Why basic retirement is an indictment against poverty – economics

For Social Democrats, election campaigns are often an inevitable and rarely fun affair – Social Affairs Minister Hubertus Heil experienced such a moment of happiness when he was proud to announce that the new basic pension would now be paid for the first time. In order for the SPD’s prestige project to bear visible fruit before the federal elections, the department head put massive pressure on pension insurance. But basic retirement can be an electoral campaign stunt for the SPD. For the outgoing federal government, seen in light, it is also a certificate of poverty.

It is not yet clear who will be chancellor after the fall elections. But one thing is already certain today: whoever it is, he or she also faces a historic task in pension policy. It is worth taking a step back to seize the challenge. The statutory old-age insurance in Germany introduced by CDU Chancellor Konrad Adenauer in 1957 is still essentially adapted to the long-lost industrial age, i.e. the ideal of a male industrial worker who worked continuously for over 40 years. There are fewer and fewer such CVs today, and in the future they will be the rare exception.

In the age of the network economy and artificial intelligence, the CVs of women and men are becoming normalized, characterized by a shift from work to part-time and full-time or by a succession of freelancers and salaried jobs. In addition, due to demographic change, there is a growing disparity between contributors and retirees.

Arbitrarily drawn border

For years, pension policy has failed to respond to this reality. But it would be necessary, as a state and an economic system delegitimize each other if they do not offer a credible solution on how active citizens can live properly in old age.

Seen in this light, basic retirement is also a symptom of crisis. It marks the attempt by the SPD and the Union to protect people who have at least 33 years of pension fund contributions from poverty in old age. But even this arbitrarily drawn limit reveals the weak point. Anyone who doesn’t manage 33 is unlucky. But the ruling coalition did not want to afford more money because the federal government already transfers more than 100 billion euros per year to the pension fund. Now, there are some smart people who say that the problem of old age poverty can be better solved with basic security, just make some repairs. The argument is made by those who, with a high degree of probability, will never find themselves in a position to confront the state as a petitioner. This is why many are already giving up the basic security to which they are entitled out of shame. Do you seriously want to put more and more people in this situation?

The basic pension is not a handout, but a right acquired through work. To take this seriously, this is where the honorable motive of the SPD lies. But she must also be criticized that short-term success is more important to her than the attempt to give pension policy a systematic and satisfactory response to the demands of the time. The Union only got tangled up and pushed for an asset test – and thus died out with a simpler income test.

Pension reforms, as has been the case in Germany for decades, is a task that only the Union and the SPD can handle together. The two parties have redeemed this debt less and less, and in the basic pension, it is finally clear that they are no longer able to do so. Finance Minister Olaf Scholz, who previously experienced the problems of pension policy as Federal Minister of Social Affairs, has managerial skills, but he has not initiated any real reform of old-age pensions either. But whether Armin Laschet, the Union’s favorite to succeed Angela Merkel, will be superior to Scholz in this regard, one can doubt it in view of recent experiences.

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