three years that foresaw gradually increasing the retirement age for men and women to 67 over the next decade. Those changes came at a time when countries like Greece were under pressure to take any steps possible to reduce costs. Greece and Italy have introduced changes to their pension systems within the past three years that foresee gradually increasing the retirement age of men and women to 67 over the next decade. Countries like Greece have been under pressure to take any steps possible to reduce costs.
In the meantime, youth unemployment has become the most pressing concern in Greece, a problem only aggravated by raising the retirement age. But experts say the pension change headed off a crisis for the Greek pension fund, where troubles only deepened with the country’s debt crisis. “Greece won’t be in a position to take this kind of action for at least 10 or 15 years,” said Savas Robolis, a labor market expert at the Greek General Confederation of Labor, the country’s main trade union.
Greece cannot hope to follow Germany’s example and roll back the retirement age. Some analysts say that a higher retirement age contributes to youth unemployment, which is widespread in many parts of the European Union. In the case of Germany, which has the reverse problem of finding enough qualified young people to fill jobs, the greater worry is pushing the cost of early retirement for workers like Mr. Fischer onto the next generation.
“Greece won’t be in a position to take this kind of action for at least 10 or 15 years,” said Savas Robolis, a labor market expert at the General Confederation of Labor, Greece’s main trade union.
In the case of Germany — which unlike Greece has a shortage of qualified young people to fill the jobs available — the greater worry is foisting the cost of early retirement onto the next generation.
“We see this move as inconsistent with the German position to stabilize the social system,” Ms. Zimmermann said. “In dealing with our European partners, we pointed to our decision to raise the retirement age to 67, which projections have shown helped to improve the public retirement fund. Now we are going against that.”“We see this move as inconsistent with the German position to stabilize the social system,” Ms. Zimmermann said. “In dealing with our European partners, we pointed to our decision to raise the retirement age to 67, which projections have shown helped to improve the public retirement fund. Now we are going against that.”
Germany also faces a shortage of skilled workers in many traditional industries that form the backbone of the country’s economy. While the shortage has led to policy changes intended to help companies attract more qualified migrants and to keep more educated women in the work force once they start a family, the problem persists. When older people leave the work force early, they take with them a wealth of skills that can be useful in shaping a company’s future. Especially in the many smaller and midsized companies that have fewer employees, older workers can play an important role.
One in four companies views the early retirement law as posing a risk to future economic development, Ms. Zimmermann said, citing a D.I.H.K. survey. “If someone has worked at a company for 45 years, they are most likely highly qualified, and there should be incentives to keep them there until full retirement age,” said Bert Rürup, president of the Handelsblatt Research Institute.
When an older person leaves the work force early, they also take with them a wealth of skills that can be useful in shaping the future of a company. Especially in the many smaller and midsize companies that have fewer employees, older workers can serve an important role. Andrea Nahles, Germany’s labor minister and a member of the Social Democratic Party, which campaigned on the promise of early retirement for longtime workers, repeatedly called the new law a matter of justice for near-retirees who had been working since their late teens. Under Germany’s apprentice system, many young people leave school after the 10th grade and receive training on the job, accompanied by classroom learning.
“If someone has worked at a company for 45 years, they are most likely highly qualified and there should be incentives to keep them there until full retirement age,” Bert Rürup, president of the Handelsblatt Research Institute, said. Most of the 200,000 people who the German government estimates could initially qualify for early retirement are likely to have physically demanding jobs. Mr. Fischer, for example, drove trucks for more than 20 years, more than half of that time for a plumbing company that required him to handle heavy pipes and equipment.
Andrea Nahles, Germany’s labor minister and a member of the Social Democratic Party, which campaigned on the promise of early retirement for longtime workers, repeatedly called the new law a matter of justice for near-retirees who had been working since their late teens. Under Germany’s apprentice system, many young people leave school after the 10th grade and receive on-the-job training, accompanied by classroom learning. “We are creating more equality for those who have worked long and hard toward our quality of life,” Ms. Nahles told lawmakers in May.
Of the 200,000 people that the German government estimates could initially qualify for early retirement, most are likely to have worked physically demanding jobs. Mr. Fischer, for example, drove trucks for more than 20 years, more than half of that time for a plumbing company that required him to handle heavy pipes and equipment. The government has estimated that the whole retirement package, which includes benefits for women who had children before 1992, will cost 4.4 billion euros, or $6 billion, this year, increasing annually to €11 billion, or $15 billion, by 2030. The costs of the early retirement, estimated to grow over the next decade to €3 billion from about €1 billion, or to $4.1 billion from $1.4 billion, are to be absorbed by the pension fund.
“We are creating more equality for those who have worked long and hard toward our quality of life,” Ms. Nahles told lawmakers in May. “We recognize the accomplishments of people who have taken responsibility to ensure solidarity between old and young continues.” While the government’s pension fund has enough reserves to cover the initial years, eventually those who are still employed will have to pay more into the system. This has angered younger Germans. Student groups and youth wings of the political parties were among those who protested against the law.
The government figures that the whole retirement package, which also includes benefits for women who had children before 1992, will cost 4.4 billion euros, or $6 billion, this year, increasing to €11 billion by 2030. The costs of the early retirement provisions — estimated at about €1 billion this year and growing to €3 billion a year over the next decade — are to be absorbed by the pension fund. “We see a discrepancy between the investment in the older generation and the burden being placed upon the younger generation, which needs to be brought into balance,” said Marcel Escher, 28, who heads the Bavarian branch of the conservative R.C.D.S. student organization. “At the end of the day, we are the ones that will have to pay for it.”
While the fund, the Deutsche Rentenversicherung, has enough reserves to cover the initial years, workers eventually will have to pay more into the system. This has angered young Germans, who consider the new law to be anything but fair. Student groups and youth wings of the political parties were among those protesting the law. Asked whether he worried about the future of his daughter, a young mother who is working and raising his grandchildren, ages 2 and 7, Mr. Fischer shook his head. “I tell her to start saving and planning for the future,” Mr. Fischer said. “That’s what I did.”
“We see a discrepancy between the investment in the older generation and the burden being placed upon the younger generation, which needs to be brought into balance,” said Marcel Escher, 28, who heads the Bavarian branch of the conservative Ring of Christian Democratic Students. “At the end of the day, we are the ones that will have to pay for it.”
Asked whether he worried about the future of his daughter, who works while also raising two young children, Mr. Fischer shook his head.
“I tell her to start saving and planning for the future,” Mr. Fischer said. “That’s what I did.”