Germany’s Olaf Scholz calls for reduction in early retirees. Source: DW

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Germany’s Olaf Scholz calls for reduction in early retirees

12th December 2022

Europe’s largest economy needs hundreds of thousands of new workers every year to replace retirees. As well as bringing in more foreign workers, Chancellor Olaf Scholz urged those over 60 to delay leaving the workforce.

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German Chancellor Olaf Scholz on Sunday said he would try to reduce the number of people retiring early to head off a potential crisis in the country’s public pension system.

Economists have for some time warned that Europe’s largest economy faces a labor shortage, with not enough workers to support those who have retired.

What did Scholz say?

“The number of those who can really work up to pensionable age needs to be raised,” the chancellor told the newspapers of the Funke media group.

Despite Germany planning to raise the retirement age from 65 to 67 by 2031 and debating a further rise, an increasing number of workers are leaving the labor market at 63 or 64.

Since 2014, German workers are allowed to draw the state pension from the age of 63 without deductions if 45 years of compulsory contributions have been made.

However, the government had calculated around 200,000 people would retire early each year. Last year, almost 270,000 people took advantage of the scheme, according to the country’s pension insurance fund.

The number of early retirees accounted for 26.3% of all new state pensions received.

German workers are also prepared to accept cuts to their pensions if they retire early without sufficient years of contributions.

This group, who retired on an average of 28 months earlier, accounted for about a quarter of all those who received a pension for the first time last year.

More women, foreign workers needed

The government also wanted to see a rise in the share of women in the workforce, Scholz told the Funke media group. “For this to work, we need to expand all-day services in childcare and schools.”

Germany to smooth entry for foreign skilled workers

Earlier Sunday, Scholz told a citizens’ forum in Potsdam, near Berlin, that the government was already working to encourage more foreign skilled labor to “keep the show on the road.”

Last month, ministers agreed on plans to reform immigration law, as Berlin seeks to open up Germany’s job market to much-needed workers from outside the European Union.

The government wants migrants to have an easier visa application process. They also proposed offering citizenship after five years instead of the current eight and multiple citizenships.

“For a long time, immigrants into Germany were treated as though they would leave the country again later. Gaining citizenship was not a priority,” Scholz said. “But we have long since become a country of immigration and wish now to get in line with international standards.”

Germany’s acute skills shortage

Experts say Germany needs some 400,000 skilled immigrants to arrive each year as the country’s aging workforce shrinks, particularly to fill vacancies in the healthcare, IT and construction sectors. 

The chancellor said the reforms meant the government might not have to substantially raise pension contributions before the end of its mandate in 2025.

Germany’s population is set to rise by 1.2 million to 84 million this year, mostly due to large numbers of refugees from Ukraine.

The government’s statistics office said the population could reach 90 million by 2070 if immigration levels stay high.

mm/fb (dpa, Reuters)

While you’re here: Every Tuesday, DW editors round up what is happening in German politics and society. You can sign up here for the weekly email newsletter Berlin Briefing.

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